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11 benefits of running your own super fund

There are changes aplenty in the superannuation space at present, but some things have stayed the same.super-retirement-superannuation-saving-elderly-old-300x239

One of which is that there are still multiple benefits to running your own super fund, regardless of any changes to the general super landscape.

In fact, more and more Australians are opting to take control of their superannuation and setting up self-managed super funds (SMSFs) but before embarking on an SMSF get specific advice to ensure it is right for you.

And there are many reasons why they’re doing so.

Let’s take a look at some of the benefits, shall we?

  1. An SMSF allows a trustee to consolidate the super assets of up to four members (usually family members or business partners) into one larger pool of funds, which increases investment opportunities.  
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  2. SMSFs can provide flexibility with more investment options. Trustees can invest directly in shares, high-yielding cash accounts, term deposits, income investments, direct property, unlisted assets, international markets, collectables and more.
  3. Tax effectiveness: Like all super funds, SMSFs benefit from concessional tax rates. In the accumulation phase, tax on investment income is capped at 15 per cent; in the pension phase, there is no tax payable, not even Capital Gains Tax. Carefully considered tax strategies can help trustees grow their super savings and reduce tax payments as they transition to retirement.
  4. SMSFs allow greater flexibility for multiple members to run a mixture of accumulation and pension accounts. Trustees can adjust their investment mix as it suits them, allowing for a fast response to changes in market conditions, super rules or personal circumstances.
  5. The cost of administration could be reduced using an SMSF. While SMSF trustees must lodge an annual tax return and audit, and pay ATO fees, these costs are based on the time to prepare and not based on a percentage of your super balance. This means the more an SMSF grows, the more cost-effective it becomes.  Avoiding-Capital-Gains-Tax-with-a-Self-Managed-Super-Fund-300x225
  6. Increased transparency and control. You’re in control of your SMSF’s meaning you can chose where and how you invest and you will have a better understanding where your money is invested, with complete visibility over performance and tax treatment.
  7. You can increase the size of your nest egg through leverage.
  8. You can purchase residential property with debt.
  9. You may be able to influence the valuation of properties in your fund through cosmetic renovations and improvements using cash within the SMSF.
  10. SMSFs can borrow to purchase your business premises. It’s important to understand that an SMSF member can’t live in a residential property owned by their SMSF. An SMSF can purchase a business property from a member (and the member can still use it), but it can’t purchase residential property from a member.
  11. Estate planning: Having an SMSF provides the flexibility to plan who receives the member’s death benefits, when they receive it and how they receive it, such as a pension or lump sum.

It’s an enlightening insight to learn that there are nearly 600,000 SMSF’s in Australia.

So that’s a lot of people in Australia who understand the benefits of controlling their superannuation.

It’s no secret, however, that the superannuation landscape can be complex. coins tax

That’s why many SMSFs access professional guidance before they establish their own super fund as well as during its duration.

So if you’re wondering whether a SMSF is the right investment vehicle for you, consider speaking to Metropole Wealth Advisory so we can help you understand all of the benefits mentioned above, as well as many more.

Why not contact us to discuss your individual needs & let Ken Raiss, director of Metropole Wealth Advisory, formulate a Strategic Wealth Plan for you, your family or your business.

Please complete click here now and set up a time for a chat

Disclaimer

The article is general information only and is intended as educational material. Metropole Wealth Advisory nor its associated or related entitles, directors, officers or employees intend this material to be advice either actual or implied. You should not act on any of the above without first seeking specific advice taking into account your circumstances and objectives. 



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About

Ken is director of  Metropole Wealth Advisory and gives independent expert advice for high net worth individuals and their families, professionals and business owners. He is passionate about property investing and small business and shares his wealth of experience in his blogs. View his articles  


'11 benefits of running your own super fund' have 4 comments

  1. Avatar for Property Update

    July 13, 2017 @ 11:31 am Lawrence Barnes

    Hi Ken,
    Great article and could not agree more with it. I setup a SMSF about 3 years ago and purchased a property through it. I conducted a comparison between running my own SMSF and having a retail super fund so see how much better off I would be over a 15 year period which is the number of years I have until retirement at 60. One of the best performing fund is QSuper which returns about 6.5% year on year over a 10 year period. If I had stayed invested with QSuper from age 44 and a starting balance of $150,000 after 15 years I would end up with about $385,000. With the SMSF I have a property worth about $520,000 which will typically generate around 5% growth year on year and after the same 15 years this property will be worth just over 1 million dollars. This is a difference of around $695,000!

    The big difference here is leverage using borrowed money to purchase the property and now I have a $520,000 asset instead of $150,000 invested to magnify my gains. This alone makes SMSF a powerful strategy instead of following the herd and just paying into a retail fund and hoping for the best. Kind Regards Lawrence Barnes

    Reply

    • Avatar for Property Update

      July 14, 2017 @ 1:31 pm Newton Hill

      Hi Lawrence,
      I wouldn’t get too excited about the property idea when you consider what he real estate agent takes out of it and the mortgage costs. The bank also likes to have (possibly) a monthly admin fee. LaTrobe charges us $15 a month for the privilege of borrowing $240K. It also hurts living in Perth. If you are in Melbourne or Sydney you are laughing. Capital gains aside, I have done calculations based on returns on investment (ie Employer Contributions) rather than return on capital which is capital growth which has been negative over here for two years. We made a return of 30% the last Financial Year which was gratifying. Buying off the Plan was the only thing we did right back at the start. We have learnt that the property market DOES travel in two directions. Perhaps now might be the best time to get in over in Perth. When you can rent a 4 x 2 for $330 wk and be 28kms for the capital city, buying could be very attractive too. I also advise people to buy property with their Super but also give them the downside too. Always ‘Caveat Emptor’.
      Cheers for the future
      Newton Hill

      Reply

  2. Avatar for Property Update

    July 18, 2017 @ 10:53 am Lawrence

    Hi Newton,
    If I factor in the costs to sell the property in 15 years time and paying down the mortgage I am still left with $700,000 in super. This is still considerably better than the alternative of staying with a retail fund. These figures have also not factored in that I can manufacture some growth by cosmetic renovations to the property which will further increase it’s value. Yes your right I am charged a small bank admin fee of $15 per month, but this is all chump change when you look at the big picture. In this instance my property is based in Brisbane. Purchasing the right type of property is of course the trick here, my property has gone up 70k in 3 years.

    Like any investment, there are always downsides, but I think the upsides far out way the downsides when you setup your own SMSF and purchase property though it, but it has to be the right type of property. If you purchased a property in a mining town, you are in a world of pain! Thanks
    Lawrence

    Reply

  3. Avatar for Property Update

    July 26, 2017 @ 11:18 am Peter

    Benefit No3 is NOT entirely correct.
    I think you should state that there is a limit now to the amount of money allowed in Retirement Phase, which greatly impacts the Tax Free part of income and especially Capital Gains for a number of people.
    Peter

    Reply


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