The Benefits of Having a Self Managed Super Fund

Oct 11, 2021

A Self-Managed Super Fund (SMSF) allows you to establish a Trust which holds your superannuation contributions for the sole purpose of your retirement. 

You have absolute control over where the funds are invested.   However, unless you are savvy or a sophisticated investor you also have absolute performance risk from your decision making.

You will not share in the administration fees of a retail fund.  However, as you are the only member, all of the fees and costs associated with the super fund are withdrawn from your member account.

You can acquire property with your super funds.   However, rent is payable at commercial rates, the property needs to be valued on a regular basis, and the property cannot be occupied by a related party (which includes yourself).

You can borrow against fund assets, and use a combination of contributions to the fund any income from the property to pay down a loan quicker.  However, complex conditions apply, and very few financial institutions are offering limited recourse borrowing arrangements, you would need a Bare Trust structure (another entity) which could be a costly structure to set up.

SMSF have a lower tax rate on income. However, if your fund is not compliant (and the rules are tremendous) the tax rate is 47%. 

Once you retire, all of your funds allocated to your pension account are taxed at 0%.  However, a minimum amount is required to be withdrawn each year, therefore cash needs to be available to draw down based on your pension balance at the start of the financial year.

Super in general can offer some Estate planning benefits. However, leaving super to non-financial dependants or a spouse will result in a tax prior to the beneficiary receiving your super funds.

Life Insurance premiums can be paid by your SMSF. However, a qualified trusted financial advisor should assess if this is in fact the best option for your circumstances.

Your superannuation can offer asset protection benefits which is most suitable for business structures that may be subject to liability or bankruptcy proceedings.  However, access personally to income and or to the assets within superannuation are restricted in the event of business failure.

Accountants can give you Tax Advice, and not Financial Advice unless they are also a qualified trusted financial planner, so do yourself a favour don’t listen to your mate who has a friend who’s got a cousin that has their own SMSF. It’s a lot more complex and not a suitable structure for everyone.