Top 10 Reasons to Manage Your Own Superannuation

May 15th, 2012

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Self-managed super funds (SMSFs) are the fastest growing sector of the superannuation industry. One reason for this is because people are becoming dissatisfied with the performance of their managed super funds, particularly in the current economic climate, and feel they could do a better job themselves.

Here are ten good reasons for taking control of your own super:

It’s cheaper

The cost of running a self-managed super fund is about $2,000 a year, so as long as you have at least $200,000 worth of super, you only pay 1 per cent or less per annum (managed funds charge from 1.5 to 3 per cent).

You have full control

You decide what to invest in, often with the help of an advisor. This means you could potentially earn greater returns by investing in non-traditional assets such as property, unlisted shares and artworks.

You can act faster

Self-managed funds allow you to quickly buy or sell assets and change your investment portfolio. This can take time with larger managed funds. Also, when there are changes to tax or superannuation legislation, time can cost you money.

You can avoid costly errors

Incorrectly calculated balances and costly delays are inherent weaknesses in large managed super funds. By being in direct control of your fund, you can be directly responsible for its management and, consequently, there’ll only be errors if you make them.

There are many tax advantages

These include a concessional 15 per cent tax rate on the fund’s income, a 10 per cent tax rate on realised capital gains, less tax on end benefits such as pension benefits and the ability to reduce tax through the use of franking credits and by offsetting capital losses.

It can be used for estate planning

If you’re over 60, you can withdraw fund benefits before you die, without paying death benefits tax.

You have more buying power

Trustees of a self-managed fund (usually family members) can pool their super amounts together and purchase large assets such as property, which they wouldn’t be able to afford individually.

You can have the administration done for you

Most people with a self-managed super fund opt to have the fund administered by an SMSF service. These companies take care of the administration, accounting, compliance, taxation and audit requirements of a fund.

You can acquire ‘business real property’

Trustees of an SMSF cannot buy property from related parties (friends, family, other trustees, etc.), but they can buy business real property (property used to carry out a business). This allows the fund to acquire a valuable long-term asset at market price, while enjoying all the tax benefits of a landlord.

You can take out loans

An SMSF can be used to borrow for the purchase of residential or commercial investment property, as long as it is purchased at ‘arm’s length’ from a non-related vendor.

Having a self-managed super fund has many advantages. It allows you to build a portfolio that suits your needs, optimise tax and estate planning benefits and have direct control over your funds.

As long as you seek good investment advice and have your fund administered by a reputable service, it has the potential to accumulate more wealth for you than a traditional managed super fund and to support you through a long and comfortable retirement.