Benefits of an SMSF

1. Control 

For most Australians, superannuation is one of the largest assets we hold and naturally we want to control it.

As a trustee of an SMSF you have full control over your SMSF. That means you decide how to invest your retirement savings but it also means you are responsible for making key decisions like who can join the fund, what insurance is in place and how to deal with death benefits paid from the fund. Heffron helps with making sure you meet all your responsibilities as trustee.

2. Investment choice 

SMSFs allow you to invest in a range of assets, including investments which are unavailable in other types of super funds.

These include: 

• investment properties 
• listed and unlisted Australian and international shares 
• term deposits 
• collectibles, such as artwork 

 For example, an SMSF can acquire the premises of a small business operator and lease it back to the business. 

3. Investing together 

SMSFs with more than one person have a particular benefit – all the members can invest together rather than individually.

This feature can be very useful for couples, in particular: 

• There is only one group of investments to manage rather than two (or more). It also means a couple’s wealth is combined when it comes to investing in things that might require a lot of money (for example, property, or something with a minimum initial investment). 
• It doesn’t matter how many underlying member accounts there are – it doesn’t complicate the investment management of the fund. For example, it's quite common around retirement for a member to have more than one super account. They might have started taking money out (known as starting a pension) but also still occasionally make contributions. These have to happen in two different super accounts. In a public funds, each one is invested separately. But in an SMSF, it doesn't matter how many super accounts there are, they can all be run (invested) together. 
• Pension payments can be made from all the money coming into the fund’s bank account no matter where it comes from. That’s not only contributions (even from other members) but it also includes all income from all investments in the fund. That’s quite different to a public fund where the pension account only receives cash flow from the assets supporting the pension. So unlike members with pensions in public funds, an SMSF trustee won’t be (say) selling assets on the one hand to pay pensions while at the same time making new investments with contributions or other income. 

 4. Cost 

Most super funds charge administration fees calculated as a percentage of your superannuation balance, so as your super grows so do your fees.

SMSFs, generally incur fixed administration fees regardless of the value of your super benefit. This means as your super grows your fees as a percentage of your super balance fall. Since you can have up to six members in the fund, the fixed administration fees can be shared across members to further reduce your administration costs. 

See our range of services and pricing for trustees here.

 5. Tax benefits 

While all super funds are subject to the same tax rules, there are some tax benefits that large funds choose not to take advantage of because it is not practical for them, requires expensive system changes or disadvantages other members.

In your SMSF you can make tax choices that are right for you. Heffron can help you understand the tax advantages that may be available in your SMSF.

6. Borrowing 

In 2007 new rules were introduced which allows super funds to borrow money for certain assets. Being able to borrow in your SMSF allows you to invest in larger assets such as an investment property. 

7. Portability 

Your SMSF is your lifetime retirement savings fund. You can switch service providers while retaining the same fund and investments.

With retail and industry super funds, changing service providers usually involves switching from one super fund to another. Not only is this time consuming, it can also mean taxes like a capital gains tax are paid on your balance, reducing your retirement savings. 

8. Agility

Not only is it possible to change virtually everything about an SMSF, it is also possible to do many of these things quickly. 

SMSFs can respond instantly to new legislation or new strategies and allow their members to take advantage of them immediately. There is no need to wait for new systems or processes – the trustees can simply decide to do it and, if necessary, update their trust deed (the legal document governing how their fund operates) to allow it. 

For example, SMSFs can start pensions the moment a member decides to do it (as long as they’re eligible). Public funds require forms. SMSFs can urgently pay out benefits to (say) a spouse when a fund member dies. Public funds need processed to make sure they are paying the right person.  

9. Estate planning 

An SMSF gives you greater flexibility and control in how you pass your wealth on to your family or other beneficiaries when you die. You can create a strategy to accomplish exactly what you are after, taking advantage of all available tax benefits. 

Be sure to keep your eye on the topics of our upcoming Trustee Webinars which are held quarterly. Follow the link below to learn more or register