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4 benefits of a Self Managed Super Fund
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4 benefits of a Self Managed Super Fund

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4 benefits of a Self Managed Super Fund

Everybody has heard the term, Self Managed Super Fund (SMSF), but most people are unaware of the ins and outs of one. A SMSF is exactly what it sounds like – it is a superannuation fund where you are the Trustee. Being a trustee of your own Self Managed Super Fund is like having remote control over your retirement. You have the power to make the investment decisions, but with great power comes great responsibility. Tax responsibilities, fee responsibilities, risk responsibilities and the same trust responsibilities as a CEO. Becoming the Trustee of your own superannuation fund is a big decision, and seeking the expert advice of an independent financial planner is crucial.

Your money, your choice

If you like to have control of your money, or like to know exactly where your money is invested, a self managed super fund might be a suitable option for you. Many people choose a SMSF to allow them to invest in things like residential property, term deposits, shares and even collectibles! Self Managed super funds aren’t just for those close to retirement. If you are a small business owner or looking to be, your financial advisor can discuss how a SMSF may allow opportunities to purchase commercial property. Most commercial properties purchased by SMSF’s are leased back to a business of a SMSF member, allowing members to pay rent to their Superfund instead of a landlord.

Reduce your tax

Now is the time to cut down on non-essential spending and cut up the credit card. Get rid of bad debt. Now, not all debt is bad. But any payments you would be making on a credit card of 18% interest or higher could be going into a high interest savings account. By redistributing money from consumption spending – that is voluntary expenses like cars, furniture, clothes and other recreational spending to a savings account, you will see a noticeable increase in retirement funds.

Reduce your fees

The cost of running a superannuation fund, SMSF or not, plays a big part in what fund people choose. The benefit of an SMSF is the more the amount your SMSF grows, the more cost-effective it becomes to run. One of the most common questions asked about SMSF’s is “how much do I need to start one”. While a SMSF can be cost-effective under $200,000, most studies have shown that $200,000 is the minimum needed to remain cost-effective and profitable. Your financial advisor will be able to go into depth regarding your personal financial position, and help you to choose the best superannuation option.

Better estate planning

Unlike other asset classes, superannuation is an asset that is held in trust for you, not owned directly by you, but for your retirement. Due to the nature of a SMSF, it is not covered by the will of the estate owner, but under a separate SMSF trust deed. All the more reason to ensure you seek the advice of a financial planner. The estate planning flexibility afforded by a SMSF is one of its major drawcards. It is also an area with changing legislation and a number of complex divestment instruments. For example, a SMSF is able to have more and more diverse types of beneficiaries than a public fund.

It is important to understand that while there are numerous benefits to establishing a SMSF, there are also a number of considerations and risks to understand and be aware of when making your decision. SMSF trustees have a requirement to prepare and implement an investment strategy for their fund and review it on an ongoing basis. It is not a ‘set and forget’ strategy. There are also a number of strict compliance and reporting procedures that require time and knowledge to complete effectively. Take the time today to speak with your local financial adviser and work out whether a SMSF is best for your personal circumstances.