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5 Reasons You May Be Better Off Managing Your Own Super

We all want to retire comfortably, and some of us plan to retire early.

Industry superannuation funds and retail superannuation funds are one way to save for retirement. Another is to create a self-managed super fund (SMSF), an option that is desirable to many Australians.

Compared to an industry or retail superannuation funds, a SMSF gives you greater control over your funds. There are other benefits, too.

So if you’re thinking about it, here are 5 reasons you might consider managing your own super.

1. You’re in Control

By in control, we mean you make the decisions. That’s because a member of a SMSF must also be the trustee. That gives you control over the strategies and investments of the fund.

You’ll enjoy flexibility in determining your financial goals for the super, and how you will achieve those goals.

That investment control also gives you wider investment choices, such as:

• Overseas assets
• Direct shares
• Residential and commercial property
• Collectibles
• Term deposits

That’s a lot more from which to choose compared to industry or retail super funds, making an SMSF a versatile part of your financial portfolio.

If you’re a small business owner, for instance, your SMSF can own a business property and lease it back to your business. That kind of flexibility will provide a steady income for your SMSF and free up capital for you to re-invest in your business.

It also provides your SMSF with a secure tenant for the property, while your business has a secure property location.

2. You Can Combine Resources

A SMSF can have up to four members in Australia, which means families, partnerships or businesses can benefit by combining resources.

You can use the SMSF to consolidate assets, for instance, to build a family super fund. You can also use it as part of your estate planning, or simply as a way to save for retirement.

3. You Can Invest in Property

We’ve already mentioned that you can use the SMSF to purchase business property that you can lease back to your business. But you can also use a SMSF to borrow money to buy investment property.

Such large assets would likely not be available to a single individual, but with the combined assets of an SMSF, for instance, a couple could purchase an investment property that could pay dividends for their retirement savings.

However, it is important to know that such residential investment properties can’t be lived in by any member of the SMSF, or anyone related to the trustees of the SMSF. As well, the money borrowed can’t be used for improvements, so you can’t buy a “fixer-upper,” invest in a development site or purchase a lot on which to build property.

It’s also important to note that this step would be seen as a long-term investment, as it isn’t always easy to sell a property quickly and comes with significant transaction costs.

For this type of investment decision, it’s best to discuss the pros and cons with a self-managed super fund in Perth expert adviser before making any decisions.

4. You Can Minimize Taxes and Expenses

Managing your own super can be more affordable than other superannuation funds, particularly as your funds grow, thanks to tax and expense benefits.

For one, in an industry or public super fund, resources are pooled and every member is treated the same. In an SMSF, strategic decisions can be made based on individual circumstances that help to minimize the amount of overall tax paid by SMSF members within the fund.

You have the ability to take a tax-free pension as an income stream upon retirement. Once the retirement phase pension begins, capital gains and income are taxed at 0%.

In fact, the transition is seamless because you don’t have to sell assets, which could incur fees and capital gains taxes. You simply keep your investments and begin to draw an income from your SMSF.

If the SMSF has property that’s been held for longer than 12 months, the fund gets a one-third discount on capital gains made upon sale, bringing that rate down to a maximum of 10 per cent.

Finally, SMSFs usually have set annual fees, which can also be a benefit compared to percentage-based industry and retail funds.

5. You Can Look After Your Dependents

The SMSA provides control and flexibility for estate planning as well.

For instance, if you keep your super assets outside of your will, you can leave your taxable pensions to dependents, who can receive them tax free. Non-dependents could receive them nearly tax-free. You can even structure payments to be over a number of years if that’s more desirable.

Final Thoughts

While these are 5 great reasons to manage your own super, there are responsibilities that go along with such a decision.

You will be responsible for the strategy and the investments, but you will also be responsible for:

• Keeping records
• Providing statements
• Managing pension plans
• Managing retirement strategies
• Preparing tax returns

But don’t let that discourage you! There are resources available to you to support the benefits gained from having control over your fund.

Getting advice from Financial Framework can provide specialized advice and guidance, ensuring you yield the best returns on your fund. That includes investment advice and tools to keep you and your fund on track.

Access to that kind of expertise is another compelling reason to manage your own super.

Disclaimer: The information in this article is general in nature and does not take into account your personal circumstances. If you are considering managing your own superannuation you should consult a financial adviser before making any changes.