What type of SMSF is right for you?
Self-managed super funds are popular investment choices but do you really know the benefits of an SMSF as compared to industry or retail super funds?
While other funds are run by external trustees for thousands of members, an SMSF is a trust structure that is run, controlled and managed by you. Currently, there are no restrictions on who can establish an SMSF but it is best for business owners or those with high income and significant wealth.
With self-managed super funds, you choose where to invest your money, adjust the funds that aren’t earning and move them to high earning investments. You can increase the number of members to up to four in your SMSF as opposed to a retail or industry fund where you can only have one member. You can also consolidate super funds with family members to have a larger pooled super balance for greater investment opportunities and one account fee.
There are wider investment choices available for SMSFs unlike a retail or industry super fund where your fund directs your investments. With SMSF, you can opt for property, direct shares, international markets, term deposits or even collectables. It also provides greater transparency because you know exactly where your money is being invested and the tax and fees you pay for. You can align your investments with your goals and values, structure them and use your funds’ concessional tax nature to reduce your tax bill.
You can easily access your assets in your SMSF when it’s time to retire as well. Unlike retail or industry funds, the SMSF structure makes for a simple and smooth transition from accumulation to pension. You don’t need to sell your assets; you simply need to set up a Pension Income Stream to send regular payments to your bank account. It also offers flexibility in managing your estate planning and make binding death benefit nominations that do not lapse. You can plan your estate strategically and specify how your death benefits are to be paid, allowing for tax effective income streams for your beneficiaries.
With SMSF, you pay a set fee unlike a retail or industry super fund where you pay a percentage fee. SMSF trustees are required to lodge an annual tax return and pay capped fees, making it more cost-effective as your SMSF grows. Administration and accounting fees for your SMSF range from about $2,000 to $5,000 a year. There are audit fees and an annual ATO levy as well.
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