Chances are you’ve heard of Self-Managed Super Funds (SMSF). But have you ever considered the advantages of setting one up for your own superannuation needs? If you’re in your 40s or early 50s it might be a very smart move.
When modern self-managed superannuation funds first emerged in the late 1990s they were a strategy mostly used by older Australians approaching retirement. However, while nearly 60% of SMSF trustees are still aged over 55, there’s a clear trend towards younger Australians getting involved in recent years. In fact, during the 12 months to June 2017 over 75% of new SMSF trustees were under the age of 55, with 43.2% under the age of 45. The average SMSF balance was approximately $1,142,000.
What is a SMSF?
Put simply, a Self-Managed Super Fund (SMSF) is a superannuation fund where the individual members have direct control over their retirement savings and investments, rather than deferring to another trustee or trustees to make decisions on their behalf as typically happens with large retail super funds.
In 2017, 70% of SMSFs had just two members, 22% were single-member SMSFs and the remaining SMSFs had three or four members (currently four is the maximum allowed but the 2018 Federal Budget proposed that this be increased to six). It’s precisely this compact control structure that’s one of the major appeals of SMSF as it gives you greater personal choice over how, when and where your hard-earned super is invested.
The Advantages of SMSF
While control is the most obvious advantage, there are others too.
- Tax Efficiency – when SMSF members are in their accumulation phase all earnings and contributions are taxed at a maximum rate of just 15%. Additional tax concessions also apply when members move into the pension phase, delivering ongoing benefits throughout retirement
- Lower Fees – high management fees have long been a superannuation bugbear for many Australians. Depending on your SMSF balance and the make-up of your investments it may be considerably cheaper to maintain compared to traditional retail super funds.
- Investment Choice – due to their nimble size and structure, SMSFs can often invest in niche assets that may not be available to a member of an industry or retail super fund. This includes owning a business property (possibly your own).
More control also means more responsibility
The flip side in setting up your own SMSF is that it also comes with a number of additional obligations. SMSFs are regulated by the ATO and trustees must comply with all superannuation laws as well as a variety of specific SMSF rules. According to the ATO: “If you set up an SMSF you become a trustee of the fund. This means you’ll be responsible for managing your SMSF according to its trust deed and the laws and rules that apply to SMSFs.”
Doing this requires time, energy and a greater degree of organisation. Some people are far better suited to the demands of doing this of course, so it’s important to weigh up before embarking on an SMSF strategy. The good news is Hill Rogers can help you in meeting most of these commitments, so it may be easier than you imagine.
How Hill Rogers can help
We believe everyone should be well informed about their super options, including the potential to benefit from an SMSF regardless of your age. We have many years of experience in helping Australians maximise their super journey before and after retirement. Chances are, we can help you too. Why not get in touch?
Ready to talk SMSF? Please contact Garvin Jones here.