In the growing pool of information out there on self-managed super funds, it can be confusing to determine exactly what the benefits of SMSF are and how they can work for you. From complicated tax rules to foreign terminology, translating the advantages of self-managed super fund (SMSF) ownership can make you feel like you’re drowning in info-overload.
At SMSF Loan Experts, we’ve waded through all there is to know about owning an SMSF so you can dive straight into the good bits.
You hold the reins to your retirement savings
By ‘self-managed’ superannuation they really mean self-managed! Owning an SMSF puts more control in your hands over how and where your retirement funds are being invested.
Instead of leaving your investment decisions to a board panel of strangers, SMSF ownership means you determine your own investment strategy and have full control of the investment options within it. The flexibility and control over your super savings that SMSFs provide is one of the strongest draw cards to people considering an SMSF for their retirement savings.
Greater investment choice
Unlike traditional industry or retail super funds, where you have a limited investment menu of managed funds, running an SMSF provides you with the ability to hold direct shares and residential property assets in conjunction with managed funds. In particular, the ability to invest directly in either commercial or residential property is a distinguishing feature of SMSFs that sets them apart from traditional superannuation funds.
This level of investment choice opens the door to premium diversification opportunities and strategical investment allocations that accelerate your super savings to meet your retirement goals sooner.
Ability to borrow to invest in property
Investing in property assets through regular super? — possible. Borrowing to invest in direct property through regular super funds? — no can do. The ability to borrow money to invest in either direct residential or commercial property through an SMSF is unparalleled with any other type of superannuation fund and one of the main reasons savvy super savers use SMSFs as their preferred superannuation structure.
A limited recourse borrowing arrangement is available for SMSF members to invest in direct property — We can show you how it’s done.
Top Tip: Because your superannuation funds are typically protected from litigation or bankruptcy, if you’re concerned about asset protection, you may wish to invest in an investment property through your SMSF rather than holding it in your personal name.
Tax planning
Nothing makes you feel more in control of your financial position than being able to pick and choose when to purchase, sell down or dispose of assets. In SMSFs, you have far more flexibility than traditional funds to allocate earnings to specified members, time your contributions and play to your capital gains or losses position advantage (to reduce Capital Gains Tax). The real kicker is that you can adjust the investment strategy to take advantage of the concessional tax rates in the super environment by targeting franking credits, too!
The tax planning benefits of SMSF ownership also shine when it comes time to retire. For those in pension phase, the timing and structuring of your pension is in your hands to take advantage of tax minimisation opportunities. Not to mention, retirement phase members can claim refunds from the ATO for any excess tax credits.
The ability to strategically tax-plan in your super fund takes the sting out of each year’s tax return.
Estate planning
Intergenerational wealth transfer is made easy with SMSFs and has recently been made even easier, with the government recently passing the six-member bill. The ability to now hold six SMSF members brings with it a greater opening to transfer wealth to your beneficiaries in the most tax-effective way.
The level of flexibility and estate planning control that SMSFs offer is evident in the ability to gift an SMSF pension to your children and have them recontribute the pension payments back into their member balance in their own name. You can also arrange to have an SMSF balance paid as a pension to a beneficiary without giving them any access to the capital.
The unique nature of SMSFs means that the fund’s investment portfolio can remain intact while extending the lifetime of the super fund. Any assets can be transferred ‘in-specie’ meaning that they don’t need to be sold down and incur a tax event to be transferred to your intended beneficiaries. This is particularly useful if you have a business property loan as it will allow the family business property to stay in the SMSF, even after the death of a member.
If you would like to take advantage of the many SMSF benefits and the unique investment ability such as purchasing property through your super, get in touch with SMSF Loan Experts today.
