Taking control of your super

A popular choice for managing superannuation is to take personal control via a self-managed superannuation fund (SMSF).

Although membership is limited to a maximum of four people per fund, the Australian Tax Office (ATO) reports there are over half a million SMSFs, representing more than a million members. It estimates the value of assets held within SMSFs is more than $680 billion!

So, what’s the attraction? Below are some key advantages of managing your own super:

CONTROL

All members of the fund are also trustees and are therefore responsible for all decisions. They are required to manage the fund in accordance with current superannuation laws.

FLEXIBILITY

Trustees can seek the assistance of administrators and licensed advisers to help them meet and maintain their legal responsibilities in the running of their fund, or they can do it all themselves.

INVESTMENT CHOICE

A much wider range of investments is available to trustees than may otherwise be offered by retail or industry funds. This allows maximum flexibility in investment selection, especially for geared investments, certain types of land holdings and personal use assets like artwork and collectibles. There are, however, strict rules that govern how personal use assets and collectibles held in SMSFs are stored.

DIRECT PROPERTY

An SMSF can invest in direct property, whereas retail funds usually cannot. In addition, a business property owned outside superannuation may be

transferred into an SMSF. For many self-employed people, having their SMSF own their business premises can make financial sense.

COST SAVINGS

SMSF fees are usually fixed whereas retail super funds are charged as a percentage of the account balance. So for accounts over $250,000, it may be more cost effective to establish an SMSF than to use a retail fund.

TAXATION

SMSFs can allow trustees to take a more tailored approach to managing taxation, especially when it comes to capital gains tax.

INSURANCE

SMSFs can hold life, temporary and permanent disability insurance on their members. This can be a tax-effective way of managing both the cost of the insurance and any future insurance payouts.

ESTATE PLANNING

The trust deed for an SMSF may allow for binding death benefit nominations. A will can be challenged in court, but under a properly executed binding death benefit nomination, trustees must pay a death benefit as directed. This can provide greater certainty in the distribution of assets.

It is clear that many people find the ability to manage their retirement nest eggs highly rewarding, despite the detailed legal responsibilities attached.

Although there are many aspects to consider when converting your super funds to an SMSF, the added choices, flexibility and cost effectiveness may outweigh the additional time taken for administrative purposes.

Please contact us if you would like some guidance to help you determine if managing your own super might be right for you.