Self-managed superannuation funds (SMSFs), or DIY funds, have been a growing sector in the superannuation market. With over 606,000 funds and more than $855 billion in assets, SMSFs continue to gain popularity. Here are some compelling reasons why SMSFs are attractive, but remember, SMSFs are not suitable for everyone. Consult your financial planner to determine if an SMSF is the right choice for you.

1. Family Inclusion

SMSFs allow up to six people, often family members, to be members of the same fund. This can simplify the management of superannuation assets and estate planning, catering to the needs of each family member within one flexible superannuation fund.

2. Control and Flexibility

SMSFs offer significant control and flexibility. As a trustee, you have the freedom to choose investments, tax strategies, and estate planning measures that suit your needs, within the superannuation rules. Specialist companies can handle administration and accounting tasks, allowing you to focus on tailoring your investment strategy with professional advice.

3. Cost-Effectiveness

While cost savings may not be the primary driver for starting an SMSF, they can be achieved. The extent of savings depends on the types of investments, fund operation, and fund balance. Although there are unavoidable costs, such as establishing the trust deed and the annual SMSF levy, managing an SMSF can become more cost-effective as fund assets grow.

4. Broad Investment Choice

SMSFs offer almost limitless investment options compared to traditional superannuation funds. You can invest in direct equities, property, overseas assets, and alternative investments like artwork or antiques, provided they align with the fund’s investment strategy and meet the sole purpose test for retirement benefits.

5. Taxation Efficiency

The taxation efficiency of SMSFs is a significant attraction. Benefits include the ability to use imputation credits to reduce the fund’s tax liability, a maximum of 10% tax on capital gains in the accumulation phase, and no tax on capital gains in the pension phase. Additionally, SMSFs can facilitate tax-effective estate planning strategies.

6. Estate Planning Opportunities

SMSFs provide unmatched flexibility for tailored estate planning strategies, which is crucial for family needs. However, careful planning and specialist advice are essential to implement these strategies correctly and avoid potential pitfalls.

7. Enjoyment and Engagement

Many people find enjoyment in managing their SMSF. Whether you are accumulating super for retirement or are already retired, being involved in the administration of your fund can be an engaging and enjoyable activity.

Conclusion

While SMSFs offer numerous benefits, including control, flexibility, cost savings, broad investment choices, taxation efficiency, and estate planning opportunities, they require a significant commitment. Ensure you have the capacity and willingness to manage an SMSF effectively. Consult with your financial planner to explore whether an SMSF is the right option for you.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.