Why self-manage your super?
When it comes to superannuation, there are two types of people – those who find it all “too hard” and don’t give it the attention it deserves, and the growing group – those who want to take complete control of their super by setting up a Self Managed Superannuation Fund (SMSF). But what does “take complete control” really mean when it comes to potentially your largest asset?
Often a superannuation fund will form the core of a financial plan. Choosing a fund and using it effectively is a vital part of ensuring a secure financial future. With a SMSF you control all aspects of your super…
Investments
Your risk profile is determined by considering your current financial position, your needs and goals and how comfortable you are with certain investments and market movements. Investments that suit your profile are then selected. For instance, a fund can hold:
Direct property. This could include commercial, rural, retail and residential property, though you need to be aware that a super fund can only borrow to invest under limited circumstances.
Shares in listed companies in Australia and overseas. You can choose the companies, but be aware that there are restrictions on investing in private companies.
Tax
Although superannuation is concessionally taxed, it is difficult for commercial super funds to spread the tax benefits fairly over all of their members. In a SMSF the tax can be controlled. By careful planning you can:
Defer payment of tax rather than it being taken directly from your contributions to the fund.
Reduce tax below 15% by investing in Australian companies paying franked dividends.
Minimise and even eliminate capital gains tax.
Insurance
The unexpected does occur and super funds can provide cost-effective cover for life and total and permanent disablement. In a SMSF you can choose the type and level of cover that suits you.
Death benefits
With many people living in more complex family relationships, “who gets your super when you die” is a key issue. In a SMSF you have absolute control and can ensure your wishes are met.
Costs
Many commercial superannuation funds charge fees based on the amount of money you have invested. If you have a large balance, fees on your SMSF can be lower !!!