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What are the Benefits of an SMSF?
Being an average Australian, have you considered how you would manage your expenses after retirement? Your regular flow of income would dry up once you retire. SMSF (self-managed superannuation fund) happens to be one of the strategic investment avenues, that would help you directly regulate your retirement savings. This type of investment gives you the liberty to control the sectors where the funds would be invested. This implies that you would have better transparency on the investment, and know where your retirement savings are. In a nutshell, tracking your wealth becomes much easier. Investing in SMSFs, you can make your lifestyle decisions more confidently.
In this post, you will get to know the multiplicity of benefits that you can reap by investing in SMSFs.
- Wider choice of investment
In terms of investment options, you have a wider range of choices when you go for SMSFs. Although a few limitations do apply, you can channelize your funds in virtually every avenue. Over the years, you can leverage the opportunities to grow your funds.
Besides, it is possible for an SMSF to purchase an asset through borrowing. Whether you are self-employed or a small business owner, you can capitalize on SMSFs to purchase commercial properties. You can then rent it off to the respective businesses at market rates.
Moreover, you can invest in unlisted entities such as physical gold and other collectables, that are allowed within an SMSF.
You can invest in a plethora of assets with most superannuation funds. This includes:
- Fixed interest assets
- Shares
- Commodities like physical gold
- Direct residential or commercial property
- Managed portfolios
- Artwork and other collectibles
- Transparency and accountability
When you accumulate funds in SMSFs, you walk in the shoes of both a member and a trustee. Therefore, you would be aware of where your funds are invested, and how those avenues are performing. This wouldn’t be possible in the case of Industry or Retail Super Funds. Due to the massive size of these investment avenues, the performance is not released regularly. Only after many months, their performance is aggregated and released.
With a reputed SMSF administrator, you would have access to all the details through a software. In the process, you can remain updated with the necessary information and accordingly, manage your funds.
- Enjoy tax benefits as a trustee
Being a member as well as a trustee of an SMSF, you reserve the liberty to invest in different avenues like term deposits, unit trusts, property, and shares, both listed and unlisted. Moreover, the trustees can benefit from certain tax advantages. One of the unique features of SMSF is that, you can purchase business property from related parties and other members. Now, the market rates would be applicable when you lease these properties out. Therefore, you can develop wealth from the capital gains and rent within the fund. In case the related party runs a business by utilizing the property, the rent obtained by the SMSF would be tax-deductible. This is in addition to all the contributions (tax-deductible) that you make to the fund.
Currently, the tax rate is 15% for these funds. However, if the income is generated from assets while completely supporting a stream of income like pension, you need not pay any tax. When you gain control over the assets at your disposal, you can simply eliminate your liability to pay capital gains tax.
- Reduced costs
As an SMSF trustee, it is imperative for you to lodge an annual tax audit and return. Besides, you need to shell out the ATO fees, that are not calculated as a certain percentage of the super balance, but are capped. With the growth of the SMSF, it would prove to be more cost-effective. However, the overall expense for running the fund would largely depend on all the related investments. You also need to consider the costs involved in hiring professional services from accountants.
- Greater flexibility
With SMSFs, multiple members can run a calculated mix of pension accounts and other accumulations. Depending on your risk tolerance and investment goals, you can make adjustments in the investment mix. This flexibility would permit you to respond to changing market conditions swiftly, based on personal circumstances or legal norms.
- Securing your assets from creditors
For small business owners, SMSFs can deliver a strategic benefit in terms of the security of assets from creditors. This is actually a less-known advantage of an SMSF. In case any member of the organization gets into financial trouble, the assets of the SMSF would remain secured from lenders.
However, this should not be considered to be a primary purpose to get an SMSF. This is more of a secondary benefit, but you would love the peace of mind with this kind of security.
Being a trustee of an SMSF: How satisfying is it?
The freedom to control and track your investments happens to be the prime source of satisfaction when you become an SMSF trustee. You virtually reserve the liberty to build the wealth for your retirement. Eventually, SMSFs can deliver you tremendous benefits, and you would appreciate this confidence to control your wealth accumulation.
However, these funds might not be suitable for everyone. You need adequate financial and legal knowledge to serve as a trustee. It would be wise to seek professional support from a reputed accountancy firm to deal with the tax norms and legalities. After all, it makes sense to comply with the norms, so that you don’t mess up your retirement savings!
