There are a number of key benefits to controlling your own SMSF.
SMSFs provide more investment options than any other super fund. Trustees can access direct residential & commercial property directly or through unlisted trusts, direct shares, high interest cash accounts, term deposits, hybrid income investments, unlisted assets, international shares either direct or through investment vehicles such as Wholesale Managed Fund or Exchange Traded Funds (ETF).
Like all super funds, SMSFs benefit from concessional tax rates. In the accumulation phase, tax on investment income is capped at 15 per cent; in the pension phase there is no tax payable, not even capital gains tax (CGT).
One of the main benefits of a SMSF is being able to invest in direct property and delay the sale of the asset until your funds are in pension phase, which ensures no CGT is payable.
SMSFs offer significant transparencies that allow trustees to align their personal goals with their investment decisions. Whether you’re passionate about property, shares or sustainable and ethical investing, SMSFs allow you to better understand where your money is invested, with complete visibility over performance and tax treatment.
The downside of the new level of control is the responsibility and ongoing requirements to ensure your fund remains compliant and meets all the ongoing costs associated with running your fund.
Ensuring you have working relationship with your Financial Adviser and Accountant is imperative to running your own fund.
One of the main advantages of a SMSF is the ability to leverage or borrow within the fund which effectively allows you to have more funds invested compared with a retail or industry fund.
Borrowing within a fund can be arranged through a Related Party Loan (RPL) or through a commercial lender, which both have advantages & disadvantages and financial advice should be sort.
Additional risks can include higher costs, lack of diversification and potential cashflow issues.
SMSF trustees must lodge an annual tax return and audit, pay ATO and ASIC fees which are based on a fixed fee. Generally Retail & Industry Super funds are based on a percentage of funds invested, which are not capped and therefore increase as dollar amount in correlation with your account balance.
As your SMSF account balance grows, the more cost-effective it becomes, but the total cost of running an SMSF will depend on the related investments such as property rental fees, direct share brokerage costs and Managed Fund or Exchange Traded Fund ongoing management fees.