Self-managed super funds are different to retail funds in many ways, and many people wonder what are the advantages and if setting up an SMSF is worth the effort.
We are going to cover a few of the main reasons that SMSF’s are popular.
Control
With an SMSF, you control all aspects of your investments. This means you aren’t limited to choosing packaged strategies such as balanced, conservative, or growth. Ordinary super funds have these structures because they are managing all their member’s balances collectively. They simply can’t tailor investment plans for their members due to size constraints.
By taking back control of your retirement, you can choose the asset classes you want to invest in, you can change your risk strategy, you can tailor your investments to suit your retirement objectives.
If you like the idea of setting up an SMSF to control your retirement savings:
Variety
Once you have an SMSF, you gain the ability to invest in a wider range of opportunities. You can choose emerging markets, FX, specific industries for shares. You can invest in crypto currencies, or residential property, or gold bullion, or collectables.
Granularity
Though indexed products like funds and ETFs are available to SMSFs, you have the ability to go deeper and choose specific stocks or markets if investing in securities. If you want to invest in property, you can choose between residential and commercial, as well as by type and post codes. Other examples of detailed choice are precious metals, such as gold, silver, etc, or collectibles such as fine art, classic cars, vintage coins, etc.
By having an SMSF, you can choose the level of detail that you want to get into, how deep you go is up to you.
The whole world of investments is open to SMSFs, and if you partner with Jarospace for administration, we will help you stay within the rules and have a smooth experience. For many, control, variety and granularity are the deciding factor for setting up an SMSF. There are more considerations though, particularly tax and cost.
Tax
Super contributions are taxed at 15 % for concessional contributions and 30 % for non-concessional. Concessional contributions have a yearly cap of $30,000 as of 1 July 2024. Unused concessional contributions are able to be carried forward for up to five years also.
The concessional rate of 15 % also applies to your investment income, providing your SMSF is compliant.
Though these benefits are applicable to ordinary funds too, the difference with SMFs however is that you have more ability to control the tax strategies around capital gains, income and franking credits. This gives you the flexibility to implement an advantageous tax structure for your SMSF.
Estate planning
Through the SMSF trust deed, complying nominations can be put forward for the disbursement of death benefits. This can be planned around specific included or excluded beneficiaries in a tax beneficial manner.
Flat fee administration
Most SMSF’s incur flat, recurring fees to maintain their operation. Our fees for administration are a flat $183.30 per month, including GST.
As your super balance grows year upon year, the percentage of your fund balance going towards fees decreases. This is because your investment returns and contributions can outpace inflationary cost increases. This allows you to make savings over the lifetime of your accumulation and disbursement phases.
Percentage based fees commonly offered in retail funds however, offer no savings benefit over time. The more you grow your super wealth, the more you pay.
The reason Jarospace’s fees don’t increase relative to your fund balance is because our costs are simply not linked to it. The underlying administration requirements are relatively unchanging. You are in control of managing your investments and we work together to ensure your SMSF is compliant and is collecting the appropriate records.
It’s a simple relationship, we take care of the boring and difficult administration, and you get peace of mind by being in the driver’s seat for your investments.
Conclusion
There are many reasons for a setting up an SMSF, whether it is worth it depends on the investments you make and the costs you incur. If you decide you’re keen to start your SMSF journey, then we’re here to help.
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