Why choose a Self Managed Superannuation Fund (SMSF)
There are a number of advantages to a Self Managed Superannuation Fund (SMSF) over a traditional super fund, including greater control over your superannuation and greater flexibility. They are, however, more complicated and regulated.
According to an Australian Taxation Office (ATO) report, there were almost 598,000 SMSFs in 2021 with almost 1.1 million members. The ATO noted that SMSFs collectively held $822 billion (25%) of the $3.3 trillion in super assets under management.
Keep reading as we will be showing you how you could benefit from an SMSF as well as some of the most important considerations you need to make before establishing one and moving your benefits to it. If you believe that you lack the necessary knowledge to determine if an SMSF be the right solution for you, we always recommend getting financial advice from fully qualified financial advisers.
What is a Self Managed Super Fund (SMSF)?
A self-managed superannuation fund, or SMSF, is a superannuation fund that is managed by its owners. The majority of people have their retirement savings invested in a fund that is overseen by an independent entity, such as a fund manager, a large firm, or an industry association.
However, a rapidly increasing number of people have elected to administer their own retirement accounts, which are referred to as SMSFs. This trend is expected to continue in the foreseeable future, depending on the financial circumstances.
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How you can benefit from a Self Managed Super Fund (SMSF)?
Range of investment options
SMSFs are able to provide access to a wide variety of additional investment opportunities, such as investing in property, precious metals and other commodities, derivatives, and, in certain circumstances and subject to certain requirements, collectables such as artwork.
Additionally, SMSFs give you the flexibility to borrow money from within your fund in order to invest.
Investment flexibility
The members of an SMSF are able to manage a variety of accumulation and pension accounts simultaneously. They can make changes to the investment portfolio whenever they see fit, giving them the flexibility to quickly adapt to shifting conditions in the market or super rules.
Greater investment flexibility means that you can achieve your financial goals even during a market downturn.
Customisable tax strategy
SMSFs are eligible for lower tax rates due to their structure. In the accumulation phase, the tax rate that applies to investment income is capped at 15%; however, in the pension phase, there is no tax that needs to be paid at all, not even the tax on capital gains.
As you transition into retirement, growing your retirement savings and lowering your tax burden can be accomplished with the help of tax strategies that have been carefully considered.
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What’s the difference between an SMSF and other funds?
There are differences between an SMSF and other types of super funds in Australia. You can review some of them below; however, if you would like to have more information, we would suggest getting in touch with Holborn Australia’s fully qualified advisers who are able to give you professional advice and suggest the right solution for you.
Members and trustees
Starting on July 1st 2021, SMSFs are limited to a maximum of six members.
Each member of the fund’s governing body serves either as an individual trustee or as a director of a corporate trustee. This indicates that each member contributes to the management of the SMSF.
When it comes to other types of funds, there is typically no cap on the total number of members.
The administration of the fund is the responsibility of trustees who hold professional and/or regulatory qualifications.
Regulations
It is expected of trustees that they have a working knowledge of tax and superannuation laws, and it is their responsibility to ensure that their fund complies with those laws.
If their fund is found to be in violation of the law, the trustees of the SMSF or the directors of the corporate trustee are the ones who are held personally liable for any resulting fines. Therefore, SMSF compliance is of utmost importance to avoid any potential problems.
On the contrary, in other types of super funds, the professional licensed trustee is the one who takes on the risk of compliance.
SMSFs are governed by the Australian Taxation Office’s regulations. The trustees are obligated to work with the ATO in order to manage their fund. Other super funds are regulated by the Australian Prudential Regulation Authority (APRA).
Investments
The SMSF trustees are responsible for developing and putting the fund’s investment strategy into action, as well as making all investment decisions.
In other types of super funds, you have some say in the overall composition of your superannuation investments and the level of risk they involve, but you typically don’t get to choose in which particular assets those investments will be made.
Holborn Australia supports your SMSF
Investment risk is elevated when markets fluctuate. Achieving your financial goals is imperative so making the right financial decision is crucial for your plan. Wrong choices may lead to financial hardship and low investment returns.
A Self-Managed Super Fund (SMSF) gives you a wide range of options and tools to execute a plan that meets your risk tolerance and retirement needs.
However, it is not always easy to make an informed decision when you lack the necessary financial knowledge and are personally liable for all the fund’s actions. Holborn Australia’s team along with the assistance of external experts are ready to answer all your questions and give you the professional financial advice you need when it comes to UK Pension Transfers or creation of your SMSF.