Unlocking the Power of Self-Managed Super Funds
Introduction to SMSF
Retirement planning is an essential aspect of financial planning, and Self-Managed Super Funds (SMSFs) have become a popular choice for many Australians. SMSFs offer greater control over investments and greater flexibility in retirement planning. However, managing a SMSF can be complex, which is why Xponential Advisory are here to help. In this article, we’ll explore what an SMSF is, its advantages, and how our advisors can help you make the most of your SMSF.
What is a Self-Managed Super Fund (SMSF)?
A Self-Managed Superannuation Fund (SMSF) is a type of retirement savings account that is managed by individuals rather than an external financial institution. SMSFs are regulated by the Australian Taxation Office (ATO) and are designed to provide individuals with greater control over their retirement savings.
A SMSF can have up to six members, and each member must be a trustee or director of the trustee company. The members are responsible for making investment decisions, managing the fund’s assets, and ensuring compliance with superannuation laws.
SMSFs offer a wide range of investment options, including shares, property, and managed funds. This allows individuals to tailor their investment strategy to their personal circumstances and risk appetite.
SMSFs are also known for their flexibility when it comes to estate planning. Members can nominate who will receive their superannuation benefits in the event of their death, and the benefits can be paid out tax-free to eligible beneficiaries.
However, managing a SMSF can be complex and time-consuming, and there are strict compliance requirements that must be met. Trustees must ensure that the fund is operated solely for the purpose of providing retirement benefits, and that all investments are made in accordance with the fund’s investment strategy.
It is recommended that individuals seek professional advice before establishing a SMSF to ensure that it is the right choice for their financial situation and retirement goals.
Advantages of an SMSF
Self-Managed Superannuation Funds (SMSFs) offer a range of advantages over traditional superannuation funds. Here are some of the key advantages of SMSFs:
Greater Control and Flexibility: One of the most significant benefits of a SMSF is that it gives members greater control and flexibility over their investment choices. Members can choose their investments, including shares, property, and managed funds, and tailor their investment strategy to their personal circumstances and risk appetite.
Lower Costs: SMSFs can be a cost-effective way to manage retirement savings, particularly if you have a larger balance. By pooling the funds of up to six members, a SMSF can take advantage of economies of scale and negotiate better rates on investment fees and other expenses.
3. Estate Planning: Estate planning is the process of organising your financial affairs so your wealth is efficiently distributed to your chosen beneficiaries after your death.
A good estate plan helps minimise the tax your family and other beneficiaries pay when receiving your assets. It also helps ensure your wishes are carried out as intended.
Importantly, it’s not set and forget. A good estate plan requires regular reviews as your personal circumstances or those of your family change. It also requires regularly checking your beneficiaries remain eligible to receive your super death benefits.
Writing a Will is the first step in estate planning. When it comes to superannuation, you can’t rely on a Will to ensure your intentions are carried out.
Many people believe once they have a Will in place, distribution of their super death benefit is fully organised. What they don’t realise is that super is not automatically part of your personal estate, even if you hold it in a self-managed fund.
That’s because super is held in a trust on your behalf and not owned directly in your name.
The SMSF trustee decides who receives your death benefits when you die. You cannot direct the trustee to pay a specific person through your Will.
The provisions of the SMSF’s trust deed will take precedence over any instructions you leave in your Will about what you want to happen to your super account, unless the super benefit is to be paid to your Legal Personal Representative (the executors of your Will) to be distributed as part of your estate in accordance with your Will.
Simply writing a Will with instructions about where your super benefit is to be paid when you die does not become a binding direction for the remaining trustees of your SMSF.
Tax Benefits: SMSFs can offer significant tax benefits, particularly if you have a larger balance. SMSFs are taxed at a concessional rate of 15%, which can be significantly lower than the marginal tax rate for individuals. Additionally, SMSFs can take advantage of franking credits on share investments, which can further reduce the tax payable.
Borrowing: SMSFs can borrow money to invest in certain assets, such as property, which can provide additional investment opportunities.
Ultimately, SMSFs offer a range of advantages, including greater control and flexibility for investing, lower costs, estate planning benefits, tax benefits, and borrowing opportunities. However, managing a SMSF can be complex and time-consuming, and it is recommended that individuals seek professional advice before establishing a SMSF to ensure that it is the right choice for their financial situation and retirement goals.
Key Takeaways
SMSFs offer significant advantages for those seeking greater control and flexibility in their retirement planning. However, managing a SMSF can be complex, which is why Xponential Advisory is here to help. By working with our advisors, you can unlock the power of a SMSF and achieve your financial goals with confidence. Contact us today to learn more about how we can help you with your SMSF.
