Self-managed super funds (SMSFs) are a popular way of planning for retirement, with over 1.1 million people currently choosing what many describe as a 'do-it-yourself' superannuation.
But why are SMSFs so popular among Australians? Let's take a closer look at some of the reasons why you may want to start and maintain a self-managed fund.
1. Less fees
If you're not managing your own fund, you'll need to pay someone else to do the majority of the legwork on your behalf – and these fees aren't always cheap. In fact, new research from Industry Super Australia showed people in the country collectively pay $31 billion of fees every year.
Ultimately, choosing an SMSF can give people more control over their retirement planning.
Half of this money goes towards funds that only manage about 30 per cent of all accounts. Meanwhile, SMSFs account for nearly one-third of accounts under management and are only responsible for 7 per cent of fees.
2. Investment flexibility
SMSFs offer a wider array of investments than other types of super fund. This can help members form sophisticated strategies that mitigate risk and offer downside protection. Common investments include:
- Residential and commercial property;
- Unlisted and international shares;
- Fixed interest and term deposits;
- Managed funds – both domestic and international; and
- Cash and collectibles.
However, Schroders research has shown that SMSF trustees don't diversify as much as they could. For example, approximately 39 per cent of the typical self-managed fund comprises Australian equities, while just 1 per cent is global equities.
3. Tax benefits
SMSFs enjoy the same tax benefits as many super funds, with income and capital gains tax charged at 15 and 10 per cent, respectively, during the accumulation phase and both levied at 0 per cent in the pension phase.
But SMSF trustees have greater control over when they purchase and sell investments, so portfolios can be tailored to maximise tax efficiency. If you would like more help with compliance and SMSFs, please contact an experienced tax accountant in Bankstown for further guidance.
4. Greater control
Ultimately, choosing an SMSF can give people more control over their retirement planning. Trustees take a proactive role in selecting the ideal risk-return strategy for investment portfolios, and this can be adjusted as members' needs change.
A recent study from CommBank also showed that SMSFs are appealing to a more diverse audience, with a greater number of individuals turning to accountants and financial advisers for help with managing their fund.
Please contact a member of our team if you would like to discuss your SMSF needs.
This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information consider its appropriateness having regard to your objectives, financial situation or needs.