Self-Managed Super Funds (SMSF)

  • Written by Accrue Real Estate

There are many things we have to thank baby boomers for, and one of these is the increasing interest in self-managed superannuation funds (SMSF). While it may seem they are only a recent innovation, they have actually been around for a while, now holding around one-third of the total superannuation funds.

Part of the reason for the popularity of SMSFs is that they provide opportunity for people to become highly engaged in planning for retirement. A SMSF gives them complete control, flexibility and transparency over the money in their own superannuation fund. Generally, the members of a SMSF also become trustees of the fund. This also gives you control over how the fund operates. This allows a SMSF fund to both pay you a pension but still accumulate funds.

Usually, the cost of managing a SMSF does not grow as your investment in superannuation grows. This means the greater the balance the more cost effective it is to run the fund. Also, a SMSF can provide benefits not just to you, but to your partner or even your children. The SMSF can continue even after your death. This allows for benefits in estate planning.


It is important to be aware that only a qualified Financial Planner can recommend you establish a SMSF. While an accountant will play an integral role in completing the tax return for your SMSF, they are unable to make any recommendations with regard to setting up or investing with a SMSF. Due to the complexity of SMSFs not every Financial Planner will be accredited to offer advice. It is essential then to complete due diligence before utilising the services of a Financial Planner for setting up a self-managed superannuation fund.


Investment Benefits


One of the advantages of the self-managed superannuation fund is the choice it provides in investment strategies. Residential property can be purchased but commercial real estate investing is also a possibility. As well, a range of other investment items such as art works, collectibles, term deposits or shares can be added to a SMSF portfolio. A small business owner can purchase commercial property through their SMSF which is then leased back to then business. This not only frees up business capital but provides a regular income for the SMSF, which now holds this property as an appreciating asset.


The rules of a SMSF allow the purchase of property. Often SMFS members would not be able to make these purchases without their SMSF, as the fund allows access to the superannuation monies of the members. While the property cannot be lived in by the SMSF members or anyone related to them, it provides the fund with an investment property which once rented then provides a regular source of income for the SMSF. Not all properties can be purchased through a SMSF as funds cannot be used to improve a property. A block of land or a ‘fixer-upper’ would fall outside these rules.


Tax Benefits


There are tax benefits gained through SMSFs. Rental income is taxed at a lower rate if the property is owned by the fund and if the property is held for over a year capital gains tax is also less. Best of all, these tax rates drop to zero if you are retired and your fund is paying you a pension.


If you decide to keep the property once you have retired and your SMSF owns the property outright, rental income from the property is not taxed. This income can then be used to purchase further investment property, allowing you to continue growing your wealth, even in retirement.


Self-Managed Superannuation Funds are popular for a reason – they have all the benefits we have just seen as well as giving you the control you would want over your own money. They are a formidable way to structure retirement savings and continue to create wealth in retirement. And your control extends to the team of professionals you want to help you structure the SMSF and give you advice on its management and operation. It may even be possible to pay Financial Planning fees through your SMSF, giving you another way to maximise the funds effectiveness.


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