The main features of self managed super fund are below.
Full control
You, the trustee, take responsibility for managing the SMSF. You manage the investment strategy and investment process. Hence, you decide the investments for your SMSF and the timing to make those investments.
You are in a unique position to create an investment portfolio in your SMSF that meets your strategy.
Investment choice
SMSF can offer the perfect opportunity for you to invest your superannuation in a wide range of assets.
SMSF can invest in most investment assets and products including term deposits, managed investment funds, direct assets such as shares – listed in Australian and overseas, unlisted shares, property trust, bonds and derivative products like warrants and options.
If investment in direct real property is your strategy for your superannuation, it can be achieved with a SMSF. SMSF may invest in real property, residential and commercial, with or without borrowings.
Other assets such as physical precious metal or collectables may form part of a SMSF’s investment strategy.
Tax benefits
Like other super funds, SMSF offer significant taxation benefits to individuals who choose to save in this type of structure. As the rate of tax on super fund is lower than individual rate of tax, the money held in superannuation may grows at a quicker rate.
When you are in accumulation phase:
When you are in retirement phase (fund assets that are held solely for the purpose of paying a current pension/ income stream), income earned and realised capital gains on retirement phase assets are exempt from tax within the SMSF.
If the SMSF holds Australian shares directly, any tax payable by the fund may be reduced by franking credits on dividends. For example, concessional contributions and earnings taxes can be reduced by the franking credits. If the franking credits exceed the tax payable, the excess amount is refundable. In retirement phase, the full amount of the franking credits may be refunded.
Flexibility
The rules governing SMSF inherently provide the members with significant flexibility. In addition to the flexibility that results in tax benefits, a SMSF may acquire business real property from a member or other related party of the SMSF.
When it comes time to move from accumulation phase to retirement phase, a SMSF will allow a seamless move without disposing any assets, and therefore, not triggering capital gains tax. The accumulated unrealised gains when realised will be disregarded for tax purpose to the extent that they support retirement phase pension/ income stream.
There are estate planning benefits, such as the ability to ensure that the benefits are directed to the nominated persons and tax effectively. When passing to a dependant, such as spouse, the benefits may be retained in the SMSF and paid as an income stream.
Cost savings
The cost of a SMSF may be lower than other superannuation, especially when the balance is high.
Life insurance
Members of SMSF are able to obtain life insurance (death, total and permanent disability and income protection insurance (temporary inability to engage in gainful employment for a specified period)) cover through the SMSF, and have the premiums paid for by the SMSF. This allows for the determination of the type and suitability of insurances to meet the member's requirement. The premiums are paid by the SMSF and is a tax-deductible expense.
Retirement income
SMSF can pay member benefits in the form of a retirement income stream, including transition to retirement income stream (superannuation pension). You can tailor the payments to meet your needs and have flexibility over amount and frequency.
The rules require one or more payment totalling at least the minimum for the financial year. For example, you may decide to be paid just one payment equalling the minimum for the financial year, or as many payment as necessary of different amounts equaling or exceeding the minimum for the financial year.
Unrivalled security
You, as trustee, control and manage the SMSF. In managing your SMSF, you will always protect your interest. Your superannuation assets are held by you as trustee, and investment assets as held directly, e.g. CHESS sponsored account – you will know at any point in time where your superannuation is invested and how they are performing. You will also have the comfort of knowing that your superannuation is in safe hands – your own.
