What are the benefits of a self managed super fund (SMSF)?

A self managed super fund is a type of self managed superannuation fund. Superannuation is just a big word for a routine employee funded payment made into a future pension fund. It may also be called a company pension fund. What are the benefits of a self managed super fund?

Give you investment control and greater investment flexibility

Most of the self managed superannuation funds allow you to choose where your investment is going, to a point. You can pick between certain fixed interest and property through managed funds and shares, but usually with some restriction. With a self managed super fund, you have much greater control. Your options will often include even physical gold and other commodities, even art work! It also allows you to borrow within your own self managed super fund to help fund other investments.  Small business owners are also allowed to hold their physical business in the self managed super fund. This type of fund also allows much greater flexibility with choosing when to buy and self investments. You have the power to adjust your own market portfolio and really control the direction you want your self managed superannuation fund to go in.

Capacity to pool your resources and ease of estate planning

With a self managed super fund, you are allowed to pool your investment resources with up to three other investors (friends, family members or even other employees that you trust). With a larger income and investment pool, you have larger opportunities for investment. This increases your spending power and the potential to make a larger amount of money. It also allows for greater flexibility with your estate planning. As long as it is allowed by the fund’s trust deed, people with self managed super funds can make “binding death benefit nominations” that cannot lapse. They also are allowed to specify where that money will go and how it will be paid out.

Effective tax management

The control that having a self managed super fund allows also reaches into the tax realm. This type of fund gives you the means and ability to consider tax codes when managing yourself managed super fund’s investments. Currently, the tax rate for these types of funds is near 15%, however, if the income created by your investment is wholly based on assets, it’s possible no tax will be due. This knowledge allows you to minimize or even possibly eliminate capital gain tax liability in certain circumstances. However, using a self managed superannuation fund also means you’re taking your tax liability into your own hands. Make sure you read all the fine print before deciding to make any big moves with your tax situation. Even small mistakes can be very costly.

When deciding to invest, consider all the risks and do your research. There are many benefits to using a self managed super fund for your investing and to help you create as much income as possible before and during retirement.