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ADVANTAGES OF SMSFS
Things to consider
Deciding to set up an SMSF is an important decision that you should consider very carefully. The following information outlines some of the advantages and disadvantages of SMSFs.
Benefits of SMSFs
- Greater control
An SMSF gives you control to choose your own investment strategy. As the trustee you are responsible for managing the investment strategy and the underlying investments of the fund. - Investment choice
An SMSF gives you greater flexibility in your choice of investments under certain conditions. Your portfolio can generally include a wide range of investments such as managed funds as well as direct assets such as bonds and shares. - Cost
Trustees of SMSFs also have greater ability to manage the fees paid by the fund. By selecting and managing your investments carefully, you can keep the fees you pay at a minimum. - Tax efficiency
SMSFs are treated for tax purposes exactly the same as other superannuation funds. This means they receive the highest concessional tax rate of 15%. - Total wealth management
SMSFs may also provide you with a range of options in terms of estate planning and flexible benefit payments.
Considerations for SMSFs
- Stability
SMSFs are not suited to everyone so it’s important that you understand the risks as well as the benefits. Your financial adviser will be able to help you decide if an SMSF suits your circumstances. - Responsibility
As the trustee, you are ultimately responsible for the fund. You need to have a good understanding of the rules and regulations for operating an SMSF. It is also important that you keep up to date with the latest developments in investment markets and legislation. Financial professionals such as your adviser or accountant can help you manage your fund. - Administration
The administrative requirements of running an SMSF are quite time intensive so you need to ensure that the management of an SMSF will fit into your current lifestyle. - Costs
If you are considering setting up an SMSF, you will need to investigate the associated set-up costs and then the ongoing accounting, brokerage and adviser fees. You will also need a sufficient account balance to make it cost effective in the long run.