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15 Jul 2021 · 5 Reasons for Opening a Self Managed Super Fund

5 Reasons for Opening a Self Managed Super Fund

Know how much you actually earn

The stark truth is that most Australians have no real idea how much they actually have in their Super Fund (Super) and a large percentage of wage earners could not tell you how much they contribute to their Super each pay day. How can you plan for your retirement if you have no idea how much you actually earn? When you establish your own SMSF you can instantly see your savings grow from pay day to pay day.

Know how much you actually earn

The stark truth is that most Australians have no real idea how much they actually have in their Super Fund (Super) and a large percentage of wage earners could not tell you how much they contribute to their Super each pay day. How can you plan for your retirement if you have no idea how much you actually earn? When you establish your own SMSF you can instantly see your savings grow from pay day to pay day.

Know precisely where your super is invested

If your super is invested with a large super fund, your money will most likely be invested via the Stock Market. Stocks and shares can be volatile which of course involves a certain risk. The Stock Market for those who do not work in that field is little more than a casino where your savings can be won or lost in an instant. If your super is in a large super fund, you are effectively giving other people who you know nothing about, permission to "gamble” with your money. When you establish your own SMSF you are the one making decisions and who will make the best decisions for your money? You will of course!

Direct property purchase

Prior to 2007 SMSF's were not permitted to borrow money. The legislation changed to allow SMSF's to borrow for the purpose of purchasing investment real estate.

With the rules that allow SMSFs to borrow, SMSF members can now purchase residential property that would otherwise be outside of their reach. For example, a couple with a combined SMSF balance of $200,000 can borrow money via a limited recourse loan to purchase a residential investment property worth up to $600,000. Generally, a limited recourse loan can be secured for up to 70% of the purchase price of a property. This excludes other costs associated with the purchase such as legal, stamp duty etc. Real Estate is not like a casino when the value can disappear overnight. Most of the worlds wealthy people made their money via real estate. McDonalds for example…their business is not hamburgers! That is their cask flow, their business is purchasing the real estate that the restaurant sits on.

Taxation

Your income is taxed (on average) at 30% the income in a SMSF is taxed at 15%. There is also the flexibility when it comes to dealing with taxable liabilities for your fund, as this fund only has one single tax return although there may be up to four different members for the fund and each can have numerous pension accounts. Where the fund has one or more members who have retired and are therefore paying 0% tax, tax advantages can be achieved by allocating earnings from members who are not retired and are therefore sitting in a 15% tax environment.

Fees

The staff in the large super funds do not work for nothing and only have their own interests at heart. They are paid from the fees they charge you on your portion of the super fund. The running costs of a SMSF are approximately $1,600 per annum for accounting fees which includes the tax return and audit. There will be Australian Securities Investment Commission (ASIC) fees for your trustee company which is currently $273 p.a. and ASIC fees for your custodian company of $55 p.a if you have purchased real estate via a loan. Check your industry superfund fees and compare.

If your super is invested with a large super fund, your money will most likely be invested via the Stock Market. Stocks and shares can be volatile which of course involves a certain risk. The Stock Market for those who do not work in that field is little more than a casino where your savings can be won or lost in an instant. If your super is in a large super fund, you are effectively giving other people who you know nothing about, permission to "gamble” with your money. When you establish your own SMSF you are the one making decisions and who will make the best decisions for your money? You will of course!

Direct property purchase

Prior to 2007 SMSF's were not permitted to borrow money. The legislation changed to allow SMSF's to borrow for the purpose of purchasing investment real estate.

With the rules that allow SMSFs to borrow, SMSF members can now purchase residential property that would otherwise be outside of their reach. For example, a couple with a combined SMSF balance of $200,000 can borrow money via a limited recourse loan to purchase a residential investment property worth up to $600,000. Generally, a limited recourse loan can be secured for up to 70% of the purchase price of a property. This excludes other costs associated with the purchase such as legal, stamp duty etc. Real Estate is not like a casino when the value can disappear overnight. Most of the worlds wealthy people made their money via real estate. McDonalds for example…their business is not hamburgers! That is their cask flow, their business is purchasing the real estate that the restaurant sits on.

Taxation

Your income is taxed (on average) at 30% the income in a SMSF is taxed at 15%. There is also the flexibility when it comes to dealing with taxable liabilities for your fund, as this fund only has one single tax return although there may be up to four different members for the fund and each can have numerous pension accounts. Where the fund has one or more members who have retired and are therefore paying 0% tax, tax advantages can be achieved by allocating earnings from members who are not retired and are therefore sitting in a 15% tax environment.

Fees

The staff in the large super funds do not work for nothing and only have their own interests at heart. They are paid from the fees they charge you on your portion of the super fund. The running costs of a SMSF are approximately $1,600 per annum for accounting fees which includes the tax return and audit. There will be Australian Securities Investment Commission (ASIC) fees for your trustee company which is currently $273 p.a. and ASIC fees for your custodian company of $55 p.a if you have purchased real estate via a loan. Check your industry superfund fees and compare.

5 Reasons for Opening a Self Managed Super Fund,

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