Think about a SMSF?
For many people (but not all, and depending on your account balance), the cost ofrunning a SMSF can be significantly lower than that of an alternative retail, industry of other commercial super fund. The main cost for a SMSF is thecompletion of the annual administration requirements of the fund. As you'll see from our information on SMSF Admin on this website, there is no industrystandard in terms of costs, however if we look at the average cost of anaverage sort of fund, then the cost will be around about the $250 to $300 pamark. Commercial super funds on the other hand tend to charge as a % of yourfund balance, with a range of around 1% to 3.5% pa depending on the fundand underlying fund managers used. So if you've got a flat cost of around $300pafor your SMSF, then the more money your SMSF has, the lower the % cost will be.For example, if you've got $300,000 in your SMSF (and remember, that can bemade up of up to 4 members' balances combined) and you pay $300pa for annual accounting,your cost is 0.1% pa. Compared to most (if not all) commercial super funds,this is very cost effective. Where to next? Ask us a question and speak to our INKOM Financial Advisers in Sydney www.inkom.com.au
For those members nearing the pension phase, the SMSF allows the mostseamless transition from accumulation into flexible income streams. As with allSuper funds, the ability to take tax free income streams on retirement is a bigincentive to stay within the superannuation environment, and as seen by theabove benefits, the SMSF offers a lot of flexibility in terms of how you goabout it.
Investing in art?
The key driver of SMSFs has always been investment control,and the much wider investment choice (such as art, gold, direct shares, directproperty, hedge funds, collectibles, wine, etc) that trustees have compared tocommercial super funds. However, the real benefit is not just in “choice”, butin the ability to have more sophisticated investment strategies working foryou. Other examples include small business owners leasing their business realproperty (that is used by their business) from their SMSF, or smart investors buyingwine and art for intergenerational wealthy transfer.
The types of investments the SMSF canhold are determinedby the fund’s investment strategy, which is formulatedby you, along with the other members in thefund, often advised by an investment professional. The strategy willreflect your objectives, risk profile and the investments you intend to utilise. The investment strategy can be changed asoften as you wish, to suit your changingcircumstances and to take advantage of new investment opportunities. The fund canalso incorporate different strategies to suiteach of its members, who are known as ‘trustees’.
An important effect of this control is that, during retirement, you can continue to invest in growthassets. This contrasts the approach of most retail providers, who lock ‘pension phase’ investors into income-producing assets such as cash and fixed interest, increasing the risk that the investor may outlive their retirement savings.
Talk to our INKOM Financial Advisers in Sydney about this.
In traditional super funds, contributionstax is taken out up front whenever you make a contribution. An SMSF willonly incur this tax when it lodges its taxreturn. In somecases the tax may not be payable at all after taking into account deductions or imputationcredits.
Another strategy is deferring capital gains tax until pension phase. This involves holding investment assets that you believe willhave high capital growth during accumulation phase, and then selling them when you retire, when capital gains tax no longer applies.
SMSFs allow you to transfer listed shares, managed funds, widely held unit trusts,and businessproperty held inindividual names into superannuation as personalcontributions. While transfers may incur capital gains tax, stamp duty and fringe benefits tax, in somecases you may be able to claim adeduction for the superannuation contribution, offsetting these capital gains costs.
More on SMSF planning, talk to our INKOM Financial Adviser's in Sydney www.inkom.com.au