SMSF advice
Manage your future your way
Secure a comfortable retirement with a flexible, diverse portfolio guided by Reventon’s expert investment advice.
What is an SMSF?
Self Managed Super Funds (SMSF) are designed to help you grow a nest egg for a comfortable retirement. Unlike industry super funds, an SMSF is a ‘do-it-yourself’ super where you have more control of your money and investment strategies.
Grow your fund your way
Build savings and investments
Manage the fund as a trustee
SMSFs make up a significant part of Australia’s superannuation pool, with more than 600,000 Australians investing nearly $7 billion into self-managed super funds (SMSFs) to take control of their retirements.
SMSFs versus industry super funds
There are some key difference between SMSFs and industry superannuation funds that should be understood before you decide where to invest your money.
SMSF
Managed by its members
Potentially time consuming
Personally responsible for compliance
Flat fees
Industry super fund
Managed by fund provider
Little time needed after set up
Fund responsible for compliance
Usually a percentage fee
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What are the pros of an SMSF?
Many people today are looking for smart ways to invest and build wealth, beyond traditional means. This is why many Australians are choosing the SMSF route to secure their retirement.
Control
Members of an SMSF are also its trustees, which means they can exert greater control over investment strategies. With maximum control over your superannuation assets, you gain the flexibility to decide how your funds are invested.
Diversity
An SMSF can be structured to meet the specific needs of its members. Unlike industry super funds, and an SMSF can be used to invest in property, unlisted shares, cash or any other assets that suit your financial objectives – even uncommon assets such as artwork.
Purchasing power
Pool your superannuation savings with others to invest in assets that would otherwise be out of your reach. An SMSF allows up to four people to join their supers to buy high growth assets such as property.
Tax benefits of an SMSF
SMSFs are highly tax effective and offer a number of discounts on your investments and your superannuation fund.
- The earnings within your superannuation fund are taxed at only 15% and the earnings within the pension phase are tax free.
- Capital gains on assets held for longer than 12 months are discounted by one third before being added to the taxable income, which means an effective tax rate of only 10%.
- There is no tax paid on income or capital gains on assets that are backing a pension.
- Franking credits earned through investment in Australian companies are refundable to your fund. As these credits are earned at the company tax rate of 30% they help lower the effective rate of the fund even further.
- Concessional contributions you or your employer make to your fund are taxed at only 15% and this level of tax is generally less than your marginal rate of tax.
- The premiums for some form of insurance can be a tax deduction for the fund. When combined with concessional contributions, this effectively allows you to pay for insurance with pre-tax dollars.
SMSF and property investment
A growing trend with an SMSF is to use it to buy an investment property. With the flexibility of an SMSF, trustees can purchase a property, pay for repairs and maintenance, and capitalise interest. You have full control of choosing which property the fund buys, as well as managing the rent and deciding when to sell.
Why invest in property with an SMSF?
Property as a secure investment – Australians love property investments, particularly residential property. Property has a place in a well-diversified portfolio and can offer good income and capital growth over the long term. Property is also attractive to people who like to be able to see and touch their investment and get involved in the management.
Reduced or no Capital Gains Tax when you sell – Provided you keep your property investment in your SMSF until you are over 60 and retired, when you convert your SMSF into the pension phase, you will pay no Capital Gains Tax if you decide to sell.
Reduced or no income tax on rental income – You may also save tax on the rental income from the property. Provided you keep the property inside your SMSF, you will pay no tax on rental income in retirement and you will only pay 15% tax on the rental income while you are saving for retirement. That can be a big saving on your marginal tax rate.
You own your business premises – According to ATO statistics, around $62 billion or 12% of SMSF assets are invested in what they call “non-residential real property”, most commonly business owners who own their business premises through their SMSF. The great thing about this strategy is that you get rid of the tenants/landlord problems that plague commercial property and you may generate significant tax savings.
You want to leverage your super investment – If you decide to borrow money to buy your property inside super, you increase your exposure to the investment, thereby magnifying the gains (and the losses) from the investment.
SMSF and home loans
Even if you don’t have enough super in your fund, you may be able to borrow the money using an SMSF home loan.
An SMSF home loan is useful to boost your super fund after pooling it with other trustees. To buy an investment property with an SMSF, you could borrow up to 80% of the value of a property. However, keep in mind that rates can be higher than average, and more lenders are tightening criteria or even stopping SMSF lending completely. It pays to get a good broker to provide you with mortgage advice about the path forward.
Achieve SMSF success with Reventon
It can be understandably daunting to take your superannuation into your own hands. But with the taxation benefits, the flexibility, and the control you have over your portfolio, the rewards can greatly outweigh the risks – particularly with the right guidance.
At Reventon, our team is trained to look at your retirement goals and help you determine which route is best for you. A good SMSF strategy relies on knowledge, diversity and attention. We can provide you with all of these things and guide you toward making the best decision for you and your retirement.
Explore your SMSF opportunities today, book a meeting with an expert.
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