In the last 30 years or so we have witnessed exponential growth of the SMSF sector both in terms of the number of funds and size of their super balances. Today, SMSFs make up over a quarter of close to $3 trillion Australian superannuation system. There are over a million people in SMSFs today and this number is likely to keep rising in the years ahead.  Also, their balances tend to get larger as the years roll by. 

The main motivation why individuals set up their own SMSFs is to have greater control of their super savings. SMSFs provide them with the flexibility of choosing what they wish to invest in, whether it is listed and unlisted shares, managed funds, bonds, residential and commercial property, including their own business premises, collectibles, and cash. They can borrow using “limited recourse borrowing arrangements” to provide some leverage when buying assets. This simply cannot be done in a retail or industry fund. 

SMSFs allow you greater flexibility of maximising super contributions annually and save tax whereas, it is highly unlikely you would do this in a larger fund. Also, they allow you and up to 3 family members to pool super savings which provide greater buying power to buy larger assets such as direct property or large share portfolio that normally would be beyond the reach of many individuals.

Tax and estate planning opportunities are far greater within the SMSF landscape than in larger funds. For example, you could have an accumulation and pension account running for each family member within the same structure. They are a great structure to allow for intergenerational wealth transfer between family members to occur with tax benefits. 

Further, SMSFs with larger balances of usually $200,000 or more, may have a lower fees compared with retail and industry funds that normally charge fees based on percentage of member balances.

It is critically important for anybody who wishes to run a SMSF should first seek financial advice with a licensed financial adviser to ensure they are doing the right thing with their super savings. SMSFs are not for everyone and you would want to get it right from the very beginning to avoid breaches and penalties.

Should you wish to find out more about SMSFs and how it can help you to achieve your financial goals please call our financial planning division on 9974 8333. We are here to help.