Self Managed Super Funds


Question: There is a lot of talk about Self Managed Super Funds – can you please explain what they are and whether it would be worthwhile to have one.  I am 57 years of age, still working full time with approximately $323,000 in superannuation.  I would like to retire in the next 2-3 years.

Answer: A Self Managed Superannuation Fund (SMSF) is a fund that is owned and controlled by individual members and allows the members to control their own investment strategy as well as allowing flexibility with regard to managing risk, taxation, estate and succession planning matters.   There are now close to 500,000 SMSFs in Australia with over 3,000 new ones established each month.

Although the title “Self Managed” implies that the members of the SMSF will be involved in the running of this type of superannuation fund, this is generally outsourced to a professional financial adviser to ensure all rules are being followed and yearly obligations are met, allowing members to concentrate on business or pursue other interests whilst still retaining control.

There are a number of key benefits of a SMSF that have contributed to their popularity particularly amongst retirees and business owners.  The more prominent reasons include:

Control: You can decide on how much to contribute and where to invest those funds.

Security: Your member benefits generally are protected from creditors.

Flexibility: Retirement income options can be tailored to a member and their family's specific needs.

Cost efficiency: Structured properly, an SMSF (which can have up to four members) can be cheaper than holding multiple superannuation funds.

Tax efficiency: You can minimise tax payable by the fund by using imputation credits available from dividends. Excess imputation credits are fully refundable to the SMSF.

Estate planning: An SMSF is the most flexible and tax-effective way for a member to provide lump sums or income streams to his or her surviving spouse, children or grandchildren.

A SMSF is not for everyone however it should be an option to explore where you have a good level of super, generally over $200,000.  Be wary that not all financial advisers are licensed to be able to talk about SMSFs, so it’s best to discuss this option with one who is and that specialises in the SMSF arena.