Self Managed Super Fund

A Self Managed Super Fund (SMSF) is a private superannuation fund established for 1-4 people that you manage yourself, which is regulated by the Australian Taxation Office.

The main advantages to having an SMSF are:

More control and greater flexibility over investments

SMSF members can choose where their retirement savings are invested, with options including direct property, listed shares, bonds, listed investment companies (LICs), exchange traded funds (ETFs), and managed funds.This flexibility in investment options allows SMSF members to actively manage their investments. With a hands-on investment approach, SMSF members can quickly adjust their portfolios as markets change.
Additionally, you can choose to transfer personally owned listed shares, business real property and managed funds directly into your superannuation fund.

Cost savings
For SMSFs with pooled assets of between $200,000 and $500,000, the average expense ratio is 1.5%p.a. As the costs of managing a Self Managed Super Fund generally do not increase with your balance, the more your investment grows, the more cost effective the SMSF becomes. A SMSF with a balance of $1,000,000 can reduce its ongoing fees to 0.56%p.a.
This is generally lower than many retail and industry funds.
Also, SMSF Trustees do not have the same prudential regulation and do not have to be licensed.
Average SMSF fees sourced from: http://www.superguide.com.au/comparing-super-funds/how-much-does-a-diy-s...

Ability to pool resources
SMSFs can have up to 4 members, which means you are able to pool your super resources with up to 3 other people with similar financial objectives, such as family members. This can assist with cost effectiveness and provide access to investments (such as wholesale investments) which would otherwise not be available.

Flexibility with pensions
As Trustee of your SMSF, you have flexibility in establishing and maintaining your pensions within the fund, including account based pensions and transition to retirement pensions.

Tax Concessions
Earnings in your SMSF are taxed at concessional rates of 15%, and capital gains on investments held in your SMSF are taxed at an effective rate of 10% if held for longer than 12 months.
Contribution Tax payments in SMSFs are deferred until after the annual tax return is lodged, unlike many industry and retail super funds where the 15% contribution tax is deducted when the contribution is received. Therefore the full contribution can remain invested in the fund, earning income until the tax payment is due. This can create a significant benefit for contributions made at the start of the financial year, where tax payments won’t be payable until after the tax return is lodged, up to 15 months later.
The fund can also provide tax concessions such as the deferral of lump sum tax in the pension phase. There are also opportunities to use credits from franked dividends to reduce the 15% tax rate.

Estate Planning Options
The flexible structure of an SMSF allows members to take advantage of estate planning strategies to effectively transfer wealth from one generation to the next with minimum tax liability and maximum asset protection.
The fund can provide benefits to you, your spouse and even your children. This means that the fund can continue after your death which can allow for many estate planning benefits.

Advantages for Small Business
An excellent strategy utilised by many small business owners is the leasing of business premises from their Self Managed Super Fund. Unlike residential property, the superannuation rules do permit business real property purchased by an SMSF to be leased back to a business owned by the trustees of the SMSF. The business is able to claim a tax deduction for the rent and the super fund only pays 15% tax on the premises net rental income. With the ability for SMSF to borrow to invest this is an effective strategy to own business real property in a tax effective structure.

Personal Insurance
More flexibility to select the insurance policy that suits your needs and the life insurance policy payment is tax deductible within the super fund.

Read more information regarding purchasing property in a Self Managed Super Fund.