Self Managed Superannuation Funds

Why a Self Managed Superannuation Fund?, I am asked many times by clients whether they should operate their own fund. This may assist you.

Control:
Perhaps the major advantage is the control over the investments that are made. As long as an “Investment Strategy appropriate to member risk profiles” is in place, the fund can purchase just about any investments. A wide range of investments including shares, direct property, bonds, managed funds etc.

It is possible for the Super Fund to purchase shares from a member of the Super Fund, as long as those shares are listed on the Australian Stock Exchange.

Flexibility:
As you Trustees have control over the investments, it is possible to switch or modify these as the member Trustee wishes and this can be done very quickly, in most cases, depending on the actual investment. Investments purchased while the member is working (this is referred to as the accumulation stage) do not need to be realised (sold down) on retirement but continue to be owned by the Super Fund to generate income to be paid to the member(s).

Income Tax Savings:
Income tax is paid on the income of the fund at a maximum of 15% and this can be reduced by the Super Fund holding Australian shares, which carry valuable franking (imputation) credits.

It would be possible to pay no tax on the income of the fund if enough franking credits were received. A little known benefit is that when the member ceases in the accumulation mode and passes to retirement (changes from accumulation to pension phase), no capital gains tax is payable within the Super Fund on sale of investments.

Because the tax rate of the Super Fund on income is set at a maximum of 15%, it is often beneficial if investments are held inside the Super Fund rather than by the member, who may be paying well in excess of 15% on income received.

Cost Savings:
The cost of running the Super Fund may be far less than using a managed or public offer Super Fund. Often, managed funds charge up to 5% entry fee on all contributions and annual management fees of up to 2%. Please remember that your fund must make enough to cover the operating costs and make a profit to become a viable proposition.