The number of people believing that the SMSF is a powerful way of consolidating investments is on a rise. This is not surprising because even the fiercest critics (any new idea arrives with its fair share of detractors) have now warmed up to the many advantages presented by Self Managed Superannuation Funds (SMSF). Let me waste no time in taking you through 4 such benefits.
Benefit 1# Greater control and sense of ownership
You are the owner of your asset and it falls upon you to make decisions pertaining to it. With SMSF, you are completely in control of where your money is going. Whether you want it invested in shares, deductibles, artwork, Term Deposits, or CFDs, among other things.
Many who have been disappointed by the perceptibly miserable performance of their superannuation funds are feeling a lot more confident now that SMSF has given the reins of management into their own hands.
Benefit 2# No need to divide benefits into multiple funds
With SMSF, you are not forced to divide your benefits into multiple funds. Let me explain this. If you have invested in a Retail or Industry fund in the past you will know how the benefit is (characteristically) invested disjointedly in a Pension and an Accumulation account.
Now, this means that when you want to draw from either of the account, the benefit first needs to be shifted to that particular account (let us say Pension or Accumulation account).
This presents a puzzling situation. If you have drawn out money from your Pension account, any further contribution will need to be made to the Accumulation account. Such separate management of accounts will invite segregate fee structures; in other words, the higher the number of such funds, the greater the fees.
So what’s different with an SMSF, you may ask? To answer, it is a Pension and an Accumulation fund joined into one. Even if you have started on your pension you won’t need to deposit to a separate Accumulation account.
Benefit 3# Tax benefits (franking credits and more)
The SMSF tax rate on capital gains is nil when you choose to commence on Transition to Retirement Pension or Simple Account Based Pension. As a natural corollary, you also get to lay your hands on any franking credits, as can be reasonably expected on your Australian Share Dividends. Such credits you receive as cash from the Australian Taxation Office (ATO).
I have always been an admirer of franking credits because it effectively eliminates any chance of double taxation (and Australia should be applauded for doing it better than many of its peer countries). It is worth remembering that the franking credits you earn on your share dividends will be commensurate with the overall rate of tax the company pays on each dollar of profit.
For your super funds, you are well within your rights to ask for your franking credits as tax refund if none of your income tax liabilities remain to be disposed and you have still got some franking credits left with you.
Benefit 4# No requirement for segregate fees
We all know that a single SMSF fund can have as many as 4 members. This squarely implies that each member can contribute to the cause of the same SMSF. No need then to pay segregate fee into their Super fund- they can just decide to consolidate 4 people’s Super benefits into one fund.
These are just 4 among the many ways a SMSF can benefit you. Feel free to call me if you have any questions lined up in your ‘doubt’ kitty. I will be glad to assist and inform.
Can you share how you have approached the tax benefits available with SMSF investments?