Like anything else on this planet, self-managed Super funds, too, are not meant for everyone. For starters, there is a need to have close to formidable amount of money in your kitty. Also, you need to have the acumen to manage your affairs yourself; hence, the term ‘Self-managed’. With this said, the popularity of SMSF is enough evidence of the fact that it has got plenty of benefits. Let us go through the advantages and disadvantages of self-managed Super funds.
Advantages of SMSF
- You are at the helm of the affairs, so you have got complete control over where you want to invest your money.
- The degree of flexibility is awesome and you can choose bonds, shares, properties, and collectables, among other things. It is well within your disposal to modify or completely shift your asset base at any time you deem fit.
- You are supposed to benefit from your fund. It is only reasonable to expect so, but the good part is that SMSF money also benefits those who survive you. In the event of your demise, your spouse, children and family can go on extracting benefits from it. This is why estate planning is such an integral part of the workload of SMSF trustees.
- There are tax concessions aplenty to be had. Take for instance successful deferral of exorbitant capital gains tax lined up at the pension phase. You can also seek aid from the credits on franked dividends. They are not thrust with the normal 15% tax slab.
- Largely, the funds are held by trustees who are close to each other so there is less chance of idea clashes. This is why rules can be bent and morphed as per liking. For instance, self-managed Super funds can run simultaneously in the pension and the accumulation phase if the trustees are willing.
Disadvantages of SMSF
- The annual fee structure and consultancy charges pertaining to SMSF management can make it an expensive thing. Remember we talked about “formidable amount of money in your kitty” in the first paragraph.
- It is outside prudential regulations so issues of compliances are vague to some extent. For the same reason, you do not have access to the Superannuation Complaints Tribunal either.
- The management of affairs lie with you and the other trustees so you have got to be completely up to date with the legislative and legal changes, of course apart from the many financial changes in the way SMSFs are going to be run.
How do you measure SMSF’s advantages against its disadvantages?