Over the past few years the growth of SMSF has been exceptional. SMSF have become a most common way to save for retirement for a lot of reasons, like providing more control and choices over the investment decisions, enhanced flexibility around estate planning and tax and much more. This super fund is certainly not designed for everyone. Its appropriateness will depend upon the abilities and skills of the members and on the money available for investment. Also, you must be well prepared to track and research your super investments regularly if you want to ensure fruitful retirement. Here are some of the key advantages of SMSF which make this fund such a powerful and popular retirement vehicle.
Investment choice – The key benefit of the SMSF has always been superior investment control and wider investment choices (direct property, art work, direct shares, hedge funds, etc.) compared to other types of funds. The real advantage isn’t just in “choice”, but also in the opportunity to have more sophisticated investment strategies.
Tax control – Another benefit that is becoming more widely know is the flexibility and tax control members of the SMSF have. Through either internal structuring or strategic investment planning, tax can be significantly reduced. There is a perfect flexibility in terms of handling tax liabilities, as the SMSF only does single tax return even though there can be up to four members in a single fund.
Estate planning – There are many advantages of SMSF and another one is estate planning benefits. This benefit includes having opportunity to leave tax advantaged income streams to dependent beneficiaries with control when they accept a lump sum, and to efficiently look after kids beneficiaries in a way that no other structure can.
Borrowing – There were new rules introduced few years ago which allowed SMSF to borrow money under specific type of arrangement. These rules can be completely utilized by SMSF and tie in with the “investment choice” benefits.
Cost – For many people, the cost of running a superannuation fund can be lower than that of any other commercial super fund. The main cost for this fund is the completion of the annual administration requirements. For example, if you have $300,000 in your SMSF and you pay $2,000 in annual administration, your cost is 0.66%. Compared to most commercial funds, this makes SMSF very cost effective.
Pension planning – For those people nearing the retirement phase, the SMSF gives the most seamless transition from gathering in the flexible income streams. The opportunity to take tax free income streams on retirement is huge incentive, and as seen by the above advantages of SMSF, this fund provides a high level of flexibility in terms of how you go about it.
Asset protection – The asset protection is very important in the world where bankruptcy and litigation has become commonplace. In each of these situations, your benefits are protected. Once you learn the intricacies, you will understand why the SMSF is such a effective and popular retirement vehicle.