1. Take Control

One of the biggest benefits of setting up a SMSF is that people start to take control of their destiny. 

Superannuation is often your biggest asset (even bigger then your house), but most people don’t understand how much they have. People with SMSF’s are more engaged with their super which helps it grow quicker for their benefit. 

2. Choose your own Investments

SMSFs have access to a broader range of investment assets than conventional superannuation funds. As well as the usual cash, fixed interest and managed funds, SMSFs also have access to investments such as residential and commercial property. Another popular investment is direct shares. 

3. Tax-effective insurance coverage

A SMSF is an excellent vehicle for holding death and disability insurance to ensure that you and your dependents are looked after.

There are two main advantages to holding insurance in an SMSF:

– The premiums are tax deductible to the SMSF 
– The premiums can be funded from your superannuation contributions or account balance.

4. Borrowing to invest

New rules introduced a few years ago allow SMSFs to borrow money to invest, subject to specific criteria. 

This makes it easier for SMSFs to acquire larger assets such as direct property, and hold the investment in the tax advantaged superannuation environment.

It is crucial that a borrowing arrangement is set up correctly to comply with the legislation. However it can be an effective strategy to boost your retirement savings through the benefits of leverage.

5. Avoiding Capital Gains Tax by selling assets in pension phase

Once you start a pension in a SMSF, the investment assets that support that pension are subject to 0% tax in the fund. 

By timing the sale of assets in the fund, substantial tax savings can be achieved such as paying zero Capital Gains Tax.

Superannuation is likely to be a substantial asset, particularly for people with SMSFs who have higher average account balances. 

This means it is essential to ensure that superannuation funds will be paid to your dependents in the most tax effective way.

7. Transition to Retirement

Once you reach age 55 you can start a pension in your SMSF – even if you’re still working.

This can be a dynamic strategy as pension payments are tax effective and can supplement your income, particularly if you are moving to part-time employment.

One of the greatest advantages of this strategy is that assets within the fund that support the pension are subject to 0% tax.

The advantages of this strategy are:

– Salary sacrifice contributions are taxed at 15% rather than your marginal tax rate
– Pension payments are tax free over age 60. Between ages 55 and 60 pension payments are taxable but receive a 15% rebate.
– Assets that support a pension are subject to zero tax in the fund.
– The combination of these three advantages can result in substantial tax savings to help boost your retirement savings.