Ever thought about taking control of your retirement savings? That’s what a Self-Managed Superannuation Fund (SMSF) lets you do. It’s like having your own personal retirement savings plan that you get to manage and decide where to invest. Let’s talk about what SMSFs are, why they’re getting more attention these days, and how this structure can be a smart way to save on taxes.
Why Are SMSFs Popular?
Think of an SMSF as a personal savings account for when you retire. You decide where to invest your money, which could grow over time, if you invest wisely. You also can benefit from paying less tax. But, there’s a bit of a catch. You need to have a decent amount of superannuation to start your own SMSF. In Australia, your employer pays 11% of your earnings to your superannuation fund. You can’t access this money until you’re at least 60, but with an SMSF, you can start making decisions about it now.
Before You Start an SMSF
If you want to start an SMSF, you don’t have to do it alone. There are the experts who can help you set things up as this is a very technical process. Just know that if you don’t have at least $150 – 200K saved up, the costs to start and keep your SMSF going might be too high to make SMSF financially vital. These costs include fees for setting SMSF up, keeping it legal, and doing yearly tax stuff, including compliance and audit.
Why Go for an SMSF?
One of the big draws of an SMSF is the tax advantage. The most you’d pay on the money your SMSF makes is 15%. Sometimes, you might not have to pay any tax at all. Who wouldn’t like that? With an SMSF, you’re in control of how your retirement fund is managed and you can invest in lots of different things, like shares, listed and unlisted unit trusts, precious metals, cryptocurrency and even commercial or residential property.
Buying Property with an SMSF
Owning property is a big dream for many Australians, but it’s not always easy. SMSFs can buy property too, but there are some strict rules to follow. If you want to borrow money within your SMSF to buy property, you’ll need to deal with some complex rules. It’s usually best to ask an expert in SMSFs for help to make sure you do it right. However, the upside is that you can use your superannuation as a deposit and borrow up to 80% from the bank to make your dream of owning the investment property come true.
Making the Most of Your Money
Having an SMSF can mean more ways to save on taxes, invert in the preferred asset and plan for the future. You can engage the right professional, such as a buyers agent or financial adviser to help you to choose the right assets. The fees of the professional help will be tax deductible in your SMSF (subject to some limitations). It’s about finding strategies that suit you best, especially when you’re planning for what happens after you retire.
The Downsides
Running an SMSF isn’t all smooth sailing. It can be expensive, and you need to know about investing or engage the right professional.
If you make a bad choice, you could lose money. There are a lot of rules, too, and if you break them, you could end up with administrative fines, trustee disqualification and even jail time.
Wrapping Up
An SMSF can be great if you understand how to manage your investments and follow the rules. You’ll need to work with professionals who can guide you. If you’re up for it, an SMSF can be a powerful tool for planning your retirement, giving you freedom and potentially saving you money.
At Easy Super, we helped thousands of clients to grow their wealth via SMSF. We would love to assist you in your journey to a happy retirement. Book a free discovery call with our SMSF Specialist, Natalia Clack here.