A Self Managed Super Fund or SMSF is a small superannuation fund designed for people who want greater control and value from their superannuation. With 400,000 SMSF in operation to date, and the value of assets reaching to around $350 billion, it seems that it is becoming the top retirement vehicle of choice.

Self Managed Super Fund has become largely popular due to the fact that holders of this policy have greater control over their investment assets in contrast to the regular super funds which are controlled by fund managers.

Another good reason for people to start using a self managed super fund is that you can pay your premiums using it. Through your SMSF you can pay your premium with pre-tax money which then reduces the tax you pay by dropping you to a lower tax bracket.

SMSF and Life Insurance

Just like commercial superannuation funds, you can also purchase insurance through your self-managed super fund. There are basically three types of insurance available through your SMSF.

• Life Insurance – It is an insurance product which pays a lump sum benefit to the beneficiaries of the insured in event of the insured’s death. The lump sum you can receive from this benefit can be used to pay off extra funeral expenses and other financial obligations left by the insured.
• Total and Permanent Disablement Insurance or TPD – It is another type of insurance product that either pays a lump sum or income stream to the insured in the event of disablement due to injury or accident. The payment can be used to cover extra medical and rehabilitation costs incurred by the disability.
• Income Protection Insurance – This insurance product pays you 75% of your gross monthly income if you become unable to work because of an illness or injury. This income stream helps you with paying monthly bills and expenses, plus providing assistance should your spouse cut off some of his or her working hours to take care of you.

Benefits of Self-managed Super Funds

Aside from control and tax concessions on life insurance premiums, there are other benefits a self managed super fund has which add to its popularity.

Investment Choice

One of the key drivers of an SMSF is its ability to be structured to meet your specific investment needs. It also has a wider choice of investment choices, such as properties, shares, stocks, and cash, compared to commercial super funds. It also allows you to have more sophisticated investment strategies. For example, you, as a business owner, can lease your business real property from your self-managed super fund, borrow to invest via instalment warrants, and direct property investments.

Estate Planning

Through an SMSF, you can devise a strategy which would specifically accomplish what you really need and want with exceptional tax efficiency. This means that you can leave tax advantaged income streams to your beneficiary with control around when they receive their lump sum benefits. It can also make binding nominations which do not expire in contrast to commercial super funds which need to be regularly updated. These are some of the reasons why SMSF is viewed as a tax advantaged intergenerational wealth vehicle when it comes to estate planning.

Tax Control

Through strategic investment planning and internal structuring, your tax can be significantly reduced, or totally eliminated when you are eligible for refunds from the ATO, especially for those who are in retirement. Through an SMSF, you also have the flexibility in dealing with the tax liabilities of the fund. Furthermore, a strategy is available where you can benefit from huge tax deductions for future years.

Pension Planning

For those who are near their retirement phase, your self-managed super fund allows you a perfect transition from accumulation to flexible income streams. Like all the superannuation funds, SMSF allows you the ability to take tax-free income streams on retirement within the superannuation environment.

Asset Protection

Asset protection under your SMSF can prove to be very beneficial in a world where legal actions and bankruptcy are as common as the air you breathe. In these events, your assets are protected even if you have to withdraw some of this.

Borrowing

Just like its commercial superannuation counterparts, SMSFs are allowed to borrow money through a particular arrangement. Through this scheme, owners of SMSFs find it easier to acquire direct property since property is a huge asset which requires huge amount of loans.

Cost

In some cases, running an SMSF is much cheaper than maintaining a commercial super fund. Although there is no industry standard in terms of cost, you could see a significant amount of savings if you were to compare the average cost of an SMSF to a commercial superfund.

Factors in Choosing an SMSF

If you are wondering whether Self-managed super funds are for you, you can begin assessing it through these questions:

• Do you want maximum control over your superannuation assets?
• Are you willing to take certain regulatory responsibilities placed on trustees of SMSFs?
• Are you willing to work at managing your investments?

If the answer is yes on all three questions, then you might begin familiarising yourself more with the ins and outs of SMSFs. There are a lot of tax concessions you can gain from it as well as life insurance premium discounts which will enable you to save a lot of money.