Implementing a self-managed super fund (SMSF) can be a powerful strategy for high-performance individuals wanting more control over their financial future. SMSFs offer a unique blend of flexibility, control, and potential tax benefits, making them an attractive option for those seeking to maximise their superannuation. In this article, our Director of Wealth, Cayle Petritsch, explores the key benefits of SMSFs and why they may be the right choice for individuals aiming for greater financial independence.

Greater control over investment decisions

“For most of our wealth clients, having greater control over investment decisions is the most compelling reason for establishing an SMSF,” Says Cayle.

Unlike traditional superannuation funds, where investment choices are often limited to pre-determined options, an SMSF allows members to tailor their investment portfolio according to risk tolerance, financial goals, and personal preferences. This includes the ability to invest in a broader range of assets, including direct property, shares, and alternative investment opportunities in unique classes like precious metals, cryptocurrencies or collectibles, depending on the fund’s strategy and compliance with regulatory requirements.

“This level of customisation is particularly valuable for high-performance individuals with specific investment knowledge or a desire to pursue niche markets.” Says Cayle Petritsch

Large super balances make them cost effective

While SMSFs can be more expensive to set up and manage than traditional super funds, they can become cost-effective for individuals with larger super balances. The costs associated with an SMSF, such as accounting, auditing, and administrative fees, tend to be fixed rather than percentage-based. As your SMSF grows, the costs become proportionally smaller, making it a more economical option for those with significant assets.

For individuals focused on ensuring that their wealth is efficiently passed on to the next generation, SMSFs offer flexible estate planning options. With an SMSF, you can nominate specific beneficiaries and dictate how your superannuation benefits will be distributed upon your death. This flexibility allows for tax-effective strategies, such as using reversionary pensions or implementing binding death benefit nominations to control the distribution of assets.

“An SMSF enables multi-generational investment strategies. For example, you can involve family members in the fund, allowing for the seamless transfer of wealth and ensuring that your superannuation continues to grow and benefit your family in the long term”. Says Cayle

“As the trustee of your fund, you have full visibility into all transactions, fees, and investment performance. This level of transparency ensures no hidden costs, and you clearly understand how your superannuation is managed. This matters to many of our clients with a sound financial literacy level and value making financial decisions”.

Tax advantages

An SMSF provides tax advantages that can be particularly beneficial for high-income earners. The income generated within the fund, including rent, dividends, and interest, is generally taxed at the concessional superannuation rate of 15%, often lower than personal income tax rates. Additionally, capital gains on assets held within the fund for more than 12 months are taxed at a reduced rate of 10%.

An SMSF can result in even greater tax benefits when transitioning to the pension phase. Once the fund begins paying a pension, the income and capital gains generated from the assets supporting the pension are tax-free, potentially maximising retirement income.

“SMSFs allow individuals to tailor their contribution strategies to suit their financial situation. This includes making personal contributions, salary sacrifice contributions, and contributions from selling certain personal assets (subject to conditions). This flexibility enables SMSF members to optimise their superannuation contributions and take full advantage of concessional and non-concessional contribution caps”. Says Cayle

Enhanced investment opportunities

SMSFs offer those interested in leveraging their investments the ability to use Limited Recourse Borrowing Arrangements (LRBAs) to purchase assets such as property. This strategy allows the fund to borrow money to buy an investment property while ensuring that other assets within the fund are protected in case of default. LRBAs can be a powerful tool for wealth creation, particularly for individuals with a high-risk tolerance and a long-term investment horizon.

While SMSFs offer numerous benefits, they are not suitable for everyone. Managing an SMSF requires significant time, knowledge, and responsibility. As the trustee, you are responsible for ensuring compliance with legal and regulatory requirements, which can be complex and time-consuming. Additionally, the costs associated with establishing and running an SMSF may outweigh the benefits for those with smaller super balances.

For high-performance individuals with substantial superannuation savings, a strong understanding of investment strategies, and a desire for greater control over their financial future, an SMSF can be a highly effective vehicle for wealth accumulation and retirement planning.

How can we help your SMSF

Whether you are thinking of implementing an SMSF as a retirement strategy or have an established SMSF that requires review, the wealth advisory team at North Advisory comprises highly experienced and qualified professionals who specialise in Self-Managed Super Fund implementation, management, and advice.

Cayle Petritsch – Director and Wealth and Investment Advisor, is a leading expert in SMSF management. He has helped many Australians maximise their retirement through carefully considered retirement planning and wealth management strategies.

Contact Cayle today and secure your retirement future.