What is an SMSF?
A self-managed super fund is a private super fund that you manage yourself, giving you the power to choose the investments and insurance options.
Greater control of investment choice – The ability to become more self-directed and invest in ways that are not available in most super funds.
Means to hold business premises - For business owners they can potentially acquire the commercial premises they run their business from and rather than the business pay rent, the business in turn can pay commercial rent to the SMSF. The maximum rate of tax paid on the net rent during the accumulation phase is 15% and 0% in pension phase and in retirement.
Economy of scale - Generally the administration costs of an SMSF are fixed no matter the balance. Therefore, if the SMSF has a high value, the fees could be lower than what they would otherwise be in a pooled fund.
Costs involved in running an SMSF can be quite high particularly when the assets held in the SMSF are low in value. Many SMSF costs are fixed and can erode low value balances.
Penalties for non-compliance - The fund may have its complying status removed. This could attract higher tax. Furthermore, trustees could face civil and criminal sanctions for serious breaches.
Lack of diversification - Some SMSF’s are established to acquire a large single valuable asset (ie direct property). This means the fate of the fund is largely dependent on the performance of that asset.
Persons who want greater control and want to acquire specific assets.
Business owners who desire ownership of their business premises in a tax-effective manner.
Very high super fund balances which want to reduce overall fees with fixed costs.