Australians in greater numbers are embracing the concept of a self-managed super fund (SMSF) to hold their retirement savings. There are many reasons for this but the most frequently cited is control. Disappointment with the recent poor performance of publicly available super funds has given rise to an “I could do a better job myself” attitude.
Another common reason for starting an SMSF is to access a wider choice of investments, particularly direct property. An SMSF allows you to invest in direct residential or commercial property, and even allows you to borrow to invest in property. Fund holders can also use their SMSF balance to complete renovations on any property owned by the SMSF.
A further advantage for small business owners is the ability to purchase commercial premises for their business to operate from, using their SMSF. Of course, a long-standing rule of SMSFs is that all assets and transactions must be at arm?s length, with extra scrutiny placed on any related-party transactions. For example, if the SMSF then leases the premises back to the business, the rent must be at commercial rates.
The opportunity to pay lower fees through DIY super has great appeal. Compared to other industry/retail superannuation funds, SMSFs are not as costly to maintain. Annual compliance fees range from $800–$2,000, depending on the complexity and asset values of the fund. The bigger the fund balance, the better the flat fee structure works in comparison to the percentage of the balance which is normally charged by standard super funds. However, it may not be viable to use an SMSF if the assets are less than $200,000 in value.