Making the most of YOUR nest egg

Superannuation & SMSF – The differences

Superannuation is an excellent, tax-effective way to save for your retirement. Plus, with the Australian government’s plan to increase the superannuation guarantee, your nest egg will grow even faster. Superannuation also enjoys special tax rules giving you the ability to reduce your tax through deductible contributions, so making informed choices will also help increase your nest egg.

Many clients ask us: what is the difference between managed superannuation funds and SMSF (Self-managed superannuation funds)?

The difference between a SMSF and other types of superannuation funds is that the members of a SMSF are usually the trustees. This means that the members of the SMSF run it for their own benefit and are responsible for complying with Australian superannuation and taxation laws.

Below is a summary, but make sure you make an appointment to discuss your situation.

Superannuation choices are critical to retirement planning

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Managed Superannuation Funds have members. These funds invest the total of all members superannuation into different assets. They employ fund managers to do this and charge each member a fee, usually a percentage of the balance.

A problem arises when an employee changes jobs and the new employer uses a different fund – leaving the employee (you) with multiple accounts and therefore, multiple fees! Of Australia’s 15 million superannuation fund members, 40% have multiple accounts, which collectively costs them $2.6 billion in additional fees each year.

At My Financial Advantage, we help you:

  • Find out if your super fund is a good fit

  • Consolidate multiple super accounts

  • See where your super is invested

  • Review the amount / types of fees you are paying

  • Ensure you have beneficiaries

  • Decide if extra contributions would reduce your tax

SMSFs are widely recognised as offering greater control and flexibility over investment choice. Although traditional industry and retail funds offer a wide range of investment options, the ability to invest in direct property and collectibles are features unique to SMSFs. For small business owners, the ability to purchase a commercial property through an SMSF can be attractive.

While these benefits appeal to many people saving for retirement, there are a number of issues and risks associated with SMSFs that you need to consider before deciding whether an SMSF is right for you.

Benefits of an SMSF can include:

  • Greater control over how your money is invested.
  • Greater flexibility in relation to transferring assets.
  • Timing of transactions that may have a bearing on taxation.
  • Potential cost savings (fees).

On the flip side:

You need a large amount of money in the fund to make set up and annual running costs worthwhile. You also need to budget for ongoing expenses such as professional accounting, tax, audit, legal and financial advice.

Plus, the time, aptitude and experience to research investments and make sound investment decisions. Along with the ability to manage the fund and understand your role and responsibilities as the Trustee.

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