Costs & Benefits of SMSF

Costs:

  • Initial cost to set up the SMSF – There are accountants in the market charge $660 for setting up a SMSF with individual trust plus another thousand dollar for corporate trustee.
  • Borrowings – There are restrictions on borrowings. Refer investment restrictions for more details.
  • Time – Members would need to spend time on managing their investments as well as administering the fund.
  • Compliance – A SMSF is required to prepare an audited financial statement and tax return each year.

Benefits

  • Control & Flexibility – The fund’s assets are controlled by the trustee, in most cases would be the members themselves, so the members would have full control of how they want to invest. There are wide range of products can be invested in, such as shares, managed funds, collectable, investment property and unit trusts.
  • Pool funds together – SMSF can have up to four members therefore allows family members to pool funds together.
  • Tax saving – Within a complying SMSF, all earnings and contributions will be taxed at 15%. When members reach age 65, all contributions, earnings and even pension payments will be tax free. If members purchased a property via SMSF and they sell the property subsequently after age 65, there will be no capital gain tax. There are wide range of tax saving on effective tax planning, investors are advised to consult their accountants or financial advisors for more details.
  • Lower fees – A SMSF would have lower cost of maintenance compare to other retail superannuation funds. Annual compliance fees would range from $800 to couple of thousand dollars depending on the complexity and asset values of the fund. Whereas retail superfund would charge on average 2% on the balance of the fund. Therefore if a SMSF has assets less than $200,000, it may not be a viable to use SMSF.
  • Asset protection – A SMSF is a separate legal entity, therefore assets within the SMSF is protected from creditors if the member goes into bankruptcy.

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