Mr Taxman
Change the way you feel about taxes.
Get informed and discover what the taxman doesn't want you to know.
Sharing it with Australia, Mr Taxman is a regular Woman’s Day columist and TV finance commentator
  • click to visit Mr Taxman on Twitter
  • click to visit Mr Taxman on FaceBook
  • rss

10 good reasons to start a self managed super fund

Sep 14, 2010

Self managed superannuation funds, or DIY funds as they are also known, have for some time now been the growth sector of the superannuation market. Nearly 290,000 funds, over 530,000 members and close to $140 billion in assets confirm the continuing popularity of self managed super.

So, what is it that makes self managed funds so attractive? Below are 10 good reasons to consider.

Keep in mind that self managed superannuation is not appropriate for everyone. Speak with your financial planner about whether self managed superannuation is the right choice for you.

1. Take care of the whole family

Self managed superannuation enables the whole family to be members of the same fund. Generally that is difficult at best with other types of superannuation funds.

By having family members and their super assets in the one flexible superannuation fund that is purpose built for you and your family, it makes matters so much easier when considering your own needs and key matters such as estate planning

2. Control and flexibility

Almost every aspect of a self managed superannuation fund offers the opportunity for as much control and flexibility as you want or need. This control begins with the fund’s all-important Trust Deed that can be drafted to your exact specifications.

As trustee of your own fund, you have maximum flexibility in relation to fund investments, tax strategies and estate planning.

Additionally, if you desire, you can utilise the services of specialist companies that do administration and accounting specifically for self managed funds. This can leave you free to concentrate on specifically tailoring your own investment strategy in conjunction with your financial planner.

3. Cost effective

While cost savings will generally not be a key driver of the the decision to start a self managed fund, there are potential savings compared to public offer superannuation funds. The extent of cost savings depends on the type of investments and size of capital in the fund.

Due to the set-up costs and annual fixed costs associated with self managed funds, it is widely considered uneconomic to commence a DIY fund with assets of less than about $200,000, unless of course you plan to make significant contributions to the fund.

The cost effectiveness of self managed funds will usually improve as the fund assets increase. As the fund balance increases, a greater proportion of assets may be directed to wholesale funds and direct assets such as shares and property for example.

4. Broad investment choice

Self managed funds offer almost limitless investment choice. Compare that with your ordinary superannuation fund where investment choice is often limited to capital stable, balanced and growth options.

Compared to your ordinary superannuation fund, a self managed fund allows you to invest in direct equities and property, a variety of overseas assets and alternative assets that might even include appropriate levels of artwork or antiques.

Superannuation law does not prescribe the type of assets that a superannuation fund can and can't invest in. Rather, it sets an investment framework that trustees must adhere to in relation to the investment of fund assets. Importantly, however, all investments need to be made in accordance with the fund’s documented investment strategy.

5. Taxation efficiency

It is the taxation efficiency of self managed funds that attract many, along with the ability to spread those benefits across family members within the fund. Some of the taxation benefits include:

  • The ability to use imputation credits from shares paying fully franked dividends to substantially reduce the tax liability of the fund. Importantly, excess imputation credits can be refunded to the fund – a key point for funds with pension members
  • A maximum of 10% tax on capital gains earned in the accumulation phase and no tax on capital gains made in the pension phase
  • The ability to structure very tax-effective estate planning strategies that can include the payment of pensions upon death to beneficiaries including children.

6. Ability to carry out RBL strategies

Self managed superannuation funds provide a good deal of flexibility when it comes to Reasonable Benefit Limit (RBL) strategies.

Complying income streams can be structured within self managed funds and will often be superior to those offered by financial services providers in terms of the rates of return available.

With certain types of income streams, there is also the chance that the underlying assets may be surrendered upon death (to the fund manager or life company), as opposed to a self managed fund where they may be retained in the fund for the benefit of other family members.

Even if you don't have a RBL problem at retirement, a self managed fund allows you to freely move underlying assets with absolutely no RBL implications – not always possible with an allocated pension purchased from a financial services provider.

7. A long term retirement structure

A self managed superannuation fund has the added advantage that it can also pay a pension from the same fund. Many ordinary superannuation funds do not allow income streams to be paid from the same fund - instead they need to transfer out to another fund that allows a pension to be paid.

The ability to operate the same self managed fund through accumulation and into retirement and beyond really does make self managed funds an attractive long-term financial planning structure.

8. Estate planning opportunities

For specifically tailored estate planning strategies, there are no superannuation funds that can match the flexibility that is possible within a self managed fund. As already mentioned, estate planning is a key component of family needs and self managed funds allow these needs to be specifically addressed.

Whether it be the ability to pay a tax-free lump sum to a spouse, or a tax effective allocated pension to children, self managed funds can provide the tailored flexibility that generally cannot be replicated in other superannuation vehicles.

9. Less onerous reporting requirements

Self managed superannuation funds are subject to less onerous reporting obligations, such as member reporting and annual return deadlines.

Due to the closely held and self-assessing nature of these funds, which are regulated by the Australian Tax Office, they are allowed various concessions through legislation designed specifically for self managed funds.

10. Be careful, you might even have fun!

It is apparent that more and more people actually enjoy being in control as a trustee of their own self managed superannuation fund. Whether you are still working and accumulating super for retirement or you have retired, you have the option of getting as involved as you please.

Some people enjoy getting involved with the day to day administration of the fund and certainly, for some, it can provide an enjoyable extra 'hobby' during their retirement years.The beauty is that the choice is yours.

Tags: EmployeesFamilyRetirementSuper

Author: Mr Taxman


"SMSF is the latest financial accessory for high income earners and other investors who want control over their investments. After going through this article, I decided to start a self-managed super fund. <a href="">SMSF Strategies</a> "

By: ActiveSMSF on Jan 09, 2013 6:22AM

Post a New Comment

Media Availability

Are you interested in booking Mr Taxman for a speaking engagement or requesting his viewpoints for an article?

comments-rhsLatest Comments

  • "Attention!!! Do you need Urgent loan? We give out loan to interested individuals who are seeking loan with good faith and with the interest rate of 3%. Are you seriously in need of an urgent loan?..."

    By: Alexander Comfort at Apr 23, 2017 1:40PM

    Post: Super, mortgage, small business benefits: How to get more money from your tax refund in 2016

  • "I have a HECS debt from 1998 that I have never repaid as I moved to UK in 2000 and unexpectedly stayed! Will this debt ever need to be repaid if I continue living in UK? If I return to Oz to..."

    By: Steve at Apr 23, 2017 8:26AM

    Post: Two important dates for those with HECS/HELP debts

  • "I really don’t know much about this scam thing and at the same time, no one wants to be on the losing side. But i just came across a good hacker who helped me hack my ex boyfriends text messages..."

    By: karr at Apr 22, 2017 8:29PM

    Post: Marriage


    By: KEISHA at Apr 22, 2017 10:19AM

    Post: Marriage

  • "Hi Mr Taxman, I have been looking into my HECS debt because I feel that I should have paid it off by now. In 2011 the debt was at $21 399. I started working full time in 2013 and have been paying..."

    By: Natalie at Apr 20, 2017 9:06AM

    Post: Two important dates for those with HECS/HELP debts