A quick guide to SMSFs

Paycheck after paycheck, Australians watch 9.5 per cent of their earnings go into designated superannuation funds. With so much money being stashed away, it’s no surprise more and more Australians are opting for self managed super funds (SMSF) that allow individuals much more control over how their nest egg is invested.

SMSFs now account for 29 per cent of the Australia’s total $2 trillion superannuation assets, according to a recent report by the Australian Taxation Office (ATO). Keen to make the switch or just want to understand a bit more about SMSFs and what you can do with them? Here’s our quick, comprehensive guide.

How is an SMSF different from other super funds?

The main difference between SMSFs and other superannuation funds is that you (the earner) are the trustee and have much more say when it comes to how the money is managed and invested.
You are the trustee and have much more say when it comes to how the money is managed and invested.

This might seem appealing, but as they say – with great power comes great responsibility. If you want to take the reins on your superannuation, you need to have the financial knowledge and skills to do so.

What can you do with an SMSF?

One of the benefits of using an SMSF is that you design and implement your own investment strategy to help grow the fund. That means taking the time to research investment decisions or working closely with advisers or other trustees.

Some trustees will use their SMSFs to invest in shares of growing companies or to purchase valuable objects like jewellery, vehicles, and collectibles.

With the real estate market rising in value, many trustees decide to invest in homes, rentals and commercial buildings. Trustees can take out SMSF loans to purchase investment property, and with the right loan and the right property, you can look forward to sound capital gains.

Investing in property is a great way to grow your SMSF.

What it means to take out an SMSF loan

An SMSF loan works the same as any other home loan in that you make a deposit, immediately building equity on the property, and borrow the rest. The key difference is that the loan recipient is the SMSF, not an individual.

This means that loan repayments come from the SMSF, not you. Similarly, tenants pay their rent into the SMSF and when the mortgage is paid off, the title is transferred to the nominated fund. Essential, it isn’t cash in your pocket – it’s money to sustain you in retirement.

When you purchase a home using an SMSF loan, it’s essential that you consult expert advisers who can help you build your assets.

Whether you want to start an SMSF or you already have a fund and want to use it to invest in property, we can help.