Benefits of setting up a Self-Managed Super Fund (SMSF)

Self-Managed Super Funds (SMSFs) have become a popular choice for Australians looking to take full control of their retirement savings. Unlike traditional retail or industry funds, SMSFs offer a range of benefits, if you’re looking to invest in property, reduce tax, or take full control of your retirement strategy. However, they also come with responsibilities and risks, making it essential to understand how they work before diving in.

Here are five key benefits of SMSFs to help you decide if this path aligns with your financial goals:

1. Greater control over Investments

An SMSF gives you full control over how your superannuation is invested. Unlike retail or industry funds, you can select specific assets, such as property, shares, term deposits, or even collectibles (with strict rules). This control allows you to tailor your investment strategy to match your financial goals, risk profile, and retirement timeline.

2. Property Investment & borrowing capacity

One of the biggest drawcards of SMSFs is the ability to invest in property using borrowed funds through a structure called a Limited Recourse Borrowing Arrangement (LRBA). This means:

  • Your SMSF can purchase residential or commercial property with a loan.
  • Only the asset purchased is at risk if the loan defaults – not the entire SMSF.
  • It’s a powerful way to leverage the fund’s capital to grow retirement savings.

Borrowing Capacity Tip: While lenders generally require a larger deposit (20–30%) and solid cash flow within the fund, it’s still a strategic way to access property markets within your super environment.

3. Significant tax benefits

SMSFs are subject to favourable tax treatment under superannuation rules:

  • Investment income is taxed at 15% during the accumulation phase.
  • Capital gains on assets held longer than 12 months are taxed at an effective rate of 10%.
  • Once the fund is in the pension phase, investment income (including rental income) can become entirely tax-free.
  • Super contributions (within annual caps) are also generally taxed at 15%, which may be lower than your marginal rate, offering additional tax-effective savings.

4. Cost efficiency for larger balances

While SMSFs have fixed setup and ongoing administration costs, they often become more cost-effective than retail or industry funds once the balance exceeds $250,000-$300,000. Pooling assets with family members (up to six members) can also help build a larger fund faster.

5. Estate planning & flexibility

SMSFs offer more control over estate planning strategies, including:

  • Nomination of beneficiaries with binding death benefit nominations.
  • Structuring benefits in tax-effective ways for heirs.
  • Planning around intergenerational wealth transfer.

An SMSF can be a powerful vehicle for wealth building, especially if you’re looking to invest in property, reduce tax, or take full control of your retirement strategy. However, it also comes with compliance responsibilities and risks, so it’s essential to get tailored financial and legal advice before proceeding.

Getting help

Chat with me to explore to see if SMSF is the right fit for your situation. Contact me at adele@aphl.com.au for guidance.

Published On: 7 May 2025