Self-managed super funds (or SMSF as they are generally referred to) continue to increase in popularity. They are now the largest part of the superannuation sector in terms of the amount invested.
Why do people flock to SMSFs? Studies suggest this is because control may be the main motive that makes Australians opt to save their money for retirement.
However, when they have this level of control, what do people really do in terms of investing wisely? In the context of financial planning with the variety of smsf tax return clients, here's what we're seeing at guidance financial services:
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Direct shares, not managed funds:
There's a substantial cost saving that can be accessed when you're a buyer and hold investor by owning shares in a direct manner instead of through the fund manager. But, more importantly, the after-tax returns could be higher, since there is less trading, which means lesser capital gains taxes.
Buying and borrowing an investment property.
With news regarding changes to the rules governing borrowing by SMSFs finally coming out We are seeing a lot of individuals decide to own an investment property to supplement the retirement funds they have.
Business owners who purchase their premises for their business through their super funds:
This method has been used for a number of years and has become more well-known now that SMSFs can be able to borrow.
Hold more cash.
This is frequently used as a reason to criticize SMSFs, but we discovered it was the case during GFC the capability to store the assets in cash saved many heartaches.