There was an article published on the 17th June 2014 in The Australian newspaper suggesting that self-managed superannuation funds (SMSFs) have significantly outperformed their APRA-regulated rivals in six out of the past eight years.
The study found that on average SMSFs had beaten the average APRA-regulated fund by 22.5 per cent over the period, after the payment of all related costs. The numbers indicate that a $500,000 investment in an SMSF at the start of the 2004-05 financial year would have returned $345,571 net by June 30, 2012, an increase of 69.11 per cent, compared with the average APRA-regulated fund returning $190,100 net, a lift of 38.02 per cent.
Contrary to plenty of perceptions out in the market place, this is proof that SMSF’s do rate very well in terms of performance when compared against other funds.
I see a number of reasons why the general public now feel more comfortable with DIY Super and why they are growing at twice the rate of other funds;
You, being the trustee and the member, have complete control over what happens inside your SMSF. If you are not happy with how your SMSF is performing, you can change the mix of your investments. You decide when investments are bought and when they are sold, you decide how much is invested into a particular asset class – no one else. All investment decisions remain in your total control.
- Investment choice and flexibility
You can invest in just about anything as long as the investment strategy allows it. Therefore, this means you can purchase land, commercial or residential property, a seaside cottage or even a bottle of expensive wine, as long as it is in line with your investment strategy and the ATO’s rules.
Earnings are taxed at 15 per cent inside the SMSF and under certain conditions can be taken out tax-free when you retire or reach preservation age. Compare that to investments outside your superannuation, which might be charged at your marginal tax rate (likely to be 34% or higher). Also, if your investments have grown in value, Capital Gains Tax will also need to be paid on realisation of the asset regardless of your retirement status. This could possibly be taxed at zero inside of a SMSF structure.
Proportionately decreasing fees depending on the size of the SMSF is popular. In certain circumstances SMSFs can be cheaper to run than either industry or retail funds. Retail or industry funds usually have costs allocated as a percentage of the assets of the superannuation fund. SMSF have fixed dollar costs that are proportionally cheaper as your superannuation fund gets larger.
- Unique investment strategies
There are many unique investment strategies that can only be undertaken through a SMSFs. Gearing inside of a SMSF or using your SMSF to borrow to purchase assets such as property is an opportunity not available to regular industry or retail funds.
DIY Super is certainly growing and the best thing to come out of all this is that many retail and industry funds have had to stand up and take notice – if not, they will lose clients and investors.
If you are keen to find out more about how a Self-Managed Super Fund could work for you we invite you to attend our next DIY Superannuation seminar in Frankston on Wednesday the 10th of September.
Get in touch and look us up at http://www.zjl.com.au