SMSF Advantages & Disadvantages: What Every Trustee Should Know

What are the benefits of establishing an SMSF?

Setting up a Self-Managed Superannuation Fund (SMSF) offers numerous advantages to discerning investors who seek greater control over their retirement savings.

1.Flexibility and Control

With a self-managed super fund (SMSF), members have full control over the direction of their retirement savings, can decide what to invest in, when to invest it and how it will be paid out at retirement, and have the flexibility to adjust the fund's investment strategy in line with their personal preferences and market conditions. This enables strategic decision-making to take advantage of new opportunities and provides a more personalised approach to retirement savings.

2.Wide Range of Investment Options

SMSFs can invest in almost anything, as long as it meets the requirements of the Australian Taxation Office's (ATO) Principles for Eligible Superannuation Investments. This includes direct listed securities, direct property, managed funds, cash and time deposits, and even rarer investments such as collectibles, V/Cs and start-ups. Through moomoo, you can invest in more than 26,000 stocks, ETFs and US stock options across Australian and global markets in one stop, easily build an investment portfolio that suits your needs and achieve wealth growth for your SMSF.

3.Scaling up for More Opportunities

Typically, a self-administered pension fund can have up to six members. Pooling the funds of six investors provides a greater scale to access investment opportunities that may not be available to you as an individual investor. It can also help reduce fees by pooling your assets and sharing costs, resulting in potential cost savings.

4.Tax Incentives

SMSFs enjoy a lower tax rate of 15 per cent on investment income and capital gains tax, and no tax on assets that fully support the income stream, such as an annuity. They are entitled to the same tax concessions as superannuation, so your investment returns are taxed at a maximum rate of 15 per cent, rather than at the personal income tax rate of up to 45 per cent. In addition, any payments received after the age of 60 are tax-free.

5.Cost Structure

SMSF management costs are typically fixed, which means that the ratio of fees to the total portfolio decreases as the portfolio grows. Compared to other types of superannuation funds, this can result in greater net returns over time from cost savings, particularly when super is pooled through a multi-member SMSF. moomoo features a low-cost trading system that reduces users' costs for CHESS-sponsored trading with a fixed fee as low as A$3 per trade, and options trading fees start from as low as $0.5 per contract.

6.Limited Recourse Borrowing Arrangement (LRBA)

SMSFs can borrow to acquire certain asset, through a Limited Recourse Borrowing Arrangement (LRBA). Under an LRBA, if the loan defaults, the lender’s recourse is generally limited to the asset acquired with the borrowed funds, helping to protect other assets within the fund. While borrowing may provide the potential to enhance returns, it also increases risk, including the risk of over-leveraging, and trustees should carefully consider whether it is appropriate for the fund’s circumstances and investment strategy.

7.Estate Planning

Self-managed super funds can provide greater flexibility or control over estate planning if a member of the fund dies. The SMSF trust deed can also provide how and to whom death benefits are distributed, as long as these are in accordance with super law. The deed may also allow death benefits to nominate or exclude certain beneficiaries, and benefits may also be distributed to beneficiaries in a tax-efficient manner.

8.Transparency

As a result of having full control over investment decisions, one of the other key benefits of a self-managed super fund is full transparency of the fund's portfolio, past investment decisions and current and expected future investment strategies.

Realizing these operational processes, potential trustees can better appreciate what is involved in managing a self-managed super fund and make informed decisions about whether an SMSF is the right choice for their retirement planning.

What are the disadvantages of SMSF?

Despite the obvious benefits, setting up a self-managed super fund comes with its own set of challenges. Below are some of the key factors to consider and a careful decision needs to be made when deciding whether to consider an SMSF.

1.Investment Sophistication

Given that SMSF trustees have full control over the investment decisions (and performance) of the fund, they should understand how the investment markets work, keep track of investments and transactions, and ensure the fund is adequately diversified to help manage risk. There is also a need to keep abreast of legislative changes affecting self-managed super funds. moomoo provides AI intelligent analysis tools, real-time market insights, professional research reports, and risk-free options paper trading functions, helping SMSF trustees quickly get familiar with market rules, polish investment strategies and achieve steady growth of SMSF wealth.

2.Time Consuming

The establishment and oversight of an SMSF can be a labour-intensive process, given the substantial time commitments involved in administering and managing a self-managed super fund. If you have limited time available, a self-managed super fund may not be the most suitable option. moomoo offers automatic recurring investments and advanced order functions, which can automatically execute periodic investment plans and set take-profit and stop-loss requirements, helping users effectively reduce the daily management time of their SMSF and making SMSF investments more hassle-free and efficient.

3.Cannot be a Permanent Overseas Resident

SMSF trustees must be permanent residents of Australia. Normally, trustees can live and work overseas for up to 2 years, but if the trustee then becomes a non-resident of Australia, the SMSF will no longer be compliant.

4.Trustee Responsibilities

SMSF trustees are responsible for ensuring that the fund is managed in a manner that complies with all relevant superannuation laws and regulations, and they remain legally responsible for the fund to ensure SMSF compliance.

How to start SMSF investing with moomoo?

If you don't have an SMSF account:

To provide comprehensive SMSF support, we partner with Rivkin, a trusted Local-based SMSF specialist with more than 40 years of industry experience.

1. Trusted local expertise

Partner with local SMSF specialists with more than 40 years of experience helping Australian manage their investments.

2. Streamlined all-in-one setup

It's all covered in one simple procress, from setting up a trust to opening your moomoo trading account.

3. Competitive pricing

Exclusive SMSF pricing for moomoo clients, whether you're setting up a new SMSF or need ongoing support for an existing one. Annual service fees from $950.*

Open an SMSF account->

Automate your SMSF data flow

Moomoo has partnered with Class to enable an automated data feed for moomoo SMSF accounts. With your consent, your transaction and portfolio data can be securely shared with the Class software widely used by your accountant or SMSF administrator, helping reduce manual data entry and improve reporting efficiency.

If you already have an SMSF account:

To open an SMSF trading account, you are required to provide the following information: the full name of the SMSF trust, Australian Business Number (ABN), Tax File Number (TFN), and identity verification documents. For more details, please visit: How to open and manage an SMSF trading account with moomoo

Once you have prepared the above documents, you can open your moomoo SMSF Account via the following 3 methods:

Option 1: Open directly in 4 simple steps by clicking the link:

• New users: opening an moomoo SMSF Account.

• Existing moomoo users: add an moomoo SMSF Account.

*You can also contact support anytime through the moomoo app.

Option 2: Book a 1-on-1 consultation

Book a 1-on-1 consultation with moomoo’s SMSF specialist team, where you can learn about moomoo SMSF account opening procedures and relevant investment strategies.

Option 3: Visit team moomoo in person Open your moomoo SMSF account at our Chatswood store with in-person support.

Address: Shop 66, 427–441 Victoria Avenue, Chatswood NSW

please include disclaimer when refering the above pricing $950.

*Fees are Inclusive of GST. Moomoo AU may receive fees from the above third-party SMSF administrators for referrals that result in the purchase of their services. Moomoo AU does not provide any advice or recommendations with regard to the providers' services or the suitability of establishing an SMSF in general. Please seek professional advice from a qualified financial adviser and/or accountant where necessary.

Moomoo Securities Australia Ltd (AFSL 224663) provides execution-only dealing services. SMSF establishment, administration and related advice services are provided by Rivkin Wealth Advisors Pty Ltd (AFSL 551201). Moomoo does not provide superannuation, tax or personal financial advice. Consider whether these services are appropriate for you and read the relevant terms and disclosures before proceeding.