No matter how far off retirement may seem, maximising your superannuation is crucial to securing your financial future. Yet, many healthcare professionals hesitate when it comes to Self-Managed Super Funds (SMSFs). Some find the idea too complex, while others think the management costs involved will outweigh any benefits.
However, managing an SMSF can be simpler and more rewarding than you might think. An SMSF offers a unique opportunity to have more control over your retirement savings and investments, providing flexibility, potential tax savings and estate planning advantages.
If you’ve been on the fence, here are 9 compelling reasons why an SMSF could be the right move for you.
1. Control over investments
With an SMSF, you have the freedom to directly control your superannuation assets. You can make investment decisions that align with your personal financial goals, risk tolerance, and preferences. This could include:
- Direct property investments (e.g., buying commercial or residential property)
- Shares and other securities
- Managed funds or bonds
2. Tax advantages
SMSFs offer tax benefits that can be particularly attractive to healthcare professionals:
- Concessional tax rate: Investment earnings are taxed at a concessional rate of 15%, which is lower than the personal tax rate of most dentists, doctors or vets.
- Capital Gains Tax (CGT) discount: If the fund holds assets for more than 12 months, capital gains tax is discounted by one-third, meaning the tax is only 10% on those gains.
- Retirement phase tax benefits: Once you reach retirement, SMSF earnings in the pension phase can be tax-free (if in a retirement phase), which can provide significant savings.
3. Diversification and flexibility
SMSFs allow the diversification of your retirement portfolio. You can invest across a range of asset classes, including traditional assets like shares and property, or more unique investments such as:
- Direct investment in a business
- Collectibles (subject to certain rules)
- International assets or niche investment products
4. Asset protection
Superannuation is generally protected from creditors in case of financial difficulties or legal action. For doctors and dentists who may be exposed to professional risks, this can be a significant benefit in safeguarding retirement assets from potential lawsuits.
5. Estate planning and flexibility
SMSFs offer greater control when it comes to estate planning. You can nominate who will inherit the superannuation, including the flexibility to distribute the assets to beneficiaries in the most tax-effective manner. In addition, SMSFs can be tailored to suit specific family structures, ensuring that funds are passed down according to your wishes.
6. Potential for borrowing (Limited Recourse Borrowing Arrangement – LRBA)
SMSFs can borrow money to invest in certain assets, such as property, using a Limited Recourse Borrowing Arrangement (LRBA). This means you can use your SMSF to purchase a property, which can then generate rental income or appreciate in value, helping to grow the fund’s value over time.
7. Ability to invest in business property (such as your practice premises)
If you are a practice owner, you can use your SMSF to purchase business property (such as the practice building) and lease it back to your practice. This can be a smart way to grow retirement savings while simultaneously providing a stable place of business. The lease payments would also generate income for the SMSF.
8. Transparency and flexibility in contributions
SMSF members can control the timing and number of contributions made to the fund, offering greater flexibility in managing retirement savings. You can also take advantage of concessional contributions (tax-deductible) or non-concessional contributions (which are after-tax but have higher contribution caps) based on income levels.
9. Cost-effectiveness for larger balances
While SMSFs may incur higher setup and annual maintenance costs, they can be more cost-effective than industry or retail funds for those with larger superannuation balances (typically over $200,000). The cost of managing the fund may become more efficient the larger the balance, as the administrative costs are typically fixed.
Things to consider
While there are many benefits with switching to a SMSF, there are also responsibilities and challenges. Running an SMSF involves significant time and effort in compliance, record keeping, and investment decisions. You must ensure that you adhere to all legal requirements, such as:
- Appointing a professional trustee (or being the trustee themselves)
- Regular auditing of the fund
- Following the rules set by the Australian Taxation Office (ATO)
Due to the time involved and compliance requirements of running an SMSF, it is recommended that advice is sought from a financial planner or an SMSF specialist to ensure that the fund is set up and managed correctly.
As specialist accountants for healthcare professionals, Amalgam Advisors can provide expert guidance to ensure your SMSF is structured correctly, remains compliant with ATO regulations, and aligns with your long-term financial goals. Our team can assist with fund setup, tax strategies, investment planning, and ongoing administration, helping you navigate the complexities with confidence.
Whether you’re looking to integrate your practice assets, maximise tax efficiency, or build long-term wealth, we can take the complexity out of SMSFs so you can focus on what you do best – caring for your patients.
To book a free initial phone consultation, call us on 1300 604 380.