A SMSF allows you to customise your strategy to minimise the amount of tax you might need to pay. When grouped into a retail or industry fund they make decisions based on the overall investors, those decisions might be very bad for your individual tax position.
By working towards your best interest either the trustees or your financial advisors could tailor your contributions, investments or returns in a way that minimises your tax burden. Another major advantage of an SMSF is the potential for tax-free gains, unlike traditional pooled funds you may not have to pay tax if your fund did not pay you dividends or a return for the year.
An example might be that your money is invested in a large housing project that could take 5 years to complete, until the houses are all built and sold your investment may not declare a profit.
By working towards your best interest either the trustees or your financial advisors could tailor your contributions, investments or returns in a way that minimises your tax burden. Another major advantage of an SMSF is the potential for tax-free gains, unlike traditional pooled funds you may not have to pay tax if your fund did not pay you dividends or a return for the year. An example might be that your money is invested in a large housing project that could take 5 years to complete, until the houses are all built and sold your investment may not declare a profit.
In this scenario, you could potentially pay tax only for one out of five years rather than every year like your normal fund. Anyone who understands compounding interest will also understand that these types of savings could potentially make a significant improvement to your retirement outcome.
