Four ways to maximise your Self-Managed Super Fund (SMSF)

With a Self-Managed Super Fund (SMSF), every step of the journey – from setting it up through to ongoing management and record-keeping – is your responsibility. SMSFs offer unparallelled flexibility and control, as well as the freedom to grow your retirement savings how you want to. And, while no two SMSFs are the same, certain products, tools and strategies, available to SMSF members, can help maximise an SMSF's ability to grow your super. 

Here are four things you can do to make the most of your SMSF.

1. Invest in property with a limited recourse borrowing arrangement 

A key benefit of SMSFs is the ability to diversify your assets by investing in property with impressive tax incentives, such as concessional tax rates on rental income and capital growth. You’ll need to find a specialist lender who offers loans for SMSFs. Under superannuation law, SMSFs generally cannot borrow money. However, there is one way that you can borrow money through your SMSF and that’s through a limited recourse borrowing arrangement, or LRBA. 

To borrow money through an LRBA certain conditions need to be met. The money borrowed needs to be for purchasing an acquirable asset, and you are required to set up a bare trust. A bare trust, also known as a custodian trust or holding trust, is a very simple trust, whose only job is to hold the property title for you. This arrangement protects the other assets in your SMSF.

Even while the property title is held in the bare trust, you’ll still retain beneficial ownership of the property, and any rental income or capital growth will go to you when you retire. Once the loan is paid back in full, the bare trust’s job is complete, and the property title is transferred from the bare trustee to the SMSF trustee.

2. Open an SMSF offset deposit account to reduce the interest you pay

Some lenders may offer an offset deposit account with their LRBA. Pairing your SMSF home loan with an SMSF offset deposit account can reduce how much interest you pay on your loan. While repayments will remain the same, paying less interest means you'll be paying off more of the principle, which will help you pay off your loan faster. 

Offset deposit accounts can also help with cashflow, as you can access the money in your offset like you would money in a transaction account. However, to avoid non-compliance, it’s important you only use the money in your SMSF offset for SMSF expenses such as legal fees, property management fees and repairs. Some renovations are permitted but only under certain circumstances. If you’re unsure, it’s always best to check. Non-compliance can result in account closure, as well as notification to the Australian Tax Office (ATO), the regulatory body overseeing SMSFs, which can come with significant penalties. 

3. Use SMSF cash and savings accounts to optimise cash management 

Another powerful way to manage your cashflow, particularly for those who haven’t taken out a loan and so don’t have an offset, is through an SMSF cash account, which you can then link to an SMSF savings account. By opening a savings account, you’ll be able to earn interest on your balance. A cash account will help give you the cashflow you need to pay for the running costs of your fund. While some banks require a minimum cash balance to open these accounts, AMP Bank offers cash and savings accounts with no required minimum balance and no monthly fees.

A cash account can also act as a source account for your SMSF’s investments, offering a cleaner, more direct approach to cash management. 

4. Stay compliant and informed 

With SMSF membership limited to six – compared to more traditional super funds, whose members can number in the millions – one of the strengths of an SMSF is its ability to adapt to changing markets, avoiding issues and taking advantage of opportunities. 

To truly benefit from this agility, it’s important to regularly assess your SMSF’s investment strategy and make changes where appropriate. It’s also important to stay up to date with the ATO’s regulatory changes to ensure ongoing compliance. It’s also worth considering seeking advice from a licensed financial adviser before making decisions about your SMSF.