Think you’re too young for self-managed super? Maybe not

Ever felt like personal finance is an endless pool of acronyms? Trust me, you’re not alone.

One that often piques curiosity is SMSFs – self-managed super funds. Many think they’re only for seasoned investors, but age might just be a number when it comes to SMSFs.

One of the perks of SMSFs is the ability to put residential property inside your super fund.Credit: Karl Hilzinger

Picture this: a super fund with the ability to pool up to six members’ balances, giving you more opportunity, control and flexibility over your approach to investing for retirement. Sounds like an interesting prospect for young accumulators working together to change the path of their retirement savings, right?

Unlike industry and retail funds, an SMSF can invest directly into property, both residential and commercial, in Australia and overseas. But before you get too excited about that idea, strict restrictions around personal use of super assets apply.

Another trend we’re seeing in SMSFs is increasing investment in cryptocurrencies. This now sits above $1.6 billion, representing a 576 per cent increase since March 2021. An SMSF can also invest in private equity opportunities, unlisted and listed shares, and you get franking credits too.

You might also be surprised to learn about some of the borderline ridiculous things Australians own in super funds. Think: collectibles such as signed cricket bats and antique cars, fine wine, paintings and even racehorses (just to be clear, I am noting what you can do, not necessarily what you should do).

The earlier you start, the more you can potentially benefit from this dynamic financial tool.

So, when is the best time to start an SMSF? As a financial adviser, I get asked this a lot, and while Tax Office data reveals that 75 per cent of Australia’s 1.1 million SMSF members are over 50 years old, the truth is that age has nothing to do with it. It’s more about the right opportunities coming along.

The specific scenarios and cases where an SMSF can work best for younger wealth accumulators typically involve business owners, high-income earners or those with large existing super balances.

Take a tradie running a business who needs a factory or warehouse, a medical practitioner requiring consulting rooms or a start-up founder looking for an office space. For business owners, owning commercial property in an SMSF and leasing it to their business is a popular strategy.

Rather than paying rent to a landlord, the rent paid by your business goes into your own super fund, and you reap the rewards of any capital growth. In my opinion, it’s one of the best ways to utilise an SMSF.

Another way for younger Australians to unlock the benefits of an SMSF is for members to pool their assets. It’s a bit like trying to buy your first home as a single – this might feel impossible while doing so as part of a couple or with help from the bank of mum and dad feels easier.

An SMSF allows you to team up with family members, business partners or friends to increase the amount of money available to capitalise on significant investment opportunities.

Tax Office data also tells us that more young Australians are opting for an SMSF, with 47 per cent of new members during the September 2024 quarter aged between 25 and 44.

Regardless of age, however, if you’re looking for greater control and flexibility with your investments, an SMSF could be the right choice. The earlier you begin, the more you can potentially benefit from this dynamic financial tool.

But as with any big financial decision, speaking with a financial adviser before you make big changes to your super is always a good idea.

Daniel Zaffino is a financial adviser and director at BlueRock.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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