Tax-free retirement: Why bother with super, such as an SMSF?

Q: Rather than putting our money in super, should we just go for a lump sum and invest in term deposit and direct shares in our own name? For example, if a couple who are senior age can receive income of $51,630 tax-free outside of an SMSF, why bother with all the requirements and costs of operating an SMSF if the annual income of the fund is less than this amount?

$51,630 income + $2,000 operating costs = $53,630 which equates to 8.93% on a $600,000 fund.

In this instance, am I correct in assuming there are no advantages (tax or otherwise) in an SMSF unless it can earn more than 8.93% PA?

A: We are an information site rather than an advisory site so I cannot comment on your specific financial situation, but what I can say is that the tax-effectiveness of superannuation (whether in a SMSF or larger super fund) will depend on the level of income and broader financial position of each individual.

When Australians reach Age Pension age they can access more generous tax treatment on taxable income via the application of the Seniors Australian Tax Offset (SATO) which means holding assets within the super system may not necessarily be worth it for some people.

If an individual receives tax-free income already, then using a super structure in retirement may not be justified. In some circumstances however, individuals may opt for a super structure for estate planning purposes.

The SuperGuide article, No tax in retirement because you SATO may also be of assistance.