All Things Self Managed Super Funds (SMSF)

Your superannuation is what you’ll rely on to live comfortably after retirement, so it’s important that you’re set up for success. Having the right structure, strong goals and strong planning are key to ensuring you’re ready for retirement. 

As we know, this planning starts well before we’re ready to retire and there are five different types of funds that we can choose from. In this blog we’re going to provide some of the key facts about Self Managed Super Funds.

What is a SMSF?

A self-managed super fund is a private fund that is owned and managed by you. All of your employer or self-employed superannuation contributions can be paid directly into this fund. If you establish a Self-managed super fund you will then be responsible for managing the investments in the fund and abiding by strict rules and regulations that control the types of investments you can use the funds for.

An SMSF can have up to six members and all members must be trustees of the fund. Otherwise, under a corporate trustee structure, each member must be a director of the corporate trustee.

The trustees must operate the fund with the sole purpose of providing benefits for retirement in following the Superannuation Industry (Supervision) Act 1993 (SIS Act). The members/trustees must have an investment strategy specific to the fund and its members that outlines risk profiles, investment goals and objectives.

Setting up a SMSF
There are a few requirements when setting up a SMSF. You will need to:

• Decide on the structure - individual trustee or corporate trustee
• Appoint trustees and ensure that they’re eligible
• All trustees must sign the trustee declaration with 21 days of consenting to being a trustee
• Create a trust deed
• Place assets under the fund that are held separately from any other entity’s assets
• Create a separate bank account for the trust
• Register with the ATO within 60 days of establishment to receive ABN & TFN
• Register for an Electronic Servicing Address (ESA) - this can be provided by us as your administrator. Otherwise, you will need to apply for one.
• Create an investment strategy- it must be in writing and reviewed regularly

SMSF Rules & Regulations
In addition to the requirements mentioned above, there are a number of other rules and regulations that must be followed. 

Every year your SMSF will need to prepare financial statements and a tax return to report your income and value your assets.

Every year your fund must be audited by an independent auditor that is to be appointed and paid for by the members of the fund.

For any investment decision that the fund chooses to make there must be trustee meetings that are minuted to discuss this decision. 

Once a member of the fund enters retirement, there are further rules that apply. Get in touch with us directly if you wish to discuss rules, regulations and requirements of SMSFs further. 

The Pros
Some benefits of a SMSF are:

• You have total control and flexibility over what happens with your fund
• A SMSF can offer a wider range of investment options for where your money is invested.
• A SMSF allows for tax effective management and strategies
• A SMSF will allow you to work with your trusted financial planner, advisor and accountant
• Pooling your super with others provides an opportunity to invest in things an individual may not be able to on their own
• Potential cost advantages- particularly for those with $200k or more in super.

The Cons
Some disadvantages of a SMSF are:

• Management and control need to reside in Australia (holidays are an exception)
• Time-consuming (a SMSF Administrator can assist with this)
• You are liable for any breaches of the regulations and will be responsible for the penalties.
• You need a considerable amount to get started for the cost-benefit to weigh up (typically $200k or more)

If you’re interested in learning more about SMSFs, our team is here to help and give you the facts. Get in touch with one of our experts today.