Considering a Self Managed Superannuation Fund (SMSF)?
In Australia, there are over 1 million people who have made the step to control their own super and setup their own Self Managed Superannuation fund (SMSF). The Self-Managed Super option is no flash in the pan; the sector now represents a combined asset value in excess of $550 billion.
The reasons for this are numerous, but we find control is the number one driver; control over investment decisions; control over asset allocation; control over fees and control over assets.
Australians wanting to take advantage of tax strategies (such as direct property acquisitions) that are not available in retail funds is also a major factor for setting up an SMSF.
What is a self managed super fund (SMSF)?
A self managed super fund (SMSF) is a superannuation trust structure that provides financial remuneration to its members in retirement. The main difference between SMSFs and other super funds is that SMSF members are also the trustees of the fund. SMSFs can have between one and four members, and one of the main advantages is the level of control that trustees have when it comes to tailoring the fund to meet their individual needs. This differs from retail and industry super funds, which are designed to benefit a large group of members, meaning decisions are based on collective interests rather than what is best suited to individuals.
How does an SMSF work?
SMSFs are established for the sole purpose of providing financial benefits to members in retirement and their beneficiaries. They have their own Tax File Number (TFN), Australian Business Number (ABN) and transactional bank account, which allows them to receive contributions and rollovers, make investments and pay out pensions. All SMSF investments are made in the name of the fund and are controlled by the trustees. As a trust, an SMSF requires a trustee. There are two trustee structure options:
1. Corporate trustee – a company acts as the trustee and each member is a director. This structure allows simpler recording and registering of assets, providing administration efficiencies and flexibility in membership. Company establishment and ongoing fees are applicable with this structure.
2. Individual trustee – each member is appointed as a trustee, with a minimum of two trustees required.
What are the responsibilities of an SMSF trustee?
SMSF trustees are responsible for making investment decisions and ensuring implementation of an investment strategy for their fund. SMSFs also have strict administrative obligations that require trustees to maintain records, provide financial statements, complete a tax return and organise an independent audit. For this reason, many trustees engage SMSF specialists to help them manage their accounting, auditing and tax reporting, as well as provide financial and investment advice; however, they always remain completely responsible for the decisions and administration of their fund.
How we can help
As your Accountant for your SMSF, our job is to assist you in keeping your SMSF Compliant. To stay compliant you have to follow a number of rules in what you can and can’t do within your Fund, you also have to complete an ATO Audit and Tax Return on the Transactions and Assets in your Fund each year at the end of the financial year.