WHAT IS A SELF MANAGED SUPER FUND (SMSF)
SMSFs (Self managed funds) are sometimes referred to as “Do It Yourself” (DIY) super funds and are currently seen in Australia. Similar to other superannuation funds, SMSFs invest contributions made by members, provide benefits to members when they retire and provide death benefits to beneficiaries in the event of a member’s death
The main difference between a SMSF and other types of superannuation funds is that the members of a SMSF are also the trustees, or directors of a corporate trustee. This means they are required to prepare and implement an investment strategy for their fund, accept contributions and manage the payment of benefits.
WHAT IS A SELF MANAGED SUPER FUND (SMSF)?
SMSFs (Self-Managed Super Funds) are sometimes referred to as “Do It Yourself” (DIY) super funds and are currently seen in Australia. Similar to other superannuation funds, SMSFs invest contributions made by members, provide benefits to members when they retire and provide death benefits to beneficiaries in the event of a member’s death
The main difference between a SMSF and other types of superannuation funds is that the members of a SMSF are also the trustees, or directors of a corporate trustee. This means they are required to prepare and implement an investment strategy for their fund, accept contributions and manage the payment of benefits.
SMSFs also provide a broader investment choice than other super funds, with options such as direct property, managed investments and direct shares included.
The members of a SMSF must appoint approved auditors, and may also choose to involve taxation agents, accountants and financial advisors as well as administrators. However, the ultimate legal responsibility for the fund’s ongoing compliance rests with the individual trustees. It is always best to work with a self managed super fund specialist
WHAT ARE THE REQUIREMENTS OF A SMSF?
A SMSF must be maintained for the sole purpose of providing retirement benefits to member. Investments must be entered into with a view to achieving a commercial rate of return, not for lifestyle or private purposes
A SMSF must have fewer than five members
All members must be trustees
If your SMSF is a single member fund, you will need to appoint a company as trustee or a second person to act as an individual trustee
No member of the fund can be an employee of another member of the fund, unless those members are related
No trustee of the fund can receive any remuneration for services as trustee
A SMSF can not lend money or give financial assistance to a member
The SMSF can not acquire an asset from a member of the fund, or any other person related to the trustee, with the exception of listed shares, managed funds, and business real property.
SMSFs are prohibited from borrowing. There are some limited exceptions.
Trustees are required to set out the fund’s objectives and to formulate an investment strategy to show how those objectives will be met. This must be in writing and regularly reviewed.
WHAT ARE THE ADVANTAGES OF SMSFs?
Advantages include:
Increased control over your retirement funds and how they are invested
Wider investment choice than public offer funds
Your SMSF can move with you from job to job, and from generation to generation
Affords opportunities for estate planning and benefit payments
ARE THERE ANY DRAWBACKS?
Drawbacks include:
Each trustee bears a high degree of responsibility to ensure all trustee duties are exercised in the best interest of fund members
There is a risk of tax penalties for non-compliance, so it is necessary to have sufficient knowledge and expertise
Running a SMSF can be time consuming and demanding
SMSFs incur a range of additional costs, eg tax and regulatory return, administration, auditing of accounts, supervisory fees.
For further information about self managed super funds visit http://financialplanner-newcastle.com.au/self-managed-super-funds/
DISCLAIMER: The information contained in this document is based on information believed to be accurate and reliable at the time of publication. Any illustrations of past performance do not imply similar performance in the future. To the extent permissible by law, neither we nor any of our related entities, employees, or directors gives any representation or warranty as to the reliability, accuracy or completeness of the information, or accepts any responsibility for any person acting, or refraining from acting, on the basis of information contained in this communication. This information is of a general nature only. It is not intended as personal advice or as investment recommendation, and does not take into account the particular investment objectives, financial situation and needs of a particular investor. Before making an investment decision you should read the product disclosure statement of any financial product referred to in this newsletter and speak with your financial planner to assess whether the advice is appropriate to your particular investment objectives. financial situation and needs.
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