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 Self
Managed Super Funds |
About SMSF Super
A self-managed superannuation fund (SMSF) is a separate entity structure for the provision of retirement benefits of the members. Self Managed Superannuation Funds represent the most effective tax and social security investment structure available. In addition they represent both an effective form of creditor protection and a unique opportunity for estate planning by allowing the provision of pensions and lump sum benefits in retirement. The trustee(s) bear the ultimate responsibility of the operation of the superannuation fund. The trustee(s) may employ administrators, accountants and investment advisers to help assist in the management of the fund. |
For further information regarding self managed superannuation visit the Australian Taxation Office website at www.ato.gov.au/super
| Advantages of a SMSF | Disadvantages of a SMSF | |
| Control - The fund assets are controlled by the Trustees who are also the members. The Trustees have responsibility for all decisions. Family Fund - Up to four members of your family can participate in the fund and reap the rewards. Secure Income in Retirement - A self-managed superannuation fund offers the most flexible option for taking your benefits in retirement, whether the benefits are taken as a lump sum or pension. Investment Choice - The Trustees have absolute discretion with respect to the choice and mode of investment. Taxation - A self-managed superannuation fund enjoys the lowest rate of tax of any entity structure in Australia. The fund pays a maximum rate of tax of 15% and may be reduced by offsetting other tax credits. Fees - The self-managed superannuation fund fee structure may deliver substantial savings when compared with other retail superannuation funds. Flexibility
- Trustees have the flexibility to make decisions
with respect to changing market movements and options for retirement
income streams. |
Time
Burden - There may be a burden
on the time of Trustees to sign documents and manage the fund investments.
However, may be reduced by using a specialist administration service.
Costs - Ongoing cost to operate the fund maybe prohibitive for members with small balances. Cannot Loan Money to Members or Related Parties - A self-managed superannuation fund must be used for the benefit of members or their beneficiaries on retirement, disablement or death. It cannot be used to provide benefits outside these parameters such as loans to members. |
Trustee
Requirements
A SMSF must have four or less individual members with all members being
trustees of the fund. In the case where there is only one member there
must be two individuals as trustees OR a corporate trustee with the member
being the sole director of the trustee company.
A trustee must not be an undischarged bankrupt, have been convicted in the past of an offence involving dishonesty, have committed a serious breach of the Superannuation Industry (Supervision) Act 1993, be a minor (under 18) or be mentally impaired.
A minor (generally under 18) or mentally impaired person can be a member however they cannot be a trustee of the fund. In this instance a legal personal representative must take this role. A parent can act as trustee on the member's behalf and still be a member and trustee of the fund in their own right.
Sole
Purpose Test
The sole purpose test underpins all investment decisions made within the
fund. It states that a regulated fund must be maintained for at least
one of the following purposes:
-
Retirement from gainful employment, or
-
Attainment of an age not less than 65, and
-
On the death of the member - the provision for benefits to be passed on to a member's dependants or legal representative.
When investing the Trustees must always bear in mind that the fund is to be utilised for the provision of accumulating benefits for retirement.
Investments
The fund can invest in a wide range of assets both in Australia
and overseas including:
-
Shares
-
Direct Property
-
Managed Investments
-
Unit Trusts
-
Mortgage Loans
-
Term Deposits
-
Cash
-
Fixed Interest Securities
-
Collectibles
-
Joint Ventures
All
investments should form part of the funds documented Investment Strategy.
There are specific rules when purchasing investments from member, trustees
and/or associates. Professional advice should be sought prior to undertaking
such transactions.
Who can contribute to a self managed fund?
Anyone who can contribute to an Australian superannuation fund can contribute to a self managed fund. Depending on the employment situation a contribution may be tax deductible. There are limits to the levels of contribution which can be made. The fund is also able to accept rollovers from other funds or contributions of certain assets in specie.
What type of benefits can a self managed fund provide?
Benefits are payable on retirement, disablement or death of the member in the form of lump sums or pensions. Benefits may be payable in cash or in specie.
In addition to investments the fund may also include insurance policies
to cover a member for Death, Total & Permanent Disability or Income
Protection.
At retirement there is no need to wind up the fund. The member simply draws a pension. The pensions available are currently an Account Based Pension or a Transition to Retirement Income Stream. Grandfathered (pensions already in place which may remain) include Allocated Pensions, Complying Lifetime Pensions, Fixed-Term Complying Pension and Commutable Complying Pensions.
