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What is a self managed super fund and how do they work?

Self managed super funds (SMSF) are private superannuation funds, regulated by the Australian Taxation Office, providing benefits to its members upon retirement.  The main difference between SMSFs and other super funds is that you manage the fund yourself as a trustee and can have up to four members responsible for making decisions about the fund. It also comes with the advantage of the level of control that trustees have when it comes to tailoring the fund to meet their individual needs.

How does the SMSF work?

 

A SMSF is a legal tax structure with the sole purpose to provide for your retirement. Self managed super funds operate under similar rules and restrictions as ordinary super funds. They have their own Tax File Number, Australian Business Number and transactional bank account, which allows the receiving of contributions and rollovers, making investments and paying out lump sums and pensions. As a trust, an SMSF needs a trustee. There are two trustee structure options:

 

  1. Individual trustee – each member is appointed as a trustee, with a minimum of two trustees required. Assets are registered in the name of the individual trustees and owned in trust for the members of the SMSF.
  2. Corporate trustee – a company is set up to act as the legal trustee with no more than four directors in the company. Assets are registered in the name of the company.

 

It is important to know that if you decide to set up a SMSF, you are personally liable for all the decisions made by the fund – even if you get help from a professional or another member makes the decision.

What are the responsibilities of a SMSF trustee?

 

When you set up a self managed super fund, you are in charge. This means you make the investment decisions for the fund and you are held responsible for complying with the super and tax laws. It’s a major financial decision so when you run your own SMSF you must consider the following:

  • You are the one carrying out the role of trustee or director, which imposes important legal obligations on you
  • You must set and follow an investment strategy that is appropriate for your risk tolerance and is likely to meet your retirement needs
  • You should have the financial experience and skills to make sound investment decisions
  • You should have enough time to research investments and manage the fund
  • You should budget for ongoing expenses, such as professional accounting, tax, audit, legal and financial advice
  • You need to keep comprehensive records and arrange an annual audit by an approved SMSF auditor
  • You must organise insurance, including income protection and total and permanent disability cover for super fund members
  • You must use the money only to provide retirement benefits.

 

The trustees have the responsibility for complying with relevant laws and thus involves significant time and effort. 

But we can help!

As licensed professionals we provide SMSF advice and can help you weigh you the pros and cons of running a SMSF and help you decide whether it is right for you. Our SMSF team can take care of setting up the trust deed and all related paperwork to establish the SMSF for you. 

Our team can take care of the administration (preparation of financial statements and tax returns), and liaise with you to ensure that your SMSF is compliant with the relevant SMSF legislation. In conjunction with our Financial Planning team at Everalls Wealth Management, we can assist you in formulating an investment strategy that will fit your risk profile, to ensure that your retirement goals are achieved.

Superannuation legislation is constantly changing and therefore it is critical that you are informed at all times how any changes may affect your SMSF. We provide you with in-depth advice on the impact of any changes and how to update your strategies to ensure you maximise your retirement savings.

Good retirement planning is essential to maximise your retirement benefits. Our SMSF team helps you to achieve your retirement goals with effective pension strategies. Based on your retirement goals, our Retirement Health Check report informs you if you are on target with your retirement goals, projects how long your retirement funds will last when you retire and lets you know if you have to contribute more and for how long to reach ensure you are on the right track to achieve your goal.

To find out if a SMSF is right for you and how we can assist you to reach your retirement goals – contact us today!

 

Contact Prichie Dunn, our self-managed super fund expert to discuss getting started with an SMSF today.

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