Self-Managed Super Funds (SMSFs) provide a way for saving for your retirement. The difference between and SMSF and other types of fund is that the members of an SMSF are usually also the trustees. The members of the SMSF run it for their own benefit and are responsible for complying with the super and tax laws.
They need to be set up correctly so it is eligible for tax concessions, can receive contributions and easy to administer. You still need to work out the structure of your fund, create a trust deed and appoint your trustees in addition to other set-up considerations.
Contributions and rollovers
You can accept contributions for your members from various sources but there are some restrictions depending on the member’s age and contribution caps.
You will need to manage your fund’s investment in the best interests of fund members and in accordance with the law. It is not as simple as investing in property, which comes with many laws and regulations. The SMSF’s investment must be separate from all personal and business interests / affairs of fund members.
An SMSF can only pay a member’s super when the member reaches their ‘preservation age’ and meets one of the conditions of release, such as retirement. The payment may be an income stream (similar to a pension) or a lump sum, depending on the circumstances. There are penalties for releasing super benefits without meeting a condition of release.
Administering and Reporting
There are administrative obligations with operating an SMSF including an annual audit of your fund. In addition, you will keep to keep accurate and appropriate records and ledge an annual return with the ATO.
If you are considering operating an SMSF you will need:-
- Considerable amount of money in the fund to make set up and annual running costs worthwhile
- Budget for ongoing expenses such as professional accounting, tax, audit, legal and financial advice
- Time to manage the fund
- Financial literacy, experience and skills so you are able to make sound investment decisions
- Life insurance, income protection and total and permanent disability cover
The benefit of an SMSF is that you are in charge – you make the investment decisions and are also responsible for ensuring for complying with legislation.
SMSF’s do require a lot of time, management and financial know-how.
Talk to us today about how we can assist in providing advice as to whether an SMSF is right for you and how we can help you administer your SMSF.