Why consider a Self Managed Superannuation Fund (SMSF)?

For individuals with fairly substantial wealth – professionals, business people, retirees and people approaching retirement – SMSFs can be attractive and have grown substantially in the last decade and now occupy a large segment of the superannuation industry.

Also known as DIY super, these structures provide an alternative to retail, industry or employer super funds and offer the opportunity for greater individual choice and flexibility.

With offices in Milton – Ulladulla, Batemans Bay and Bowral, contact us to arrange a meeting with one of our Self Managed Super Fund Specialist Advisers.

What are some of the benefits?

A SMSF gives you much greater flexibility over your investments which could include direct shares, property, cash, term deposits, government bonds etc. Besides this flexibility, other advantages may include:

  • Control & transparency– you have control over where your retirement funds are invested and increased transparency.
  • Potentially lower costs– depending on the total fund balance and the degree of direct
  • investments you may be able to significantly reduce your ongoing administration and investment costs.
  • Tax effectiveness– by having greater control over the purchase and sale of assets you can
  • carefully manage the tax implications as well as better manage potential Capital Gains Tax.
  • Estate planning– your SMSF can be structured to provide effective estate planning.
  • Effective insurance– more flexibility with the choice of insurance providers.
  • Borrowing to invest– SMSFs are permitted to borrow to purchase assets such as direct property but very strict procedures and rules are applied.

Superannuation is becoming the largest asset for many Australians, often exceeding the value of the home. Therefore, it is critical that this wealth is managed in the most effective manner possible.

How does a SMSF work?

The difference between SMSFs and other professionally managed super funds is that the members of the SMSFs are also the trustees – they are responsible for the investments and payments of benefits to all members of the fund.

Trustees need to understand their responsibilities and investment restrictions for an SMSF. The Superannuation Industry (Supervision) Act (SiS Act) stipulates a range of requirements that trustees must comply with. These rules include the sole purpose test which requires that superannuation monies are for the sole purpose of providing funds for members in retirement or in the case of the death of the member, to their nominated beneficiaries. There are also rules to limit buying certain assets from related companies, trusts and people.

A SMSF will typically have the following features:

  • it has a trust deed that meets the requirements of the SiS Act
  • has four or less members
  • each member is a trustee or director of a corporate trustee
  • no member of the fund is an employee of another member unless they are related
  • no trustee receives remuneration for their services as trustee
  • the fund needs to apply for an ABN and TFN
  • the fund needs to elect to be regulated by the SIS Act in order to receive concessional tax treatment
  • a bank account is required to be established
  • if direct shares are going to be part of the investment portfolio, then a share account is required to be opened with a broker
  • financial statements are required to be produced each year, a tax return lodged and the fund audited by an independent auditor.