What is an SMSF?

Time and time again we talk to people who have no idea how much is in their superannuation, let alone how it is performing and what rate of return their superannuation fund is achieving.

This is where we come in. This is where we can help provide a solution to this problem through the creation of Self Managed Super Fund or SMSF.

A Self Managed Super Fund (SMSF) is essentially a small superannuation fund whose members take control of their investments directly.

SMSFs have the following characteristics

  • Up to 4 members
  • Each member must be a trustee of the fund and the trustees do not get paid for their duties
  • A trust deed that sets out the rules of the fund that complies with the Superannuation Industry Supervision Act 1993 (SIS Act)
  • Strict compliance obligations that must be adhered to
  • Lodgement of annual regulatory and tax return

How does an SMSF work?

A Self Managed Super Fund is a form of trust. It’s sole purpose must be to provide an income upon retirement for its members, or as a death benefit. A SMSF has its own Tax File Number (TFN) and Australian Business Number (ABN), and is required to have its own bank account. The members of the fund simply direct their superannuation contributions into the SMSF bank account.

As a member/trustee of the fund, you are responsible for ensuring there is an investment strategy for the fund, and implementing investment decisions. If you’re not investment savvy – we recommend you seek the advice for a Financial Adviser who will assist you to formulate your overall fund strategy or an Investment Adviser to assist you with selecting your investment portfolio.

SMSFs have strict lodgement and administrative obligations, which require ongoing attention. These include keeping copies of all records, keeping minutes of Trustee decisions and preparing annual financial statements. An SMSF is considered an entity in its own right, with strict rules and regulations governing it. Although you are a trustee and have the ability to control your investments, the SMSF must still prepare a set of financial statements, lodge a taxation return, and have the financial statements audited by an approved auditor.

SMSF Membership

One of the advantages of self managed super fund is that you can include other people as part of the fund. In fact, you can have up to four members wherein you can accept contributions from them through various sources. However, there will be restrictions such as the member’s age and contribution caps.

The good news is you and the other members don’t have to be related. The important thing is that you trust that person/s and willing to manage the fund’s investments to the best of everyone’s interests.

Keep this in mind: you are in charge once you set up your SMSF. As a matter of fact, this is a major financial investment. Therefore, you make investment decisions for your fund based on what will benefit you. At the same time, you are required to comply with the requirements prescribed by law – which is why we recommend partnering with a SMSF Administrator to help you meet your obligations, rather than dealing with a traditional Accountant.

Running your own SMSF requires your time and skills to make it work for you. Our role is to help you meet the administrative and compliance burden, so you can free up your time to focus on making the most out of your money.