What’s a Self Managed Super Fund?

February 2, 2023

The world of superannuation is a tricky one to navigate – with countless fund options and equally as many deciding factors that go into where and with whom to invest your money, it can be hard to know what the right move is.

Another option available to Australians, is a Self Managed Super Fund (SMSF). Essentially, it’s a do-it-yourself superannuation fund with between one and six members. All members of the fund must be individual trustees or directors of the corporate trustee (we can set this up for you). SMSFs are perfect for investors wanting to take control of their own retirement savings.

How is an SMSF different to a standard superannuation fund?

The biggest difference is that in an SMSF structure, you’re in control of your own superannuation decisions rather than having someone (an industry or retail fund) make the decisions for you.

A SMSF survives changes in:

  • Advisers and administrators
  • Employer and employment arrangements eg: moving to self employment
  • Preferred investment platform
  • Merging/closing of retail and industry super funds
  • Investment approach without affecting pension structures or tax components; in other words, the fund goes with you and copes with all manner of changes in your life.

What are the benefits of a SMSF?

Investment choice and control: there are limitations set out in the legislation (for example the members cannot invest in a property from which they get use or enjoyment). However property, shares, managed funds and cash are all investment options available to the trustees. Business real property is also a popular option for trustees where the SMSF can own a commercial property that is then leased to the member’s business.

Tax advantages: the timing and amount of contributions and pension payments are all more flexible than when dealing with an industry or retail fund.

Estate planning and intergenerational assets: superannuation is dealt with separately to the assets in your will. This means it’s possible to use your SMSF to plan for your superannuation to be dealt with in the most tax effective or preferred way for each member.

Borrowing: there may be an option to take advantage of borrowing rules in an SMSF and leverage your superannuation, which is not available in an industry or retail fund.

Cost control: whilst industry and retail funds often charge fees proportionate to the amount invested, SMSFs have a more predictable cost structure that is based on the work required to be done.

Pension planning: the member is in control.

Asset protection: superannuation assets are protected from creditors.

What are the tax implications of a SMSF?

A major benefit of SMSFs is the control that trustees have over the tax position of the fund. Through proper planning, tax can be minimised and then eliminated altogether in retirement.

Are there any criteria to meet before starting a SMSF?

Anyone 18 years old or over can be a trustee or director of a super fund so long as they're not under a legal disability (such as mental incapacity), or a disqualified person (such as a person who has been convicted of an offence involving dishonest conduct or an undischarged bankrupt).

Who should have a SMSF?

SMSFs can be useful to everyone (small business owners, families, couples and individuals) depending on their individual circumstances. If you are looking to grow your wealth for retirement, or ready to retire now, it’s an option worth investigating.  

How to create a SMSF

Talk to us about the set up – we work closely with financial planners who can make sure a SMSF is right for you. After that we take all the necessary steps to get your fund up and running in no time. Your fund will require legal documents that establish the fund and ensure its compliance with all relevant legislation. This then allows  a bank account to be opened in the  SMSFs name so that you can start investing for your future.

Compliance requirements for SMSFs

As SMSF legislation is continually changing, our team is focused on ensuring your fund always complies with the current legislation. You, as trustee of the SMSF, are responsible for the fund complying with all the relevant laws but we, as your advisors, guide you through the process and produce the necessary paperwork to ensure you meet your obligations.

Each year an SMSF is required to lodge a tax return and have an audit, covering both financial as well as compliance requirements.

Whether you're a trustee or director of a corporate trustee, you are responsible for running the fund and making decisions that affect the retirement interests of each fund member, including yourself. Professional advice and guidance throughout the lifespan of your SMSF is a must.

If you’d like to understand more about our SMSF service, read about it here. Otherwise, contact us to discuss creating one here.

Written by 
Lis Keilty
February 2, 2023

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