What is a SMSF?

A SMSF is a self managed super fund. As the name suggests, it is a kind of do-it-yourself retirement plan where you, as a member, have complete control over how your funds are managed. While it is a popular way for you to save funds for your retirement, a SMSF does come with administrative duties and requirements that must be complied with. Knowing the costs involved as well what administrative duties are expected of you is key to making your SMSF beneficial for your future.

A SMSF is defined as a trust that holds and manages funds or assets for its members who are provided with retirement benefits that are paid out upon retirement. A SMSF allows up to a maximum of four members who can all act as trustees of the fund, giving them collective yet personal control over their funds or assets. There must be at least two trustees out of the members and all trustees must take part in administrative duties and the compliance with regulations of having a SMSF.

The Benefits of a SMSF

What is great about a SMSF is its flexibility, the investment opportunities and how much more control you have. As a trustee of your own retirement fund, you make the decisions about the investment strategies and you decide on what types of assets you wish to hold in your fund.

Subject to legal restrictions and other limitations, your SMSF can invest in various investments that aren’t typically available to public super funds. You can customise your investments to suit your personal needs and those of the other members of the SMSF.

SMSFs are taxed at concessional rates but they must comply with the regulations of the ATO, SIS Regulations and the Superannuation Industry (Supervision) (SIS) Act of 1993.

SMSF Rules and Regulations

Since complying with the rules and regulations of a SMSF is so important, you should know what they are before investing. The trustees of the SMSF must review the fund’s investment strategy periodically and take insurance for all members into consideration.

While it is your responsibility as trustee to manage all administrative duties of the fund, seeking the assistance of a specialist is permissible. The beneficial part of this is that you can reduce your administrative burdens while still enjoying a high level of control.

However, complying with rules and regulations of superannuation is crucial, and this is your responsibility. You are still accountable if you have sought the assistance of an outside specialist.

The main rules to comply with are:

• To ensure the sole purpose of the SMSF is to provide all members with retirement funds.
• To ensure assets are acquired from related parties.
• To ensure all assets held are separate to any business that involves the fund’s trustees.
• To ensure the assets and investments are able to produce retirement funds.
• To ensure all fiduciary responsibilities are met. The SMSF must have its own bank account and all administrative costs are covered by the members collectively.