A SMSF is a self managed super fund that must comply with conditions set out by the SIS Act. The key conditions are:
In the case of a single member SMSF, the SIS Act outlines that if there’s a single member of the trust, who must also act as trustee, he or she must be one of two trustees that are related to each other, and the single member must not be employed by the other trustee. If the single member SMSF appoints a corporate trustee, the single member must be the sole director of the company or be one of two directors that are related to each other. The member must also not be employed by the other director.
The goal of a SMSF is for its members to prepare for retirement which is when they will reap the rewards and receive their portion of the trust. The structure of a SMSF is an incentive-based trust that receives tax benefits. All members have the opportunity to cover health care costs, burial costs and other aspects of being at the retirement age.
Is a SMSF Right for You?
A SMSF isn’t the right choice for everyone, but basically anyone who hopes to retire comfortably can look at it as an option. It is a more attractive option than other alternatives, as it allows members to have control and flexibility as well as the funds available to deal with the costs of retirement. The earlier one starts planning for this eventuality, the better it is in the long run, which means young individuals should begin considering their options for their retirement.
While an SMSF is the perfect solution for many Australian citizens, non-residents can also be members. However, they must be tax residents and may be subject to higher tax consequences if residing overseas for extended periods of time.
It is also possible for members of a SMSF to be under the age of 18 years. The underage member cannot, however, act as a trustee. They must have a personal legal representative to act as trustee on their behalf or, in the case of them not having a personal legal representative, their parent or guardian becomes trustee.
A SMSF also allows members that are legally disabled for any reason other than them being under the age of 18 years. These members must have a personal legal representative act as trustee on their behalf and, again, if there is no personal legal representative, a parent or guardian acts as trustee.
Legally disabled members, including those under the age of 18 years, can have corporate trustees, but their personal legal representative, parent or guardian must be the director of the company that is appointed trustee.