What is a Self Managed Superannuation Fund (SMSF)?
A SMSF is a small superannuation fund established for 1-4 people with the fund being controlled by trustees/directors who are also the members. Control is kept in the hands of the members, and the members decide how the fund will operate and what investments the fund will invest in.
What are the advantages of an SMSF?
The advantages of managing a SMSF include:
Control - An SMSF provides maximum control over your superannuation assets and allows you the flexibility to decide how your funds are invested and how the fund is to operate.
Investment Choice - An SMSF can be structured to meet the specific investment needs of members and greater control over investment strategies. The fund can invest in a wide range of investments including property, shares, cash or any other assets that suits the investment objectives of the fund (provided it meets the sole purpose test). Access to investment gearing opportunities also exists.
Tax Concessions - Investing in an SMSF has tax advantages that make superannuation a powerful wealth creation strategy.
- The concessional 15% tax rate applies to income of the fund, including contributions for which the tax payer has claimed a tax deduction
- Realised capital gains on investments held for more than 12 months are taxed at an effective rate of 10%
- Tax can be lowered through the use of franking credits and the offsetting of capital losses
- Concessionally taxed end benefit, including pension benefits
Estate Planning - An SMSF can be structured to be used for efficient estate planning.
Is a SMSF right for me?
An SMSF is best suited to those people looking for maximum control over their superannuation assets, but are also willing to accept certain regulatory responsibilities placed on trustees of SMSFs and to work at managing their investments.
Self managed superannuation funds offer many advantages to small business owners and high net worth individuals. They are usually most cost effective when assets exceed $100,000. If deciding to set up an SMSF with less than $100,000, you need to consider the ongoing administration costs.
How long does it take to set up an SMSF?
Once your signed application is received, it generally takes around 1 week to establish a new fund.
What are the steps involved in establishing an SMSF?
There are six (6) steps to be completed:
- Obtain a trust deed
- Appoint trustees to the fund - who must also be members
- Elect to become a regulated fund
- Obtain necessary taxation registrations from the Australian Tax Office
- Set up an bank account for the fund
- Establish an investment strategy for the fund
Who are the Trustees?
The trustee can be either an individual or a trustee company; all members are required to be either a trustee or directors of the trustee company.
For single member funds, there are a number or options, as a fund cannot have a sole individual as a trustee. The member can appoint a second person (not an employer) to act as the trustee of the fund, or the member is the sole director of the trustee company.
Where a trustee company is appointed, all members must be directors of the trustee company. Under circumstances where a member is under a legal disability, for example being under the age of 18 years, a member's legal representative can act as trustee.
What are the Trustee's duties?
The Trustee's duties are governed by the Superannuation Industry (Supervision) Act 1993.
Trustees are required to:
What is the sole purpose test?
Self managed superannuation funds must be maintained for the purpose of providing benefits to members upon retirement, or to their dependants in the case of a member's death before retirement.
What contributions can be included in a SMSF?
Your SMSF can accept employer and personal contributions, including member non-concessional contributions, subject to contribution limits and restrictions.
What can an SMSF invest in?
The investments an SMSF can invest in are very broad. All investments held by the fund, must be purchased with the intention of providing benefits in retirement for the members and are subject to the fund's investment strategy.
There are certain regulatory limitations placed on SMSF, such as borrowing to invest in assets, acquiring assets from related parties or investing in in-house assets.
What is an investment strategy?
This is a written plan for the strategic investment of the fund. It is not a decision in relation to particular assets but the overall strategy of what the fund intends to achieve.
How do I transfer my other superannuation benefits to my SMSF?
Premier Superannuation Services can organise for members super benefits to be rolled in to SMSF, allowing super balances of each member to be consolidated.
