Setting up or joining a self-managed super fund (SMSF) allows you to make decisions about your own retirement savings. However, managing an SMSF can be complicated and time-consuming.
There are strict rules governing how you can use the fund and manage investments. An SMSF must be maintained for the sole purpose of providing retirement benefits to fund members. It must be set up and maintained correctly so it is eligible for tax concessions, can pay benefits to members and is easy to administer.
The following questions will help you decide if setting up an SMSF is the right step for you.
With so much to consider, we recommend seeking professional advice. If you decide to go ahead, you’ll need a strong support team to assist with ongoing management.
The main difference between an SMSF and other types of superannuation funds is that its members are also its trustees. This means the trustees run it for their own benefit.
There are two types of trustee structure:
Having a corporate trustee can make it easier to administer ownership of fund assets. Importantly, it keeps fund assets separate from personal and business assets – a key requirement of the Superannuation Industry Supervision Act 1993 (Cth). However, the need to establish a company to act as trustee can increase fund set-up costs. You will also need to meet the annual reporting requirements of the Australian Securities and Investments Commission.
Once an SMSF is established, the trustees control how contributions and the fund’s earnings are invested.
Funds must have a trust deed that forms part of the governing rules for operating the fund. The trustees must have an investment strategy that is reviewed regularly. There are also regulations to ensure the fund’s assets are protected to provide retirement benefits to members.
As we’ve seen this year, circumstances can change rapidly. That’s why it’s important to continually reassess the fund and individual members’ circumstances to determine whether an SMSF is still the best option for you.
An SMSF may need to wind up if members leave (for example, by rolling over benefits to another fund or dying) or when all the benefits have been paid out.
You may also find that it may no longer be cost-effective, or you may not have the capacity to keep managing the fund. Depending on your circumstances, it may be necessary to transfer member benefits to another complying super fund.