Superannuation is a great way to invest for your retirement because it allows you to build funds gradually until you reach retirement age. While workers are legally entitled to join a fund when they are employed, you may also decide to join and contribute to a self managed superannuation fund or diy super funds.
Nature of DIY Super Funds
Self managed superannuation funds (SMSFs) are funds established for a small group of people, typically less than 5, and regulated by the Australian Tax Office. As a trust fund, the fund members or contributors are its trustees as well, having the responsibility for the prudential operation of their funds and in creating and implementing an investment strategy. Its assets and money are strictly for providing retirement benefits of its members and not for the personal use of any of the trustees or other third party.
Advantages of super funds
Super funds, including DIY super funds, are entitled to tax concessions such as a lower income tax rate and allowable deductions for contributions made. These funds also enjoy government benefits and in some cases may even provide insurance coverage as well as total and permanent disability insurance for its members.
Who can join?
Generally, anyone can join a super fund, whether you are employed or not. If you’re not employed or have a low income, your spouse can contribute for you until you reach the age of 65. If you’re self employed, you can also decide to join and contribute to a fund and claim a full tax deduction for contributions you make.
Limitations of DIY superannuation
This type of super fund is governed by super laws and the trust deed which is a legal document setting out the rules for establishing and operating the fund. In particular, the trust deed will specify:
- the powers, duties and responsibilities of the fund’s trustees
- the rights of the members
- the fund’s objectives
- who the trustees are
- qualifications of a trustee
- manner of appointment and removal of trustees
- qualifications of members
- when contributions can be made
- how to avail of benefits
- appointment of professional advisers like an auditor
- winding up procedures
While a self managed superannuation is a do-it-yourself arrangement, it requires a generous amount of your time and investment skills to manage and operate profitably. Anyone intending to set up one must be prepared to comply with strict requirements of super laws and seeking expert advice at the outset is highly advisable.