DIY or do-it-yourself superannuation basically means setting up and managing your own superannuation fund. DIY super is also called self managed superannuation fund or SMSF for short.
Superannuation is a way of saving up for retirement. This is the Australian and New Zealand equivalent of what is called retirement plans in the United States and pension schemes in the United Kingdom as well as Ireland.
There are several different types of superannuation funds in Australia and all are governed by different rules. In this article we take a closer look at what govern the SMSF rules.
The areas for compliance:
Self managed super fund rules and regulations are set out by the Australian Taxation Office (ATO) on behalf of the Australian Government. The rules govern everything from set up to ongoing maintenance such as:
• keeping records
• annual reporting
• auditing
• accessing your super
• winding up your SMSF
Here is a brief summary of some areas that need to comply with the policies behind self managed super funds:
1. Record Keeping
Keeping comprehensive records of the administration and management of your superfund is a key requirement so the ATO can audit your fund to ensure compliance. Records that need to be kept include the following: information on investment decisions, any transaction records, annual statements, trustee declarations and tax-related documentation.
2. Annual Independent Audit
SMSF rules require every self managed super fund to be audited annually by an independent, ATO approved auditor. The auditor examines the fund’s financial statements and assesses the fund’s compliance with the applicable rules and legislation.
3. Accessing Your Superannuation
Members can generally only access the funds in their SMSF when they meet one of the conditions of release. An example of this is when they reach a certain age or they retire. In some instance members may be able to access the funds prior to the official conditions of release. One condition, for example, would be when the member suffers from a terminal illness.
Keep in mind however that in instances where superannuation funds are released without meeting the official requirements, the ATO imposes severe penalties.
Because the SMSF rules are so complex and time consuming, many people choose to team up with an experienced accounting firm and an approved SMSF auditing expert. As a result, the compliance with SMSF rules is much easier and you can be sure that your superannuation fund will show a healthy balance when you are ready to retire.