Super Funds

The Top 10 Things You Need to Know About Self Managed Superannuation Funds

1. Make sure that this is the best option for you

  • Setting up a SMSF is a major financial decision.
  • It is the trustees responsibility to run the fund and to comply with the law at all times.
  • You will need the right advice and consider whether or not you have the time, knowledge and skill to manage the super.
  • You will need to take into account the assets and funds needed to make it viable.
  • Choosing a SMSF is a very important decision, you should see a qualified and licensed professional to help you decide if it’s the right super fund for you.

2. Trustees, their roles and responsibilities

  • A Self Managed Superannuation Fund can have up to four members.
  • Being a member of the fund also means you must be a trustee of the fund.
  • You can have a company as a trustee, but all members must be directors of that company.
  • All trustees are responsible for the running of the fund and should act in the best interests of all fund members when decisions are made.
  • The trustees need to comply with the superannuation and taxation laws to ensure the fund retains it complying status and is entitled to the superannuation tax concessions.
  • Talk to a professional you can trust who can give you the right advice for your situation.

3. Responsibility and Accountability

  • Trustees can engage SMSF professionals to complete mandatory obligations and tasks. This includes tax returns, administration, reporting and auditing.
  • Professionals can include an account, lawyer, administrator or a financial adviser.
  • While trustees may engage the services of professionals, they are still bound to retain control over the funds.
  • Trustees will have ultimate responsibility and accountability for the fund.

4. Retirement planning strategies

  • There are many different retirement planning strategies that can be put in place to help you reach your goals and objectives.
  • Seek professional advice from a lawyer or financial adviser to ensure your maximise your SMSF returns and achieve your retirement planning goals.

5. Define and set an investment strategy

  • A trustee of a SMSF is required to prepare and implement an investment strategy.
  • This strategy will establish investment objectives and detail the investment methods the fund will adopt in order to achieve these objectives.

6. The SMSF must be a complying Australian super fund

    • A SMSF must comply to receive tax concessions; the fund needs to meet the definition of an ‘Australian Superannuation Fund’ for tax purposes.

 

    • The fund must satisfy three tests to be classified as an Australian superannuation fund.

 

    • The fund must have:

 

    1. Been established in Australia or the assets of the fund are located in Australia;
    2. Satisfied the central control and management test; and
    3. Satisfied the active member test.

7. Don’t break the investment rules

  • The trustee must be aware of relevant restrictions that prevent SMSFs from making certain investments. This is a detailed and important rule, and a professional will be able to advise you of all factors relevant to your situation.
  • It is essential to seek advice from a financial adviser to help ensure the trustees set, executive and review an appropriate investment strategy.

8. Keep things separate

  • The trustees of an SMSF must ensure the assets of the fund are kept separate from personal financial affairs. This means you need separate bank accounts and investments.

9. Remember the sole purpose test

  • The sole purpose test for an SMSF aims at ensuring investments are maintained for the purpose of providing benefits to fund members upon their retirement.
  • The trustees of an SMSF must comply with the test to maintain the taxation concessions available.

10. Follow the rules

  • An SMSF is a trust, and the trust deed contains the governing and operating rules of the fund.
  • The fund must also adhere to all other requirements, such as superannuation and taxation laws which need to be consulted in conjunction with the trust deed.
  • When setting up a fund, the deed should be constructed by a professional such as a solicitor specialising in Self Managed Superannuation Funds.
  • Your deed will also need updating by a legal professional over time to reflect the changes in superannuation laws.