There are many benefits in having your own super fund, not least that it gives you greater control over your investments – and a wider choice of assets in which to invest. This article will guide you through the process of setting up an SMSF, what is involved, the benefits, and help you to decide whether an SMSF is right for you.
What is an SMSF?
SMSFs are for family members and close business associates who wish to take more control of their retirement savings.
- has 4 members or less
- all members must be trustees and all trustees must be members
- where the trustee is a company, all members must be directors of the trustee company and all directors must be members of the fund
- no member of the fund can be an employee of another member unless they are also related
- the trustee cannot receive any remuneration for fulfilling his or her duties as a trustee of the fund
- Single (1) member funds have special Trustee structures
- Greater control over the investment strategy for the fund. This provides greater ability to tailor an investment strategy to suit circumstances and preferences.
- Flexibility to change types of assets you invest your superannuation in and vary the allocation to each.e.g. increasing the allocation to property and or varying the allocation to shares at particular points in time.
- A wider range of investment options such as direct property, direct shares and fixed interest securities
- A SMSF can be tailored to meet your own personal circumstances in relation to estate planning.
- Confidentiality that these funds provide. Highly paid executives who are able to have employer contributions paid to a SMSF may be able to keep their details confidential.
- A SMSF can be used as a vehicle to accumulate superannuation benefits and can be maintained well into retirement
Why establish an SMSF?
Compliance Obligations
As Trustee(s), you are accountable for a broad range of responsibilities, including:
- lodging appropriate documents with the ATO to establish and register the SMSF
- documenting an investment strategy (including insurance)
- investing assets
- maintaining proper records
- ensure annual accounts are prepared
- having the accounts audited
- submitting annual returns to the ATO
- ensuring the Fund at all times complies with the relevant legislation.
- Most traditional investments
What can the Trustee (s) Invest in?
o Direct shares
o Direct property
o Direct fixed interest
o Derivatives (possibly)
- Exotics
o Art, wine collections, antiques, collectibles-sole purpose test rules
- No no’s
o Residential Property from members
o Loans to your businesses or companies
o Breaking the in house assets rules-sole purpose test
Cost to run an SMSF
- It is generally accepted that the cost to run a fund make the establishment of a SMSF too expensive for individuals with less than $190,000 in super
- Given the technical nature and the penalties that apply for not meeting trustee obligations, it is expected that you may choose to use the services of SMSF specialists
- Typically the annual compliance fee for a 2 person fund with simple investments is around $2,200
- Obtain a trust deed-lawyer
- Appoint Trustee(s)-Company formation or individuals
- Apply to ATO and elect to become a regulated fund
- Obtain a tax file number (TFN)
- Obtain an Australian Business Number (ABN)
- Open a bank account
- Review and or placement of Insurance
- Rollover super from current fund to new SMSF
- Development of an Investment Strategy
- Determine solutions to satisfy Administration and Trustee(s) Compliance duties
- Invest assets
- Binding Death Benefit Nomination forms
What is involved in the establishement of the fund?
For more information and advice on Self-Managed Superannuation Funds and whether they are right for you, please don't hesistate to call Norman Howe on 02 9238 1188.
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