Self Managed Superannuation Funds

Your SMSF Questions Answered

Self Managed Superannuation Funds offer more control on the management and growth of superannuation. There are many factors to consider when switching over to a SMSF.

1What is an SMSF?

A Self Managed Superannuation Fund (SMSF) is a particular form of a trust, governed by both the trust deed and the Superannuation Industry Supervision Act and the Income Tax Acts (both 1936 and 1997).

It is a fund established to provide for the members retirement, just like any other superannuation fund;

It is distinguished from retail and industry super funds by having less than five members where all the members are the trustees.

2Where do you find the rules?

The trust deed establishing the SMSF;

Terms and conditions relating to any pensions established by the fund;

Superannuation Industry (Supervision) Act 1993 and the Regulations;

Income Tax Assessment Act 1936 and 1997 and Regulations;

ATO Rulings and Determinations;

APRA Guidance Notes;

Many other Tax acts relating to superannuation;

State Trust Acts, governing the operations of trusts;

Common Law.

3Is an SMSF suitable for you?

___Possibly

Do you have a balance in super of at least $300,000?

Are you organised and like to handle paperwork?

Do you have an understanding of the share market, or are willing to learn and have the time to do so?

Do you own a business and want to invest in your premises so that you benefit from the rent you pay?

Do you want to take control of your superannuation?

If you answered yes to 2 or more of the above, then a SMSF could be suitable for you.

___Possibly not

Do you want to get hold of your super money to invest in those great schemes you hear your mates talking about?

Are you fed up with the return on your superannuation money?

Do you think super is a waste of time and want to get the money to make better use of it?

A yes answer to any of the above means you may be looking at a SMSF for the wrong reasons. It may be suitable for you, but, your super is your investment for your retirement. ‘Look before you leap’ is good advice if you’re thinking of switching to a self managed superannuation fund. SMSFs are great for some people but they don’t suit everyone.

4How do you establish a Self-Managed Superfund?

STEPS

1. Consult with a licensed advisor who MUST provide you with a Statement of Advice outlining the advantages and disadvantages, costs and benefits, of establishing a SMSF;

2. Ensure you receive an analysis of your current super fund compared to the alternatives, and full disclosure of fees, charges and commissions you advisor may receive and a Product Disclosure Statement;

3. Read the ATO’s booklet – “It’s your money but not yet”;

4. Once you’ve decided to establish a SMSF, you can instruct your advisor, accountant, financial planner or lawyer to acquire a trust deed;

5. Decide who will act as trustee – individuals or a corporate trustee (a company);

6. Decide whether you will appoint an administrator to manage the paperwork and compliance obligations, and if so appoint them;

7. Meet to execute the documents and establish the fund;

8. Appoint an Auditor;

9. Apply for an Australian Business Number (ABN), Tax File Number, and make an election to become a Complying Superannuation Fund with the ATO.

10. Receive membership applications, ensure all members have nominated a beneficiary and provided their Tax File Number;

11. Have the executed trust deed stamped for Stamp Duty at the State Revenue Office, if applicable;

12. Establish an Investment Strategy for the fund – this can only be prepared by a Specialist SMSF Advisor or a licensed planner;

13. Open a bank account for the fund in the name of the trustee, noting that it acts in its capacity of the super fund;

14. Roll over you existing superannuation into the new fund, and/or make contributions into the bank account;

15. Acquire investments in line with your investment strategy.

COSTS

You should expect to pay in the order of $4,400 for the Statement of Advice, Trustee Company and Trust deed and associated administrative matters. If you are paying less than this, it is likely you are getting a product that hasn’t been developed by specialists and so runs the very real risk of not being suitable in the long run. If this sort of cost is an issue for you, then establishing a SMSF is not for you.

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