Q How does a SMSF work?
It works the same as a retail superannuation fund. It accepts contributions from members, and invests and manages those contributions and subsequent earnings. Importantly it must pass the “sole purpose test” of being set up for the sole purpose of providing retirement benefits.
You will be required to be a trustee of the SMSF and be involved in the decision making process of the fund. This means you will be responsible for tasks such as administration and accounting, managing tax implications and ensuring an investment strategy is in place.
The trustees of a SMSF are responsible for ensuring the SMSF remains compliant with the law. Your SMSF can have up to a maximum of four members (e.g. you, your partner and your children).
Q What are the benefits of a SMSF?
- You have control over how and where your money is invested
- Generally, there can be fee savings if you have more than $200,000 invested
- SMSF's offer the potential to use tax savings strategies not possible in other types of funds
- SMSF's can purchase your business’ real property
Q What are the limitations of a SMSF?
- You are responsible for making sure your fund complies with regulations
- You have to administer the fund (or pay a company to do it)
- Penalties for non-compliance range from financial penalties to imprisonment
- You are required to prepare, implement and regularly review the SMSFs investment strategy
Q Where can I get more information
The Australian Taxation Office (ATO) has some useful guides in relation to self managed super:
- Thinking about Self Managed Super? (ATO publication)
- What you need to know about setting up a SMSF (ATO publication)
- Role and Responsibilities as a SMSF Trustee (ATO publication)
At Apex Partners we advise clients on whether or not a SMSF is appropriate for their needs.