Self Managed Super fund (SMSF) Information

Can you hear yourself saying “Superfunds? Retirement? Those things are years away for me, right?” Time to think again. The amount of retirement funding which we have available is dependent on the actions we take now. One of the major problems with a lot of retirement funds is management fees. Fund managers and financial planners often impose a number of management and account keeping fees which eat into your retirement saving and reduce your quality of life in retirement. So how can people take control of their retirement savings and make sure people get the income they are entitled to when they retire. Self Managed Super Funds (SMSFs) provide an answer to this question. So what are they and how do they work? How can I set one up?

What is a self managed super fund?

Briefly, a super fund is short for ‘superannuation fund’ which is a set of shares, monies or property which is designed to provide support to a person during their retirement years. The legal requirements which set out a super fund have less than 5 members and each person in the fund is responsible for the operation of the trust. No person is an employee of another member of the fund unless those members are related. This is a quick dot point summary of the characteristics of a self-managed super fund:

• Has less than 5 members;
• Each individual trustee of the fund is a fund member;
• Each member of the fund is a trustee;
• No member of the fund is an employee of another member of the fund, unless those members are related;
• The trustee can be a corporate entity;
• No trustee of the fund receives remuneration for his or her services as a trustee; and
• A SMSF is registered with, reports to and is regulated by the Australian Taxation Office

How does an SMSF work?

A Self Managed super fund is like any other superfund except for the fact that it is managed by its members. The members put aside a portion of their income derived from working each year in order to fund their retirement. This money is invested usually in shares or property assets or possibly in fixed interest securities. These are financial assets which produce an income that a person can live off during retirement. Each different SMSF will have a different investment strategy according to the investors needs for income, capital growth or a combination of both.

In most cases, the trustees of an SMSF are required to prepare and implement an investment strategy for the superannuation fund. The strategy must reflect the purpose and circumstances of the fund and take into account:
• How to maximise member returns while having regard to the risk;
• Appropriate diversification in a long term investment strategy; and
• The ability of the fund to pay benefits as members reach retirement, and other costs incurred by the superannuation fund.
Trustees must make sure all investment decisions are made in accordance with the documented investment strategy of the fund.
What are my roles and responsibilities as a trustee?
The Australian Taxation Office Produces an excellent document outlining the roles and responsibilities of trustees of self-managed super funds. But briefly, as a trustee, you have responsibilities of:

• Lodging an annual income tax return and superannuation fund annual return
• lodging Superannuation member contributions statements
• appointing an approved auditor to complete the annual audit
• maintaining records for up to ten years, and complying with investment requirements.
• Some of the key restrictions under the SIS Act include: meeting the sole purpose test
• not accessing your money without meeting a specific condition of release
• not providing loans or financial assistance to members or relatives, and
• not borrowing money to invest.