What is Self-managed super fund(SMSF)?

What is Self-managed super fund(SMSF)?

A Self-Managed Superfund (SMSF) is a type of private fund that allows its members to be in control of all the decisions concerning their retirement savings, and it usually allows up to four members. A self-managed super fund is a legal structure that consists of a set of rules which need to be set up and adhered to accordingly. It tends to attract a lot of investors due to the fact that it is able to offer direct control of their retirement benefits. Due to this, it has become one of the fastest growing sectors in the super industry. 

How a Self-Managed Superfund Works 
As much as you have the freedom to set up and manage a superfund that you can make private, there are rules and regulations that must be adhered to. Among the rules is that it must consist of between one to four members where each one of them is required to be a trustee with legal duties imposed on each. It is also good to keep in mind that the superannuation funds are supposed to be used to provide retirement benefits only. When running a super fund managed by yourself, you will be required to have a reasonable amount of money that will assist you in making set-up and costs running throughout the year worthwhile. These ongoing expenses could include professional accounting, legal advice, audit, and tax. 


Trustee Structures 

1. Individual Trustees 
Under this, often a Self-Managed Superfund will consist of a husband or wife and potentially the children and every member of the fund must be a trustee. In case of a single member fund, then there must be a minimum of two people who have to act as trustees on behalf of the fund. In this case, then the member is required to appoint a second individual or a company to act as a trustee. The main purpose of these trustees is to ensure that the fund remains compliant at all times by making decisions on behalf of the fund. In this type of trustee, you are the ones that hold the assets of the fund in your name on behalf of the fund, for example, John Doe and Jane Doe as trustees for Doe Superannuation fund. 

2. Company Trustee 
In this case, a single member will seek to utilize a company to act as a trustee. In most cases, this happens when an individual seeks to be the sole decision maker or signatory of the fund and cannot find anyone else willing to act as a second trustee. This leads to a company being established allowing the member of the superfund to act as the director of the company. There are normally costs that have to be incurred as a result of starting a company and also taking care of the paperwork involved. It is therefore advisable to discuss this with an investment advisor when deciding on a trustee structure. 

Requirements for One to Become a Member of Self-Managed Superfund 
Basically, anyone who has attained the age of eighteen and above and is not under a legal disability can become a trustee of a superannuation fund. A person is considered to be disqualified if he or she: 
• Is insolvent under administration. 
• Considered disqualified by the regulator. 
• Has been found to have been subjected to a civil penalty. 
• Has a history of being convicted of an offence associated with dishonesty. 
• Is undischarged bankrupt. 


What to Keep In Mind Before Getting Into Self-Managed Superfund 
Taking care of a super fund on your own is not easy hence you need to keep a few things in mind so as to ensure that it becomes a success. First of all, you need to understand the legal requirements so as to avoid getting into trouble with the authorities. When it comes to tax, you also have to understand the tax implications involved and also you are required to have knowledge about the market of investment so as to make it easier for you to take care of your own super fund. You can always take help from a specialist who sells SMSF documents. Putting these things into consideration is very important to anyone since you are bound to take any responsibility for your fund despite the fact that you might have received the wrong advice from professionals. For anyone thinking of getting into a self-managed super fund, it is always advisable to consider taking a self-managed superannuation fund trustee education program that can be found for free. The program is normally designed in a way that it helps the trustees in getting to comprehend their roles and responsibilities. In case you are unhappy with your current fund, it is good to contemplate switching to another fund before deciding to go for a super fund that is self-managed due to its complex nature. Sometimes there may be promoters who will approach you and advise you on getting into a self-managed super fund. Their main aim is usually to have you withdraw part of or your entire super to pay off debts. You need to be wary of these kinds of people and also arrangements of this kind are normally illegal. 


Advantages of opting to Self-Managed Superfund 


1. A self-managed super fund gives you full control of your super by letting decide on where you want to invest your super benefit. 
2. You tend to save a lot when managing your own superannuation fund as compared to other superannuation funds whereby their fees tend to increase as your super balance grows. 
3. It allows you to contribute by use of assets such as commercial properties and shares as opposed to cash. 
4. The fact that you can set it up yourself and add up to a maximum of three more people enables you to cut down on the average fee per member given that your annual fee remains the same whether you have one or three members. 
A self-managed super fund can offer a great way of taking control over your super but it is not always good for everyone since there can be a lot of technicalities involved hence it needs people with a wide range of knowledge on how the system works.

Comments