A self-managed fund is a superannuation vehicle which is run by you for you. As a member and trustee of your own self-managed you are in control of the investment decisions.
Legislation now requires all members of self-managed funds to be trustees of the fund. Each fund must have two individual trustees or in the case of single member funds, the member can be trustee through the use of a special purpose trustee company.
The structure of a self-managed fund is essentially the same as one managed by an institution. The major difference is that you are in total control of the investment strategy and specific investments within the fund.
Self-Managed Superannuation Funds (SMSFs) are becoming more common – here are some of the most frequently asked questions and answers about this investment strategy.
“Just about anyone” is the easy answer to this question provided you are not a disqualified person. A disqualified person is someone who:-
- Is disqualified by the ATO or the Australian Prudential Regulation Authority as acting as a trustee of a superannuation fund; or,
- Is in bankruptcy; or,
- Has been convicted of an offence for dishonest conduct arising out of a law of the Commonwealth, Sate, Territory or foreign Government, such as fraud.
A SMSF is usually most cost effective when assets exceed $250,000. It is best suited to investors seeking maximum control and transparency and who are willing to accept responsibility of being trustee for their fund.
There are many issues to consider before making the commitment to establish a self managed superannuation fund, such as:
- the financial and time burdens of operating a self managed superannuation fund
- your responsibilities as a trustee to comply with the legislation, and
- determining whether you have a sufficient amount of money to contribute to the fund to make it viable.
You should also ensure you have the appropriate combination of asset levels, investment diversification and expertise to manage the fund successfully. We strongly recommend you consult a qualified professional to discuss whether a self managed superannuation fund is the best retirement saving option for you
Trustees of self managed superannuation funds are the ones who are ultimately responsible for the running of the fund. It is imperative that each trustee understands the duties, responsibilities and obligations of being a trustee.
Before implementation of a self managed superannuation fund, we recommend you read this publication from the Australian Taxation Office entitled “Trustee Duties and Responsibilities”.
There are four main benefits of managing your own super fund:
- Control – you choose how your assets are invested. With our assistance you can have full visibility on how those investments perform and make appropriate investment decisions
- Flexibility – As you have total control of your fund, you can switch or modify investments as you see fit. And you’ll be able to make prompt ‘corrections’ to your investment plan. You can link your fund with your overall financial plan. For example, your self-managed fund can be used for both accumulating assets during your working life and for income during retirement by converting to an allocated pension
- Tax Savings – Superannuation funds can use credits from franked dividends to reduce the 15% tax rate. In a self-managed fund you are in a better position to plan your investments to reduce this tax rate. In fact, some strategies can reduce this down to an effective tax rate of 0%
- Cost Savings – To quantify whether a Self Managed fund is right for you we provide a fee analysis of your current superannuation arrangements and the cost savings from implementation of a self-managed fund.
The cost of setting up a Self-Managed Superannuation funds varies depending on the complexity of the implementation and the time involved. The compliance requirements will usually cost around $3,000 per annum, including the ATO superannuation supervisory levy.
The SIS legislation gives you ample latitude to judge for yourself the merits of investment opportunities as they arise.
You can invest in literally anything you choose, provided it fits the fund’s overall investment strategy and passes the “sole purpose test” within the legal guidelines.
The trustees (you) must still ensure that investments are made only after considering a number of questions including:
- Is the investment for the sole purpose of providing for my retirement?
- Is the investment consistent with my Investment Strategy?
- Does the investment breach any of the Investment standards?
There are a number of steps that you must follow including:-
- Establishment and purchase of a Trust Deed
- Appointment of Trustees to the fund
- Election to become a regulated fund
- Obtain the necessary taxation registrations
- Establish a Bank Account for the fund
- Establish an Investment Strategy for the fund
- Ensure the ongoing compliance requirements are met each financial year.
If a SMSF is right for you, we can coach you through the entire set-up process of your fund.
Our SMSF packages have been competitively priced to ensure your self managed superannuation fund remains compliant and operates within the legislation requirements. We offer the following services:
- Full financial analysis of your current situation to explore your options and assist you with making a confident financial decision
- Development of a formal Investment Strategy for your fund
- Assisting with the choice of Corporate Trustee or Individual Trustees – depending on your situation and estate planning requirements
- Preparation of new trust deeds and the upgrade of existing Trust Deeds
- We offer as part of our package an ongoing administration system and yearly taxation reports
- Ongoing annual reporting requirements – we provide our clients with the full financial reporting required to meet the ATO compliance requirements.
Contact us to discuss how we can assist you.