Self-Managed Super Fund Advice

As the name suggests, a self-managed super fund (SMSF) is one that the members manage for their own benefit.

A self-managed superannuation fund is a trust structure established in accordance with the Superannuation Industry (Supervision) Act 1993 (SIS Act or SISA) to hold retirement savings for its members. It receives concessionary taxation treatment, in line with other superannuation funds. As a consequence, a SMSF must comply with the normal superannuation rules regarding preservation, contributions caps, death benefits etc., as well as investment rules specific to SMSFs.

There are several notable and distinctive features of a SMSF.

  • There can be no more than 4 members of a SMSF. It is recognised that 4 is a fairly arbitrary number, chosen with the traditional nuclear family of two adults and 2 children in mind. The Superannuation System Review – Statistical Summary of Self-Managed Superannuation Funds – December 2009, noted that more than 90% of SMSFs have only one or two members.
  • All members of a SMSF must be trustees of the fund or directors of a corporate trustee where one is used. This means all members must be actively engaged in the operation of their fund.
  • No member of a SMSF may be an employee of another member of the fund unless they are related.
  • Trustees are not able to be remunerated from the fund for duties or services performed in relation to the fund, in their capacity as trustee.
  • Where a fund has only one member, they must either have a corporate trustee with the member acting as the director of the corporate entity or another person may be the supplementary trustee. There is a good video on this issue at: https://www.ato.gov.au/super/self-managed-super-funds/setting-up/choose-individual-trustees-or-a-corporate-trustee/
  • Trustees must be residents of Australia.
  • SMSFs are regulated by the ATO. All other superannuation funds are regulated by APRA, which makes intuitive sense given its roles in regulating Australia’s financial sector. Regulation of SMSFs moved from APRA to the ATO, in recognition that the ATO was better equipped to perform the compliance role required on such a large number of funds.

SMSF’s are a rapidly growing segment of the superannuation segment of Australia. SMSF’s allow for maximum control over super benefits, which in turn means that super benefits are managed in ways that complement all other elements of a financial plan. This includes, of course, your estate planning (super benefits are not generally subject to your will and therefore you need to make specific arrangements for the posthumous management of super benefits).

Establishing a New SMSF

If you are looking to establish a new SMSF, this can be a daunting task.

Whilst there are many beneficial features to SMSF’s they are a complex structure.

Our job is to simplify and de-mystify SMSF’s for you and assist you with the entire process.

We will first sit with you and explore your needs, goals and objectives and help you ascertain if an SMSF is indeed the right structure for you as they do not suit everyone.

If it is a beneficial structure for you and you are happy to proceed we will help you establish the fund and understand and execute your responsibilities as Trustees.

We will help:

  1. Identify the members.
  2. Develop a trust deed.
  3. Appoint trustees. They can be individuals or a company. In the case of a SMSF, every member of the fund must be a trustee or a director of the trustee company. They must consent to acting as trustee. They must not be a disqualified person (e.g. undischarged bankrupt).
  4. Invite members to join the fund. The fund should request that members supply it with their tax file numbers.
  5. Apply for an Australian Business Number (ABN) and a Tax File Number (TFN) for the fund.
  6. Whilst registering for the ABN and TFN, application will be made for the fund to become registered as a superannuation entity.
  7. Hold a meeting of Trustees. The trustees will elect to become a regulated superannuation fund, accept the membership applications and authorise the establishment of an operating account (bank account) for the fund.
  8. Trustee(s) sign a declaration stating they understand their duties as SMSF trustees.
  9. Open Fund bank account(s).
  10. Apply for replacement insurance where required.
  11. Make Rollover requests to the member’s existing superannuation funds (consider insurance issues – may need to leave a small balance).
  12. Set up an investment policy for the fund, outlining what its investment aims are and how it intends to achieve these investment aims.
  13. Appoint relevant service providers such as
    1. asset providers
    2. consulting actuarial firms
    3. custodians
    4. investment managers.
    5. accountants and auditors
  14. Set up an appropriate accounting system so as to maintain an account for each member. This will typically be done through an administration service or accountant.

Existing SMSF Review

If you are an existing SMSF you may want to consider an independent review of your SMSF.

Are you 100% confident your SMSF is performing as planned and on track to meet your retirement objectives?

Are you compliant as a Trustee and meeting all your compliance obligations with the ATO and APRA?

Are you correctly structured to take advantage of all the tax benefits available to you through your SMSF?

Has your SMSF been updated with the latest legislative changes?

Have you conduct a recent risk review to ensure you are not falling fowl of APRA and the ATO?

Where trustees are found to have failed in their responsibilities to carry out their role with diligence and within the law, significant penalties may be applied. In circumstances where the regulator (ATO) considers the SMSF has engaged in a serious breach, it may lose its complying status.

The consequences of becoming non-compliant may include:

  • criminal prosecution
  • SIS penalties
  • loss of concessional taxation benefits
  • reduction of fund assets

The ATO is increasing its focus on non-compliant SMSF’s and the Trustees responsibilities within these funds.

The ATO does not hesitate to prosecute trustees for serious breaches of superannuation law and a non-compliant fund will be taxed at 47%

The ATO is proven to be more lenient and reasonable with Trustees who voluntarily notify them of any breaches, often giving time to rectify verses Trustees who do not notify them and the ATO itself discovers the breach(es).

These are just some of the many questions and points a SMSF trustee needs to think about and be aware of.

PLEASE CONSIDER THE VALUE OF AN INDEPENDENT REVIEW OF YOUR SMSF.

We are here to help and give you peace of mind.

We will ensure the structure, Trust Deed and investment strategies of your Fund are inline with and delivering on the members needs, goals, objectives, and investment risk profile.

We will make sure your SMSF and its Trustee’s are compliant and fulfilling their compliance obligations in an ongoing manner.

Another important point is to ensure your SMSF structure and strategy dovetails in with your Estate Plan. This way you ensure all your hard earned money and investment is not squandered through incorrect treatment of assets, investments, contributions, taxation and death benefits.

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