Self Managed Superannuation Funds
A Self-Managed Superannuation Fund (SMSF) is a fund of between 1 and 4 members and is controlled by those members as Trustees. The Trustees choose how and where the funds are invested. And SMSF allows members to invest directly into shares, managed funds, cash, property and some other types of investments.
An SMSF gives members more flexibility and control over their retirement savings. It allows greater choice and control over investments and a greater ability to control investment costs.
An SMSF has the same tax benefits as other forms of superannuation and retirement benefits such as pensions can be paid directly from the fund.
The Self Managed Superannuation is the fastest growing sector of Superannuation assets pool.
Danny Goss is a SMSF Association Specialist Advisor™ and also a Certified Practising Accountant with over 30 years’ experience in the superannuation industry.
If you are establishing a new Self Managed Super Fund or you already have one in place, there are many rules and regulations that govern your superannuation.
Therefore, when you manage your fund yourself it is important to get things right. Our experienced and qualified staff will arm you with the right information and oversee your fund, giving you with real peace of mind.
- Establishment of the SMSF
- Accounting and Taxation compliance and advice
- Preparation of Financial Statements, Members Statements, Assets schedules and annual documentation for the Trustee including Minutes for Trustee meeting
- Taxation advice
- Preparation and Lodgement of ATO annual returns
- Preparation and lodgement of SMSF Annual Returns, Business Activity Statements and Instalment Activity Statements
- Investment strategy advice
- Advice on limited recourse borrowing arrangements (borrowing to purchase assets)
- Independent audit of the financial statements. We outsource the audit but organise the whole process for you
- Control over where your money is invested
- Greater flexibility of investment choices
- More opportunity to reduce taxes and capital gains
- Flexibility in the use of pension income streams
- Estate planning opportunities
- Ability to transfer existing shares and some other securities into the fund
- Ability to own property and perhaps farm land within the fund
- Investment strategy advice
- The opportunity to borrow for an investment, utilising a limited recourse borrowing arrangement, provided the asset is allowed under the SIS Act
We use Class Super software which is the most advanced SMSF accounting software available to provide clients with the best services possible. Our clients can view their portfolios on line in some cases because Class Super uses daily bank data feeds and market price updates.
Considerations before Establishing a Self Managed Superannuation Fund
1. Establishment Reasons
The most common reasons we hear to establish an SMSF are ‘control’ and ‘choice’. These are important concepts to many people and usually relate to fund investment and strategies. Normal retail funds do not always provide the range of choices in investments that are available to SMSFs especially in direct property ownership.
It is important for Trustees to work with an accountant who specialises in SMSF administration. Superannuation Law is complex and penalties for breaches can be severe. A trusted adviser can guide Trustees and handle all of the administrative duties such as preparation of the Financial Statements, Members Accounts, Annual Return to the Tax Office and arranging an independent audit.
Self Managed Superannuation Funds have a choice between a Company as Trustee or Individual Trustees. Although additional costs are involved, there are many benefits to using a corporate trustee. We usually recommend a Company but will assist to determine the most appropriate structure to suit each Fund.
An SMSF can borrow to purchase certain assets. This is called a Limited Recourse Borrowing Arrangement (LRBA). There are very strict rules around borrowing and Banks have strict limits. Great care needs to be taken to get a LRBA correct as penalties could be huge.
5. Sole Purpose
The sole purpose of establishing a SMSF must be to provide retirement funds. This test is always used by Trustees in considering the operation of the SMSF.
6. Fund Balances
It is seems to be widely accepted that at least $200,000 is needed as a Fund balance to ensure that the costs of running the SMSF are not prohibitive. Some accountants (not us!) can charge a lot of money to administer the fund and these need to be considered as a percentage of the fund’s assets. If the fee is around $2000 and the fund balance is $200,000 this equates to 1% fee which is very often much cheaper than retail funds. But if a fee of $2000 was charged on a fund with $100,000 then Trustees need to consider whether a SMSF is the correct structure.
7. Initial Funds
Start up capital usually comes from a rollover from existing superannuation funds, or from contributed personal funds. We always offer to assist clients with how to do this.
8. Investment Strategy
A sound and well thought out investment strategy is crucial to the success of a Self Managed Super Fund. Diversification, asset allocation, risks and returns all need to be carefully considered by Trustees. Recent changes to the super rules now requires Trustees to also consider insurance in the fund and whether it is needed.
9. Trustee Responsibilities
An SMSF trustee is ultimately responsible for the operation of the SMSF so it is very important that Trustees understand their responsibilities. Trustees are required to sign a standard ‘Trustee Declaration’ issued by the ATO. This form declares that Trustees are aware of their responsibilities so it is very important that Trustees spend time to familiarise themselves with these responsibilities.
10. Succession Planning
Consideration should be given as to whether an SMSF is to be used for the current members only or will new members (such as children) be admitted in the future? If it is thought that perhaps children will become members (and Trustees) in the future it could be a good idea to involve them earlier so they can get an understanding of how the fund is run and its purpose (bearing in mind an SMSF can only have a maximum of four members).