Self Managed Super Funds (SMSF) are the largest and one of the fastest growing super segments in Australia^. But what exactly is a SMSF?
Like other superannuation funds, SMSFs are a way of saving for your retirement. The difference between an SMSF and other types of funds is that, generally, the members of an SMSF are also the trustees. This means the members of the SMSF run it for their own benefit.
Managing your own super is a big responsibility. There are strict rules which govern how you can use an SMSF, how you can invest the fund’s money and when you can access your super. If you set up a SMSF, you’re in charge – you make the investment decisions for the fund and you are responsible for complying with the law.
Alternatively, you can put your super in a large super fund where it’s pooled with the super of other members and professionally managed by the trustees of the fund. Most people invest their super this way.
If you decide that an SMSF is the appropriate vehicle for your super savings, you need to ensure the fund is set up and maintained correctly so that it is eligible for tax concessions, can pay benefits and is as easy as possible to administer.
When one or more members retire, you as trustee need to understand and follow the requirements of the law and regulations governing the payment of benefits. The payment standards contained in the legislation and regulations, the sole purpose test and the preservation rules ensure that money in the fund is paid to members in the appropriate manner.
Setting up a SMSF can be tricky, especially if you not have the appropriate skill level or understanding of the law. For this reason, it is important to speak to a financial advisor or solicitor for more information. There is plenty of online reading material to give you a head start. Here are a few great sources you can use…
The Australian Taxation Office has an entire section of their website dedicated to SMSFs and provide lots of information, case studies and scenarios to help explain different circumstances. You can visit their website at http://www.ato.gov.au/Super/Self-managed-super-funds/. The Australian Securities and Investments Commission also provides lots of great information at https://www.moneysmart.gov.au/superannuation-and-retirement/self-managed-super-fund-smsf.
Further, many business entities have taken to providing information and expertise with setting up and controlling your SMSF. Their websites are very informative and can help shed light on things you may not have otherwise realized. These include http://www.spaa.asn.au/ and www.amp.com.au.
In any case, it is extremely important to consider your own circumstances and to appreciate the advice of industry professionals
^ Source: AMP Directors’ Quarter 3, 2012 report to shareholders, dated 26 October 2012
