The ABCs of Self Managed Superfund
The self managed superfund is considered one of the most effective ways to ensure comfortable, secure and happy retirement days, which explains why many Australians are turning to it to provide themselves with a stable retirement income. However, the self managed superfund is also a complex taxation and estate planning, which means you need to be well informed and know all the details about it in order to make the most use out of this structure.
Naming the Superfund
Although there are no restrictions on what name you can choose for your fund, experts claim that the shorter the name, the better. For example, it is totally allowed for a superfund to be called the ‘William Jones Family Executive Superfund’. However, the name needs to fit on the papers of bank statements, plus many back computer systems will not accept such a long name. Therefore, keep your superfund name as short as possible.
What is a Self Managed Superfund
Like all other super funds, an SMSF is a trust – a legal arrangement where assets are controlled by a person, a group of people, or a company, for the benefit of other people.
Requirements of a Self Managed Superfund
- An SMSF should be set up to provide retirement benefits to its members
- In case the members die before they retire, then the fund can give the savings to the member’s beneficiaries
- The fund can not be used for business or personal purposes
- All members need to be trustees of the fund
- In case the trustee of the fund is a company, then all members must be directors of the company
- The trustees of the fund must be members – with the exception if the fund has only one member.
- A member of the superfund cannot be an employee of another member, unless they are related.
SINGLE MEMBER FUNDS
When the fund has only one member other requirements apply:
- If the trustee is a company, then the single member can be the sole director or one of only two directors of the trustee company. In this case, the second director should be an employee of the member, unless they related.
- If the trustee is not a company, then two trustees will be required: one of them being the member and the other (unless they are related) must not be an employee of the member.
Managing a Self Managed Superfund
The self managed superfund involves strict rules that serve as guidance for managing the fund, as well as for creating boundaries that you can operate in. These rules have to be followed.
- Apply to all types of super fund
- Dictate who can contribute to the fund and when access to the fund is allowed
- All the trustees must adhere to the rules
THE TRUST DEED
- A trust deed is a document that establishes rules that the fund must operate under
- It is required by all SMSFs
- Not complying with it could cause the fund to be deemed and the trustees to be penalised
THE INVESTMENT STRATEGY
- This document establishes how the member’s money will be invested and it is required for all SMSFs
- It takes into consideration the risks and returns involved in investing in certain classes of assets; the investment risk each member is willing to accept; the cashflow as well as and how the fund should meet its expenses
Your superfund must meet the rules established by the tax act, the corporation act and any other government publication covering investments, super and taxation.
We highly advise you to seek expert guidance to be able to take full advantage of the benefits that your superfund offers. Hiring an expert will help you ensure your investment strategy meets your goals and that your SMSF is set up, administered and managed correctly.