What is an SMSF?

A Self Managed Super Fund or SMSF is superannuation fund that has been set up for only you and your members. You are also the trustee of the superannuation fund with total control and responsibility over the investment strategy as well as everything else that it does.

It is the control of the investment strategy and day to day running of the fund that is the most common reason that SMSF are set up. With superannuation a compulsory component of every working Australian’s remuneration and the taxation benefits associated with it, more and more people are becoming more active in how their retirement savings are managed.

Superannuation is an investment environment set up to help fund Australians throughout retirement and reducing the dependence on the Australian government.  Superannuation has also been incentivised for Australian’s to contribute to by enabling all earnings to be taxed concessionally as opposed to an individual’s marginal tax rate.

A self managed super fund is defined by meeting the following criteria:

  • – The fund has 4 or less members
  • – SMSF has a trust deed that meets the requirements of the SIS Act
  • – Each member of the fund is a trustee
  • – No member is an employee of another member of the fund unless related
  • – No trustee of the fund receives any remuneration for their services as a trustee

There are many benefits of a SMSF but with these benefits comes responsibility.  Trustees of a self managed super fund are responsible for:

  • – Completing an annual tax return for the SMSF
  • – Ensuring SMSF is audited by an independent approved auditor
  • – Setting a trust deed
  • – Setting up an investment strategy and investing responsibly
  • – Be wary of related party rules
  • – Do not allow in-house assets to exceed 5%
  • – Meet the sole purpose test to ensure the fund is providing for retirement benefits

It is also possible for a SMSF to have one member if it has a corporate trustee or if there is 2 related individual trustees or the 2 individual trustees do not work for one or the other trustee. If there is a corporate trustee the member must:

  • – Be the sole director of the trustee company
  • – Or, be related to the other director of the trustee company and there is only 2 directors
  • – Or, not be an employee of the other director of the trustee company.

It may also be possible for a Self Managed Superannuation Fund to be more cost effective. The ATO has normally given an outline that there should be at least $200,000 in super in order for a SMSF to be worthwhile. The reason for this is that they assume that it costs approximately $2000 per annum to manage a SMSF. $2000 based on a balance of $200,000 is equal to approximately 1% which is then comparable to the average retail SMSF.

As more and more SMSF’s are opened and the competition in the marketplace continually increases the ongoing cost of managing a SMSF is decreasing. The other potential benefits when opening a SMSF that need to be taken into consideration are:

  • – Potential borrowing if structured correctly
  • – Payment of insurances inside of SMSF
  • – Other investment opportunities.

If you would like to know more, just send us an email.




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