Take control of the 'better super' rules with a self managed super fund (SMSF)
Self managed super funds are becoming increasingly popular offering you control, flexibility and investment choice. However, there are important obligations that come with managing your own super so if you're thinking of starting your own fund, make sure you discuss your options in detail with a financial adviser.
What is an SMSF?
An SMSF is a trust where money or assets are held and managed on behalf of up to four members. In most cases, all members of an SMSF must be trustees of the fund or directors of the fund's corporate trustee. The Superannuation Industry (Supervision) Act 1993 and Regulations (SIS) and related legislation govern Australian super funds and the Australian Taxation Office (ATO) is responsible for overseeing the regulation of SMSFs.
Why establish an SMSF?
As the trustee of the fund, you have complete control over your investment strategy and the flexibility to decide on the type of investments you make. Additionally, like all super funds, an SMSF receives concessional tax treatment. The top tax rate for the investment earnings of your SMSF is 15% - probably well below the top tax rate applicable to your own income.
It's important to note that this tax concession is only available where you operate a 'complying fund' - that is an SMSF that complies with all the rules set out by SIS and the ATO.
Understanding the rules and obligations of an SMSF
While there are benefits in establishing an SMSF, running your own fund is complex and there are many things you have to consider, including:
- your investment strategy - setting it and regularly reviewing it
- the administration of your fund - completing all the paperwork correctly and on time
- compliance with super and other laws - and there's a lot of them.
In fact, many people who choose self managed super use a specialist SMSF administrator to undertake the onerous compliance activities. This allows them to enjoy the benefits of investment control and flexibility without as much paperwork.
Your fund's compliance with super laws is essential and you're legally responsible for making sure your fund complies with all the rules - even if you pay for professional advice and/or administration. While the ATOs regulatory approach to SMSFs has been focused on education and information, it's fast becoming more aggressive in its position on fund compliance.
Getting started
Like to know how you can take advantage of the super rules with a self managed super fund? Talk to your adviser. Alternatively, we can help you find one.
