Self-Managed Super Funds

What is involved with an SMSF

So you’re thinking about starting your own self-managed super fund. That’s great – but are you aware of what’s really involved?

Let’s take a quick look at a typical self-managed super fund.

When you first set up you need to

• Decide on fund members and trustees;

• Establish the trust and trust deed;

• Set up a bank account,

• Register with the ATO,  

• create your investment strategy,  

• and include a plan for when your SMSF ends

There’s more to consider once set up including  

• Rolling over of existing super;

• Organising employer contributions;

• Accepting contributions within limits

• Making investments without breaking rules;  

• Regularly reviewing the investment strategy; and  

• Documenting and maintaining records for up to 10 years.

Then, each year you need to

• Value assets;

• Prepare accounts & financial statements,  

• Appoint a registered Self Managed Super Fund auditor;  

• Lodge the annual return,  

• Pay the Self Managed Super Fund levy; and

• Any tax that’s due.

When you start making payments, you need to

• Decide if any assets need to be sold;

• Ensure minimum payments are met each year;

and you may also need to

• Appoint an actuary;

• Withhold tax; and

• Give payment summaries to members as well as the ATO.

Finally, when the fund is finished you need to

• Get a final audit; and

• lodge your final return;

plus you’ll also need to

• Pay any outstanding tax; and

• Payout or rollover all of the assets.

As you can see, there is a lot involved. Before you decide to start a self-managed super fund, you need to consider whether you can manage everything or whether you are prepared to pay Self-Managed Super Fund professionals to help.

For more SMSF information visit the ATO website at www.ato.gov.au

Compare SMSFs with other super funds

There are a lot of differences between SMSFs and other super funds, but the once thing they have in common is to provide retirement benefits to their members

• Members and trustees

  • SMSF - SMSFs can have a maximum of 6 members.

    All members are either individual trustees or directors of a corporate trustee of the fund. This means all members are involved in managing the SMSF.

    Some State and Territory laws restrict the number of trustees a trust can have, to less than 6. As an SMSF is a type of trust, it is important that clients seek professional advice to help understand if their SMSF is impacted by these restrictions. Alternatively, they could restructure/structure their SMSF to have a corporate trustee, where each member is a director of that corporate trustee.

  • Other super funds - Usually no limit on the number of members.

    Professional, licensed trustees are responsible for managing the fund.

• Responsibility

  • SMSF - Trustees are expected to have knowledge of tax and super laws and must make sure their fund complies with those laws. Compliance risk is borne by the SMSF trustees, or the directors of the corporate trustee, who can be personally fined if their fund breaches the law.

  • Other super funds - Compliance risk is borne by the professional, licensed trustee.

• Investments

  • SMSF - Trustees develop and implement the fund’s investment strategy and make all investment decisions.

  • Other super funds - Most allow you some control over the mix and risk level of your super investments, but you generally can’t choose the specific assets your super will be invested in

• Insurance

  • SMSF - Trustees must consider whether to purchase insurance for their members. Insurance premiums may be higher than in other super funds.

  • Other super funds - Most Industry funds offer insurance cover to members. Public Offer funds may offer insurance cover, or the member may apply for underwritten insurance cover and have this paid from the super fund.

• Investments

  • SMSF - Trustees develop and implement the fund’s investment strategy and make all investment decisions.

  • Other super funds - Most allow you some control over the mix and risk level of your super investments, but you generally can’t choose the specific assets your super will be invested in

• Insurance

  • SMSF - Trustees must consider whether to purchase insurance for their members. Insurance premiums may be higher than in other super funds.

  • Other super funds - Most Industry funds offer insurance cover to members. Public Offer funds may offer insurance cover, or the member may apply for underwritten insurance cover and have this paid from the super fund.

• Regulation

  • SMSF - Regulated by the ATO. Trustees are required to engage with the ATO to manage their fund.

  • Other super funds - Regulated by the Australian Prudential Regulation Authority (APRA). Generally, members don’t have to engage with APRA.

• Complaints / disputes

  • SMSF - The ATO is not involved in resolving disputes among members. Disagreements can be resolved through alternative dispute resolutions techniques or in court, at the members’ own expense. There is no government compensation scheme.

  • Other super funds - Members have access to the Australian Financial Compliants Authority (AFCA) and may be eligible for statutory compensation.

• Fraudulent conduct or theft

  • SMSF - No government financial assistance is available to SMSFs.

    Members may have legal options under Corporations Law but there is no guarantee that compensation will be awarded.

    Be aware of who you provide your personal information to. If you are approached by a financial adviser, make sure they are registered with ASIC.

  • Other super funds - Members may be eligible for government financial assistance in the event of fraud or theft.

Source: ato.gov.au