Self-Managed Super Funds (SMSFs) provide a way for saving for your retirement.
The difference between an SMSF and other types of superannuation funds is that the members of an SMSF are usually also the trustees. The members of the SMSF run it for their own benefit and are responsible for complying with the superannuation and taxation laws.
More and more Australians are now taking control of their retirement savings and establishing their own SMSF. If you are considering managing a SMSF, you will firstly have to ask yourself whether you have the time to manage and administer an SMSF, whilst being willing to learn about managing your fund’s investment.
Here are our quick tips on getting the most out of your SMSF.
1. Give Yourself Time
SMSF’s do require some time, management and financial know-how.
Get educated by attending free web/seminars on SMSF’s. This will assist you in getting up-to-date information about managing your SMSF and the associated current taxation and compliance rules.
Check in with your financial adviser as they could also offer similar seminars and provide information so utilise their knowledge and expertise.
2. Set up
SMSF’s need to set up correctly to ensure the fund is eligible for tax concessions, can receive contributions and be easy to administer.
Your financial adviser can assist you by facilitating discussions on the structure of your fund, create a trust deed and appoint your trustees in addition to other set-up considerations.
They can also help you with the indicative cost of setting up a SMSF. Remember that there are also annual running costs associated with a SMSF and these are more important to the long-term viability of your SMSF than the set-up costs. They will impact your investment return and the size of your superannuation account over time.
3. Contributions and rollovers
You can accept contributions for your members from various sources but there are some restrictions depending on the member’s age and contribution caps.
Keep up-to-date with any restrictions and continuing changes to your SMSF. You can download up-to-date information and articles, however, it is important to get specialist technical advice from your financial adviser or a SMSF expert.
You will need to manage your fund’s investment in the best interests of fund members and in accordance with the law. It is not as simple as investing in property, which comes with many laws and regulations.
The SMSF’s investment must be separate from all personal and business interests / affairs of fund members.
5. Paying Benefit
An SMSF can only pay a member’s super when the member reaches their ‘preservation age’ and meets one of the conditions of release, such as retirement. The payment may be an income stream (similar to a pension) or a lump sum, depending on the circumstances. There are penalties for releasing super benefits without meeting a condition of release.
Your financial adviser will be able to guide you through the process of paying benefits at the appropriate time.
6. Administering and Reporting
There are administrative obligations with operating an SMSF including an annual audit of your fund. Set up good reporting practices from the start. Keeping accurate and appropriate records also help with lodging an annual return with the ATO.
Your financial adviser will be able to help you with the administration and reporting of your SMSF. They will also work with you to ensure that you have considered the following:-
- Appropriate amount of money in the fund to make set up and annual running costs worthwhile
- Budget for ongoing expenses such as professional accounting, tax, audit, legal and financial advice
- Financial literacy, and experience and skills so you are able to make sound investment decisions
- Life insurance, income protection and total and permanent disability cover
We can work with you to ensure that your records are comprehensive and satisfactory the ATO requirements. This could include the following:-
- Minutes of meetings and decisions
- Trustee declarations
- Annual audit records
- Audit reports
- Investment strategies
- Registration documents including ownership documents
- Notices of compliance
- Tax returns
- Operating statements
- Bank account statements
7. Join a Professional Association.
Consider joining the Australian SMSF Members Association. The (ASMA) is a not-for-profit organisation that is building contacts with government, regulators and the media to ensure SMSF member’s benefits are grown and protected.
SMSF’s are a great way for Australians to save for their retirement as it puts you in control of your retirement savings. We can help you make it happen so talk to us today about how we can assist you in providing advice as to whether an SMSF is right for you and how we can help you administer your SMSF.
General Advice Warning
This blog contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
If you decide to purchase or vary a financial product, your financial adviser, Charter Financial Planning Ltd and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/or a percentage of either the premium you pay or the value of your investment. Please contact us if you want more information.