subject: Get To Know More About Smsf [print this page] SMSFs (Self-Managed Super Funds) are otherwise called "Do It Yourself" (DIY) super funds. Just like other superannuation funds, SMSFs invest contributions made by members, provide benefits to members when they retire and provide death advantages to beneficiaries in the event of a member's decease.
The major difference between a SMSF and other kinds of superannuation funds is that the members of a SMSF are also the trustees, or directors of a corporate trustee. This means they are needed to prepare and implement an investment strategy for their fund, accept contributions and handle the payment of benefits.
SMSFs also offer a broader investment option than other super funds, with options like direct property, managed investments and direct shares included. The members of a SMSF must appoint approved auditors, and might even decide to involve taxation agents, accountants and financial advisors as well as administrators. Though, the ultimate legal responsibility for the fund's ongoing compliance rests with the individual trustees.
WHAT ARE THE REQUIREMENTS OF A SMSF?
A SMSF must be maintained for the sole purpose of offering retirement benefits to member. Investments must be entered into with a view to attaining a commercial rate of return, not for life-style or private purposes
A SMSF has to have fewer than five members
All members have to be trustees
If your SMSF is a single member fund, youll need to appoint a company as trustee or a second individual to act as an individual trustee
No member of the fund can be an employee of another member of the fund, unless those members are related
No trustee of the fund can get any payment for services as trustee
A SMSF cannot lend money or give financial assistance to a member
The SMSF can't obtain an asset from a member of the fund, or any other person relating to the trustee, with the exception of listed shares, managed funds, and business real property.
SMSFs are prohibited from borrowing. There are some restricted exceptions.
Trustees are needed to set out the fund's objectives and to formulate an investment strategy to show how those objectives will be met. This has to be in writing and regularly reviewed.
WHAT ARE THE ADVANTAGES OF SMSFS? ADVANTAGES INCLUDE:
Improved control over your retirement funds and how theyre invested
Wider investment option than public offer funds
Your SMSF can move with you from job to job, and from generation to generation
Affords possibilities for estate planning and benefit payments
ARE THERE ANY KIND OF DRAWBACKS?
Downsides include:
Each trustee bears a high degree of accountability to ensure all trustee duties are exercised in the very best interest of fund members
There is a risk of tax penalties for non compliance, so its crucial to have adequate knowledge and expertise
Running a SMSF could be time-consuming and demanding
SMSFs incur a range of extra costs, eg tax and regulatory return, administration, auditing of accounts, supervisory fees.
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