2020 was a year that left us all a bit shaken and seeking a greater sense of security. When it comes to your personal finances, it always pays to have a game plan and perhaps now more than ever. Here …
Self Managed Super Funds
A Self-Managed Super Fund (SMSF) is your own personal superannuation fund that can give you more control of how your funds are invested for retirement.
To take advantage over the traditional superannuation funds, you should set up a SMSF only when you have accumulated at least $300,000. Running your own SFSF is not for everyone. If you would like to take control it is important to note that with that control comes great responsibility.
Do I need a Self-Managed Super Fund (SMSF)?
There are 10 Golden Rules to keep in mind:
1. Ensure that it is the best option for you
Choosing a SMSF is a very important decision, so we recommend you seek a qualified and licensed professional to help you decide if it’s the right super fund for you.
2. Trustee’s Roles and Responsibilities
A SMSF must have four or less members. Being a member of the fund also means you must be a trustee. The trustees need to comply with the superannuation and taxation laws to ensure the fund retains it complying status and is entitled to the superannuation tax concessions.
3. Ultimate responsibility and accountability
Even though trustees can engage the services of professionals, they are bound to retain control over the funds and will have ultimate responsibility and accountability for the fund.
4. SMSF must be a complying Australian Super Fund
The fund must satisfy three tests to be classified as an Australian superannuation fund. The fund must have:
- Been established in Australia or the assets of the fund are located in Australia;
- satisfied the central control and management test;
- satisfied the active member test.
5. Choose a retirement planning strategy
A SMSF can allow you to use many different retirement planning strategies in order to reach your goals and objectives. It is essential to seek professional advice from a financial adviser to ensure your maximise your SMSF and retirement planning goals and objectives.
6. Set and define your investment strategy
A trustee of a SMSF is required to prepare and implement an investment strategy for the fund. An appropriate strategy will establish investment objectives and detail the investment methods the fund will adopt in order to achieve these objectives.
7. Do not break any rules
The trustee must be aware of relevant restrictions that prevent SMSFs from making certain investments. Examples include borrowing in particular circumstances and lending money or providing financial assistance using fund resources to a member or a relative.
8. Remember the sole purpose test
The sole purpose test for an SMSF aims at ensuring investments are maintained for the purpose of providing benefits to fund members upon their retirement and not for any other purpose.
9. Keep things separate
The trustees of a SMSF must ensure the assets of the fund are kept separate from the personal financial affairs. This means you need separate bank accounts and investments.
10. Follow the rules
A SMSF is a trust and the trust provides the governing and operating rules of the funds. A SMSF must also adhere to other regulatory requirements, such as superannuation and taxation laws, which need to be consulted in conjunction with the trust deed.
Other things to consider
There are costs involved in setting up your SMSF, as well as significant administrative and reporting responsibilities. We can help advise you about these and other pros and cons to work out if this is the right strategy for you and your goals.