What is a SMSF (self managed superannuation fund)

1. Corporate funds – available by people working for a particular employer or organisation
2. Industry funds – open to people under a particular industry award or in a particular industry. Some industry funds are open to anyone.
3. Retail funds – open to anyone, generally run by financial institutions
4. Self-managed super funds – only open to you and up to three other people.

This information sheet focuses on self-managed super funds.

Australia has over 300,000 self managed superannuation funds, with this number growing by around 2,500 a month (source: Australian Tax Office).

Self managed super funds provide the same function as other super funds – they invest contributions and make them available to its members on retirement. However unlike other super funds, the members of self-managed super funds are also the trustees, and they decide what the contributions are invested in and how benefits are paid. As all the members are trustees, they are all in a position to ensure their interests are protected.

What is a self-managed super fund?
A self-managed super fund is just what it says – a super fund that is managed by the people who invest in it. Like other super funds, the assets and money in a self-managed super fund are solely for retirement benefits. It cannot be used to run a business, renovate a house or benefit you before retirement.

Under guidelines from the Australian Tax Office, a superannuation fund is generally a self managed super fund if (with a few exceptions):
▪ it has a trust deed that meets the requirements of the Superannuation Industry (Supervision) Act 1993 (SIS Act)
▪ it has four or less members
▪ each member of the fund is a trustee
▪ no member of the fund is an employee of another member of the fund, unless they are related, and
▪ no trustee of the fund receives any remuneration for their services as trustee.

Who can set up a self-managed super fund?
Anyone can set up a self-managed super fund – it is not just for people over the age of 40, or those approaching retirement.

The maximum number of people who can be in a self-managed super fund is four. They do not need to be related however it is useful if they have similar investment goals and styles.

Is a self-managed super fund right for me?
Self-managed super funds are not for everyone. Because it is self-managed, you need to do some work. This includes sitting down with your accountant and the other trustees and working out an investment strategy that will grow in value to meet your investment goals.

As you will be a trustee of your own fund, you will be legally responsible for the decisions made, regardless of the professional advice you may seek. It will be your responsibility to ensure the fund is correctly structured, keeps thorough records, and meets all reporting requirements (such as income tax and regulatory returns).

Morris Accounting can help you understand with the legislative requirements and administrative responsibilities of running a fund.

What are some of the benefits of a self-managed super fund?
Perhaps the biggest benefit of a self-managed super fund is that you control what you invest in. And depending on what you choose, there are also opportunities for increased financial gains in short and long term.

Setting up fund with up to three other people also allows you to pool funds together to increase investment and effective diversification

What can my self-managed super fund invest in?
Self-managed super funds can provide significant opportunities to create wealth. Traditionally self-managed super funds invest in listed shares, but there is no need to limit yourself to this. They can use most forms of investment and wealth creation including shares, property, cash (such as term deposits), public and other trusts as well as a number of other options.

There are new laws around self-managed super funds that now allow most forms of borrowing, as long as rules are met.

What does a self-managed super fund cost?
Self-managed super funds generally have upfront and annual fees, however these can often be offset with greater gains than normal superannuation accounts with lower returns and % based fees.

Talk to Morris Accounting for more information on costs and how much you should have in your fund to make it viable.

How do I set up a self-managed super fund?
Talk to Morris Accounting! As well as being accountants, we are also qualified to discuss financial matters and therefore authorized to help you set up a self-managed super fund as well as advise you on what your fund should invest in.

We can do a lot of the hard work for you!

The Australian Tax Office (www.ato.gov.au) and the Australian Securities and Investments Commission (www.fido.gov.au) can also provide information on self-managed super funds.

Self-managed superannuation funds (Downloadable version)