what is a self-managed super fund?
A Self-Managed Super Fund (SMSF) is a trust run for the sole purpose of providing retirement benefits to its members by managing assets of the trust for the benefit of its members.
Unlike industry funds, an SMSF:
Is managed by its members;
Must have all its members as trustees or directors of any corporate trustee; and
Must comply with the requirements of the Superannuation Industry (Supervision) Act 1993.
This means that members (or the corporate trustees) are the trustees of the SMSF, meaning that members are wholly responsible for all investment decisions, insurance and compliance with tax and super laws.
This also means that members are personally liable for all the fund’s decisions. Further, if the fund loses money through fraud or theft, it won’t have access to any special compensation schemes or the Australian Financial Complaints Authority (AFCA).
What are the advantages of an SMSF?
The advantage of a SMSF is that you have more control over your superannuation. If you are fully informed and involved, then your SMSF may be far more lucrative than an industry super fund.
What are the risks?
As previously mentioned, the members are wholly liable and responsible, they must be intimately involved with the management. Non-compliance with any tax or superannuation legislation can lead to severe penalties. All members of a SMSF are trustees and are responsible for ensuring the SMSF complies with super and tax laws. If it does not comply there are a range of sanctions that may apply including disqualification, penalties, and tax consequences.
Illness, death, and relationship breakdowns of the members can cause issues with the management, and thus an SMSF must be structured to properly account for this.
Is an SMSF right for you?
An SMSF is not for everyone, it is best to consult a lawyer and financial advisor or accountant to help you decide if a SMSF is the right investment vehicle for you.
If you require assistance establishing a SMSF, please contact our office.