SELF MANAGED SUPER INFORMATION

A Comprehensive Approach

What is an SMSF?

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A Self Managed Superannuation Fund (SMSF) is a Superannuation fund with between 1 and 6 members and is used to accumulate and invest the retirement income of its members.

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For 2 to 6 member SMSFs, all members must be trustees (or directors of the corporate trustee) and all trustees must be members. The rules are slightly different for single member funds. 

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SMSF's use a Trust structure and the rules of the fund are contained in the Fund's Trust Deed.

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In addition to the rules of the Trust Deed, trustees of a SMSF are required to act in accordance with Superannuation laws (SIS Act and Regulations), Income Tax laws and the Corporation Act 2001. 

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These various laws impose duties, responsibilities and obligations on fund trustees.

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Because a SMSF is a separate entity, it is required to be audited and to lodge a Fund Income Tax and Regulatory Return annually.

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Eligibility to be a Trustee of a SMSF

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Trustees must be at least 18 years old.

Here are some of the guidelines for Trustees:

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• not under a legal disability

• no conviction of an offense involving dishonesty

• no civil penalty under the SIS Act

• no undischarged bankrupt

• no disqualification by a regulator

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The maximum number of members an SMSF can have is 6.

Under the relevant legislation, a fund can have either a Corporate Trustee or individuals as trustees of the SMSF.

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Set up Costs and Compliance

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With an SMSF there are certain fixed costs associated with the running of the fund. 

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There is an initial set-up cost when an SMSF is formed. This is due to the necessity of obtaining an ABN, TFN, and a Trust Deed for the fund before the fund can commence operating.

If you intend to use a company to act as the Corporate Trustee of your SMSF, there will be the additional costs to establish a company, but this is the structure recommended by the ATO for SMSFs.

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There are also ongoing compliance costs for the SMSF which includes fees for annual administration, audit and taxation returns.

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An SMSF is required to be audited annually, and there is an annual ATO Levy payable to the tax office on lodgement of the Self Managed Superannuation Fund Income Tax Return.

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Other fees may be payable depending on the fund's circumstances. If at least one member of the fund is in pension mode, pension fees and the cost of obtaining an Actuarial Certificate may apply.

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Minimum Fund Value

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There is no prescribed minimum level of Superannuation required before you can establish an SMSF. However, it is prudent to consider the fixed costs of running an SMSF before you decide to establish such a fund. Funds with a small asset base will not be economic to run, resulting in a poor overall return to fund members.