Key Takeaways
- In an SMSF, members act as the trustees. This means you are legally responsible for all investment decisions and compliance with Australian tax and superannuation laws.
- SMSFs offer a wider range of investment choices than standard retail funds, including direct property, collectibles, and specific international equities.
- A Self-Managed Super Fund can have a maximum of six members. This is often used by families to pool their superannuation assets and reduce overall management costs.
- Every SMSF must have a written Trust Deed and a documented Investment Strategy. These documents must be regularly reviewed to ensure they continue to meet the retirement objectives of all members.
- While initial setup costs can be high, SMSFs often become more cost-effective as the total fund balance grows, as many administrative costs are fixed rather than percentage-based.
An SMSF is a personal or family superannuation fund that is managed by the members of the fund, who are also the trustees. They can tailor their own investment strategy and select specific assets such as listed securities, managed investments, cash and term deposits, international equities, and installment warrants.
Core Features of a Self-Managed Super Fund
Generally, an SMSF has the following features:
- A personal or family super fund with no more than 6 members.
- Each member of the fund is a trustee (or a director of a corporate trustee).
- No member of the fund is an employee of another member, unless those members are related.
- No trustee receives remuneration for their services as a trustee.
- The SMSF must have a written Trust Deed and Investment Strategy that meets all members' objectives.
Key Advantages of Managing Your Own Super
Choosing an SMSF provides several benefits over traditional retail or industry funds:
- Greater investment choice: Direct access to both Australian and international shares, property, and unique assets.
- Greater control: You decide exactly where your retirement savings are allocated.
- Gearing opportunities: Access to investment gearing (borrowing) options that are generally not available in retail super funds.
- Cost effectiveness: Once the fund reaches a certain balance, the fixed nature of many SMSF costs can make it cheaper than percentage-based fees.
- Tax arrangements: Preferred tax structures can be established to suit the members' specific needs.
- Family benefits: Allows you to pool assets with family members to build collective wealth.
How an SMSF Operates
The trustees of an SMSF are responsible for the entire operation of the fund. This includes establishing the trust deed, arranging ongoing administration and audits, and managing the actual investments. Trustees are also responsible for receiving member contributions and paying out member benefits.
Additionally, trustees must review member insurance policies. Life insurance policies within an SMSF may be tax-deductible if certain criteria are met. This requires careful financial planning to ensure the fund remains compliant while protecting its members.
Is an SMSF Right for You?
While there are many advantages, you must consider if an SMSF is appropriate for your specific situation. Consider these four questions:
- Is the fund strictly for retirement benefits?
- Do you have the time and expertise to manage your own fund?
- Will the total balance be high enough to make the benefit worth the cost?
- How will switching to an SMSF affect your current superannuation benefits, such as existing life insurance?
We have a number of services to assist with setting up and administering your fund. Contact your adviser or nearest office for an obligation-free discussion about your retirement planning.
Find an Adviser
Taking control of your super is a significant responsibility. Our specialists can help you determine if an SMSF is the right vehicle for your retirement goals and provide the technical support you need. Find a Morgans adviser today to discuss your superannuation future.
Frequently Asked Questions
What is a Self-Managed Super Fund (SMSF)?
An SMSF is a private superannuation fund that you manage yourself. Unlike retail or industry funds, the members of an SMSF are also the trustees, meaning they are responsible for all investment decisions and legal compliance for the fund.
How many members can an SMSF have?
As of current Australian regulations, an SMSF can have a maximum of six members. This allows families or small business partners to pool their superannuation assets together to increase their investment power and share administrative costs.
What are the legal responsibilities of an SMSF trustee?
Trustees are legally responsible for the fund’s decisions and for complying with the Superannuation Industry (Supervision) Act. This includes meeting the "sole purpose test" (ensuring the fund is only for retirement benefits), keeping accurate records, and arranging an annual audit.
What assets can I invest in through an SMSF?
SMSFs offer a vast range of options, including Australian and international stockbroking services, residential or commercial property, term deposits, and even physical assets like gold or artwork, provided they meet strict compliance rules.
Is an SMSF more expensive than a regular super fund?
The costs of an SMSF are often fixed (accounting, auditing, and tax lodgement), whereas regular funds often charge a percentage of your balance.
