SELF-MANAGED SUPER FUNDS

“Self-Managed” means exactly that. A SMSF is controlled by you and only you. This is possible as the you are the member of both can and must be both trustee, or in its capacity as a director of a trustee company, and be a member of the fund
As to who can have a SMSF? The answer is simple - just about anybody. This would include:

• Anyone who already has money in another superannuation fund.

• Anyone who is under 75 years of age and, for those over 65 years of age, gainfully employed on at least a part-time basis for a minimum of 40 hours in any 30 consecutive day period of the financial year.

THE ADVANTAGES OF SMSF’s

1. Control – the major advantage of a self-managed fund is the control aspect in that you choose where the fund’s monies are invested, you make the investment decisions and you monitor how these investments perform.

2. Tax effective savings – Superannuation remains one of the most tax effective mechanisms available in order to save for your future.

3. Ability to diversify investments – A SMSF has total control in deciding the range of investments that suits the fund.

4. Estate planning – A SMSF is a most desirable tax planning tool. It is able to provide tax effective death benefits to dependants and reversionary pensions to surviving spouses.

5. A retirement fund for the family – Current regulations allow the trustee of a SMSF to accept 4 members providing the perfect vehicle for families to aggregate their retirement savings. This is a popular attraction for family run businesses who can use the flexibility of a SMSF to produce retirement pensions for older members of the fund as younger members take responsibility for the day to day management of the business and in time effect a change of ownership.

6. Creditor protection – Superannuation benefits are protected from creditors in the event that a fund member faces bankruptcy. Generally monies inside a SMSF are protected from the member’s creditors.

7. Fixed costs – A SMSF’s costs generally do not grow at the percentage of assets growth, which is commonly the case in pooled superannuation funds.

8. Life insurance cover – A most useful benefit is the ability of a trustee of a SMSF to provide a life insurance cover for its members. Under a SMSF the premiums are tax deductible and any proceeds from the policies are added to the member’s benefits on death.

DISADVANTAGES OF SMSF’s

1. Responsibility – As a legal entity the trustees have legal obligations to comply with relevant legislation. Whilst these are not onerous, legislation exists to penalise trustees for non-compliance.

2. Administration & Compliance tasks – The trustees must keep accurate records and provide these records to the administrator and auditor of the fund for compliance purposes. In addition there is frequently a need for a business activity statement (BAS) to be prepared on a regular basis.

3. Keeping up to date – The trustees are responsible for keeping themselves informed of changes in legislation and any effect on it’s members. Whilst the fund may well be administered by an external provider of such services, the ultimate responsibility is on the trustees to administer the fund in accordance with regulations.