What is a SMSF?

Have you heard your family or friends speaking about self-managed super funds lately, and wondered what all the fuss is about? A self-managed super fund, otherwise known as a SMSF or DIY Super, are a way of saving money for your retirement and have a huge range of benefits when used correctly.

We have put together some information regarding SMSFs below, however if you have any further questions regarding SMSFs, their structure or if they are a suitable arrangement for your needs, give Bottom Line Control Sunshine Coast accountants a call on (07) 5471 7077 and we can discuss all the options with you.

What is a self-managed super fund?

According to Australian Securities and Investments Commissions (ASIC), a SMSF is a private superannuation fund, regulated by the Australian Taxation Office (ATO) that you manage yourself.

The following ATO video sets out what is involved with a SMSF:

Who can be a member of SMSF?

Self-managed super funds can have up to 6 members, and all members are required to be trustees (or directors, if there is a corporate trustee, and the company must be registered with ASIC, while each director of that company must also be a member of its corresponding SMSF). All members are responsible for decisions made about the fund and compliance with relevant laws.

How do SMSFs work?

Self-managed super funds are legal tax structures that are created for one purpose - to financially provide for you in your retirement. Similar rules and regulations apply to both public super funds and SMSFs and according to ASIC, when you run your own SMSF you must:

• Carry out the role of trustee or director, which imposes important legal obligations on you
• Set and follow an investment strategy that is appropriate for your risk tolerance and is likely to meet your retirement needs
• Have the financial experience and skills to make sound investment decisions
• Have enough time to research investments and manage the fund
• Budget for ongoing expenses, such as professional accounting, tax, audit, legal and financial advice
• Keep comprehensive records and arrange an annual audit by an approved SMSF auditor
• Organise insurance, including income protection and total and permanent disability cover for super fund members
• Use the money only to provide retirement benefits.

What is an SMSF adviser?

If you decide that you would like to set up a self-managed super fund, you can enlist the help of SMSF advisers to assist you with the process and any ongoing compliance. An individual must be appropriately licensed in order to be an SMSF adviser (Bottom Line Control have some great SMSF advisers if you need some help!) and can help you take a look at both the positives and negatives when it comes to running an SMSF and help you decide whether it's right for you, as well as assisting with ongoing administration and investment decisions.

Remember, if you decide to set up an SMSF, you are personally liable for all the decisions made by the fund - even if you get help from a professional or another member makes the decision.

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Who regulates SMSFs?

The ATO and ASIC are the entities that regulate self-managed super funds:

• The job of the ATO is to ensure that SMSFs comply with their financial reporting and taxation obligations.
• The job of ASIC is to manage the registration process for independent SMSF auditors. SMSF auditors are a crucial component in ensuring overall regulatory compliance, as they report any breaches they have found to both fund trustees and the ATO.

Self-managed super fund vs other super fund

You have likely got this far and are probably thinking to yourself, what is the difference between a SMSF and other super funds? This is a relevant question, and one that not a lot of people know the answer too:

• Trustees : SMSF members are trustees of their own fund, meaning they are legally responsible for its compliance with the relevant tax and superannuation laws. On the other hand, public super funds usually have professional, licensed trustees who take on the legal compliance responsibility.
• Limited Members : SMSFs can only have 6 members, however public super funds can have unlimited members.
• Strategy & Decisions : The trustees of an SMSF develop investment strategies and make all investment decisions for their fund, whereas public super fund members usually can't choose specific assets that their fund is invested in (they do usually have some control over the mix/type of investments though).
• Regulation : SMSFs are regulated by ASIC and ATO, whereas public super funds are regulated by APRA (Australian Prudential Regulation Authority).
• Superannuation Complaints Tribunal : Members of public super funds have access to the Superannuation Complaints Tribunal to resolve disputes, whereas SMSF members have to resolve their own disputes through the relevant legal channels if necessary. Members of public super funds are also eligible for a government compensation scheme if trustee misconduct or fraud occurs.

Your SMSF advisers across the Sunshine Coast

If you have any further questions regarding self managed super funds, or would like to speak to one of our qualified SMSF accountants regarding setting up a fund, management, investments and more, give Bottom Line Control a call on (07) 5471 7077 today. We are specialists when it comes to SMSFs, so get in contact now!

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Resources:

ASIC (Self-managed super fund): https://www.moneysmart.gov.au/superannuation-and-retirement/self-managed-super-fund-smsf

ATO (Self-managed super funds): https://www.ato.gov.au/super/self-managed-super-funds/

Canstar (What is a Self Managed Super Fund (SMSF)?): https://www.canstar.com.au/self-managed-super/what-is-an-smsf/

ATO (How your SMSF is regulated): https://www.ato.gov.au/Super/Self-managed-super-funds/Administering-and-reporting/How-we-help-and-regulate-SMSFs/How-your-SMSF-is-regulated/

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This information should be taken a a guide only, and not read in isolation. Make sure you speak to qualified professional before making any decisions regarding self-managed super fund, and complete your own extensive research.