All You Need To Know About Self-Managed Super Fund

A self-managed super fund is at the rage and has to gain popularity with time. As the name suggests, it is fund on a trustee structure. It seems quite profitable, and when you hear about it, it feels like a win-win situation. However, this is true to some extent, but if you do not possess sufficient knowledge about this, there are higher chances that you might get lost in rules.

Self-Managed Super Fund

Do it yourself, DIY is another trend that has gained popularity in recent times. SMSF is also a kind of fund scheme that, in a way, is DIY. It is a superannuation trust scheme which facilitates its members after retirement. The question arises what make SMSF different from other funding structures. SMSF is a trust where members themselves are trustees; hence they get direct control over their money and savings. A self-managed super fund usually has four members, all of whom are a trustee.  SMSF has a few advantages as well as a few disadvantages too. Some of the advantages include flexibility, cost-saving, trustees having control, tax benefits and having the benefit of estate planning. The problems of SMSF are not generally disadvantages but a few cautionary things. That would be a trustee bearing the responsibility, compliance with the laws and legislations and ongoing change in rules.

How does it work?

Members of SMSF may not unanimously agree on some terms. Still, they all are not only responsible but also if the need arises answerable legally for all the decision fund makes. It is convenient for them to receive and deposit payments, make investments and the primary reason receive pensions. The trustees make investments, not in their names, but in the name of the fund and these trustees control these funds. The trustees are in control of ongoing expense, so budgeting is also one of their significant responsibilities. Not only budgeting but to ensure that expenditures do not get out of their boundary lines.

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Structures of trustee

There are two types of trustees.

  • Corporate Trustee¬†

In this type of trustee company acts as trustee and every member has the role of a director. Here recordings of money, registration of assets, administration expenses and members have the flexibility. However, establishment and ongoing expenses are liable to fund in this category of SMSF.

  • Individual Trustee

As the name suggests in this structure, each member is a trustee upon becoming a part of the team.

SMSF Trustee

As rewarding as it sounds to act as an SMSF trustee, it truly is not a piece of cake. The trustee gets a lot on their plate and often have to manage their schedules accordingly. They should stay updated about the laws and orders about SMSF because it tends to get changed with time. They are required to lodge annual reports, prepare auditor and actuarial reports. SMSF needs certain meetings; hence attendance of trustees in those meetings is also mandatory. A trustee is also responsible for taking decisions and ensuring timely implementation of those decisions. It has rigid administrative regulations that require a trustee to maintain records, provide financial investments, and be able to organize an audit. He should have skills and knowledge of SMSF. Many trustees seek out help for they find themselves unable to take responsibility for all these actions. Although ultimate responsibility is always on a trustee’s shoulders.

Choosing an SMSF service

SMSF services have gained a good deal of popularity in recent years, and hence there are now a variety of SMSF services in the market. On the one hand, this has given rise to competition; on others; it has given people more choice, which has made choosing a little tricky.

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Having a little knowledge of SMSF is a plus. If you are a newbie here, getting professional help would be a better idea for you. People usually get attracted to the flexibility offered by service, which is not a red flag. Still, a person should have sound knowledge and a thorough understanding of the rules of that service. The factors that are important while deciding on choosing an SMSF service you should see

  • How much are you aware of SMSF related knowledge
  • How much would you require to expand tasks of the service

A trustee may outsource some jobs, but according to law, he is responsible for superannuation and taxation legislation. Therefore staying updated with regulations and legislation is an absolute necessity. A trustee is liable to fine and penalties if failed to comply with the rules and laws.

SMSF Services

As stated earlier pension is the most tempting benefit of SMSF service. It also provides

  • Figure out the structure of service. It can also be a part of a company if a company has two to four directors who also act as trustees.
  • It is making out a strategy for investment. It is a legal requirement that SMSF has a document stating investment strategy that clearly says how, where, and how much fund is invested by whom.
  • Annual audit of finances.
  • Handling transactions, on behalf of trustees.

Warning signs

The latest statistics from the Australian Taxation Office (ATO) show that more than 1.1 million Australians are availing services of SMSF. On the average value of each fund is around $1.3 million, which is $679,000 per member. When there are many service providers in the market, chances are higher that you get caught in a scam. Before choosing an SMSF fund, it is better to look and be wary of warning signs. Some of these are

  • Having little or no experience in SMSF
  • Few clients
  • Not comprehending and valuing your input
  • Insist on only property investment
  • Not having an appropriate license and qualification of the services
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All of the above gives you a clear idea that SMSF is all about finances and a person having a degree or experience or both in finances is always a better consultant than a newbie. One must make sure that before becoming a part of any SMSF service, it is still a good idea to go about and search by yourself and get yourself equipped at least with basic knowledge. Managing incomes is not everyone’s cup of tea and some people despite trying hard struggle in this domain. It requires a lot of time and effort, but no one else other than you will care about your money as much as you would. However, if you think you will be unable to give time and energy, then it is better to get professional help. Legal responsibilities and investments is another crucial aspect.