Superannuation and Self Managed Super Funds (SMSF) are two topics that have quite complex responses. Last week we delved into the world of Superannuation and explained exactly what it is and why you need it. Now we head a little deeper and tackle the Self Managed Super Fund side of the business.
What is a Self Managed Super Fund?
Self Managed Super Funds, as the name suggests, are a form of Superannuation fund. The difference is instead of being managed as a standard super fund, it is managed by a trustee/s (being you and other fund members). You can have up to 4 members in a SMSF, all as trustees of the account.
So How Does It Work?
Just like a third party super fund company, SMSF are created to provide a retirement nest egg for the fund members. They are set up with their own ABN, TFN and transactional bank account so they can make investments and pay out lump sums and pensions. All investments are made in the name of the fund and controlled by the trustees. They are basically a fully recorded business where up to 4 members are included.
In a Corporate Trustee set up, the SMSF is a company and the members are Directors. This setup allows for easier recording of assets and flexibility in membership.
With an Individual Trustee all members are trustees of the account. There must be a minimum of two trustees.
How Do I Manage My SMSF?
As a trustee or director of a SMSF, you have full control over your funds investments and overall decisions. You can seek advice from a specialist, however final decisions will always be up to you.
SMSF are a complex entity to manage and in most cases, trustees engage a SMSF specialist to manage the day to day running of their fund on their behalf. Despite the administration and tax obligations being controlled by a specialist, the trustees still have full control over the fund and investment decisions.
What Can I Invest In?
Whilst most people choose to invest in shares or property with their SMSF, there’s also the ability to invest in other assets as well. Assets can include: collectables such as artwork, jewellery, antiques or even vintage cars as well as cryptocurrency.
A lot of Australians choose to open a SMSF to invest in property. This has become a growing trend over the past decade, especially with property prices booming in some areas. Many feel they have more control over their investment and can see the steady growth more clearly. There are, however, a lot of rules surrounding property investment when it comes to SMSF’s. You need to make sure it’s right for you and your circumstances.
It’s important to note with a SMSF there are running costs involved, especially if you are having your account managed. Please check your individual circumstances and make sure a SMSF is the right decision for you.