Planning for retirement is a crucial aspect of your financial arrangements, perhaps more so today than ever.
With so many options for securing investment returns, finding the right investment vehicle, or suite of options, to suit your needs can be both challenging and confusing.
However, while there are numerous managed options available, for those looking to take some control over their investments, the Self-Managed Super Fund (SMSF) can seem like an attractive option.
As with most investments, there is often a lot of misunderstanding or misinformation surrounding many of the options available, so before jumping in, we will look at Self-Managed Super Funds in more detail.
It is created in the form of a trust, and as such requires a trustee to be the legal owner of the fund’s assets, and also take responsibility for all necessary decision making for the fund.
The role of a trustee can be held by an individual or a company, but there must be a trustee for the fund to operate.
Each Self-Managed Super Fund can have up to four members. If the fund has individual trustees, then all members must be trustees, likewise, if the trustee is a company, then all members must be directors of the company.
If the Self-Managed Super Fund is set up with just one member, and also decides to have individual trustees, them while the member must be a trustee, the fund must also appoint a second, non-member, to act as a trustee too.
That non-member must be given identical responsibilities as the member trustee and carry out the same role. If a single member fund chooses a company as the trustee, that single member can be a sole director of the organization.
Knowledge and education is the key to identify if a SMSF is right for you
All members of the fund must be trustees, or in the case of a company, must be directors of the trustee business.
On the first examination, having individual trustees can appear the ideal solution. It costs less minimum amount to set up and reduces paperwork significantly, however as an investment fund, it is vital that all aspects of the process are looked at for their impact over time, and the choice of trustee structure is no different.
While a corporate trustee approach incurs higher initial costs, it also means the administration is more efficient throughout the life of the fund, while governance can be carried out more effectively.
Taking all this into account, a corporate trustee arrangement, using a company where all members, from one to four people, are directors, can save costs over the life of the fund.
All Self-Managed Super Funds are covered by the SIS Act and Superannuation Industry supervision regulations. As these laws change, the deed should be updated to reflect those changes to ensure that the fund complies with the prevailing legal structure for such investments.
In addition, Self-Managed Super Funds are also regulated by the Australian Tax office. Each fund must submit financial statements and an annual tax return, independently audited by an ASIC registered organization to ensure accuracy.
Failure to provide these documents can result in the registration of the fund being removed, which prevents employers from paying contributions into the fund, in addition to causing problems when trying to rollover funds.
With that in mind, having all reporting and accounting provision in place as part of the set up of the fund ensures seamless functioning when needed.
To ensure this, trustees must understand and follow the Sole Purpose Test when making any decision about the fund.
A breach in this exclusivity, such as if a member of the fund or any party related to
The fund can be declared as non-compliant, which results in tax concessions being lost and as a result, all assets and, excluding concessions, contributions, being taxed at the highest marginal tax rate.
Maintaining this compliance is one of the more common issues trustees of Self-Managed Super Funds have, and it is the main cause of compliance failure.
Personal and Fund assets must be kept completely separate at all times.
First, it is important to understand that assets held by a Self-Managed Super Fund cannot be used in the same way that assets of a family trust or other investment vehicle.
Importantly:
It is important that you have the time and investment expertise to manage the funds well, it is a long-term commitment that investors must stand to buy throughout the life of the fund.
In addition to understanding the expectations and duties of a trustee, those looking to form a Self-Managed Super Fund will require upfront expense to cover:
Guidance is important here, having everything in place as the Self-Managed Super Fund is launched ensures that ongoing administration is much easier and less prone to breach any legislative restrictions.
Finding the right advisor includes ensuring they are registered with appropriate regulators and offer the kind of service you are looking for. Some have a traditional face-to-face service, others operate entirely online, many combine the two. The right approach is purely down to personal taste and situation.
1. Schedule an appointment (Conference Call) with an Investment Manager
2. Submit a Managed Discretionary Account (MDA) application with Walker Capital Australia.
3. Open a trading account with the Walker Capital Australia’s executing broker.
4. Select from our range of investment strategies and choose your asset allocation between the choices of accounts.
5. Once all accounts are opened, and funds have been chosen, our team gets to work and begins trading.
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