SMSF Basics – What is SMSF (Self Managed Super Fund) and what types are there?

SMSF Basics – What is SMSF (Self Managed Super Fund) and what types are there?

SMSF Basics – What is SMSF (Self Managed Super Fund) and what types are there?

Self-Managed Super Funds (SMSF) are one type of super fund similar to the commercial public funds, in that they are trusts.

Super funds can be in 3 forms –

  • Independent large super funds such as retail, industry, bank and financial institutions (Regulated by APRA – Australian Prudential Regulatory Authority)
  • Retirement Savings Accounts (RSA) banks, institutions (rare now)
  • Own self managed super fund (SMSF) you manage it (Regulated by the ATO)

Under Australian superannuation law, you have the ability to choose to contribute your personal superannuation contributions (and in some cases, direct your employer to pay employer contributions) to a superannuation fund of your choice. All super funds are trusts, as your money is held in trust until you are eligible by law to access it to have money to use in retirement.

The difference between a self-managed superannuation fund and other types of superannuation funds is that members are also trustees, or they can be directors of a corporate (company) trustee. This means they control the investments of the fund, the payment of their benefits and are ultimately responsible for the ongoing compliance of the fund.

SMSF are regulated by an Act of Parliament, have different types or structure, are a special Trust (like the major corporate super funds) and are governed by the Sole Purpose Test, that super funds are kept solely for retirement purposes and not to be used for any benefit of members before a lawful retirement event happens.

An SMSF is created under the “SIS” Act whose full name is – Superannuation Industry (Supervision) Act 1993 (or “SISA”) and can be in two main forms

  • Multiple member SMSF

– 2- 4 members

  • Single member SMSF – 2 possibilities

– 2 trustees (you and one other non-employee)

– Or have a Corporate trustee with you as sole director

NO member can be an employee of another (unless family)

NO Trustee can be paid for services

An important part of the law is to recognize and abide by the “Sole Purpose Test” – that an SMSF is established  to pay Retirement Benefits – the purpose of this is to ensure the super assets/money are preserved and protected for retirement, and in the meantime both managed and invested wisely.

This means there are some restrictions on investments in related party assets, assets that can be acquired from related parties, and restrictions on personal use of fund assets.

There are two main different types of SMSFs, based on structure, that is, whether there will be a corporate (special super company) or individual trustees. Another difference is the number of trustees, single member or multiple, up to four trustees/members.

Corporate Trustee:

  • Four or less members
  • Each member also a director of the company who is the trustee itself
  • No member an employee of another member unless related
  • Corporate trustee, nor any director is paid for services related to the fund

Individual Trustee:

  • Four or less members
  • Each member is a trustee
  • No member an employee of another member unless related
  • No trustee is paid for services related to the fund

Single Member Funds come in Two Forms:

  • With corporate trustee, member must be sole director of the corporate trustee, or one of two directors either related or not an employee of each other
  • Two individual trustees, one a member and the other either related or any other person who does not employ them

See ATO: Setting up a self-managed super fund – or print NAT 71923 Pg 6-7

Interested to know what self-managed super (SMSF) is all about, and if it is for you?

See the slides SMSF Roadmap Overview.

If you want experts who have years of helping others, without the hype – then call for a FREE strategy session today and see how our Super-Connector Service assists you to find the right expert to answer your question – it’s FREE also!

No obligation. 0407 361 596, Paul.

Also get your FREE Expert Guide – Self-Managed Super and Youtop right hand side above.

About SuperBenefitnews

Self-Managed Superannuation Service Providers in Australia. SuperBenefit provides a wholistic SMSF assistance, education and administration service continuum - 1. “assistance” is help of whatsoever nature where our overall SMSF experience and knowledge enables us to provide assistance/help without any legal (or “license”) limitations. 2. “education” involves providing knowledge through teaching, coaching and mentoring about all matters SMSF, including (but not limited to) investment issues such as equities and property, 3. “administration” encompasses all admin aspects of legally required SMSF trustee and member record keeping including (but not limited to) audit and ATO matters. In keeping with our key point that SuperBenefit does not provide Financial Advice, where issues arise from 1, 2, and/or 3 above Indicate a need for a legally authorized provider (such as a Financial Adviser) and the client does not have their own service provider, the client can utilize SuperBenefit’s ‘Connect Assist’ … SuperBenefit, in itself, does not provide Financial Advice, but it does provide the wherewithal for great SMSF service. WE do not provide Financial Advice or any other service that requires a legally authorized provider. However, where such advice or service is required we have our ‘Connect Assist’, a SuperBenefit resource we use to connect clients to a Licensed Advisor or other legally authorised service provider. Call us 0407 361 596, no obligation FREE Connection call to see how we can help you!
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