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A self-managed superannuation fund (SMSF) is a trust where money and investments are held and managed on behalf of the members. The fund’s purpose is to provide benefits to members on retirement or death.
A SMSF acts in the same way as any other super fund with the main difference being that in most cases for a SMSF, the members are also the Trustees. This means the members of the SMSF run it for their own benefit. Therefore, they will be the ones responsible for managing the fund’s investments in accordance with its trust deed and the laws and rules that apply to SMSF’s. One important feature of SMSF’s is that its investments must be separate from the personal and business affairs of fund members.
Some of the major advantages of SMSF’s for individuals and families is that they give people control over their own superannuation, they can provide greater investment flexibility and also provide a unique way to implement tax-planning strategies that take advantage of tax concessions afforded to superannuation savings in Australia.
The income of a SMSF is generally taxed at a concessional rate of 15%. To be entitled to this concessional rate, the fund must be compliant with all laws and regulations for SMSF’s.
Because the ATO is the regulator of SMSFs, there are a number of administrative obligations for the SMSF trustee.
Once a SMSF has been set up, members generally cannot access the funds contained within the SMSF until they reach their ‘preservation age’ (for most people this would be over 55 years of age) and officially retire or specifically once they turn 65. There are very limited circumstances where members may access their super before this and there are significant penalties for funds that unlawfully release super benefits to members.
At some point, you will need to wind up your SMSF. This could happen if all the members and trustees have left the SMSF or if all the benefits have been paid out of the fund.
Phillip Cross, Royce Cross Agencies
Gloria Rowett, Marion Holiday Park