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The lure of greater control over your retirement savings with a self-managed super fund may be enticing but the freedom to chart your own destiny also comes with the responsibility to comply with the rules.
An SMSF is a private super fund regulated by the Australian Taxation Office that you manage yourself. You can have up to four members in your fund, each of whom must be a trustee or, if a corporate trustee has been appointed, a director.
As a trustee you are legally responsible for all the decisions made about the fund and compliance. Even if you outsource both the administration and the investment of the fund to a professional, you must still understand what they are doing because you are legally responsible.
So what are the rules an SMSF needs to follow?
An SMSF is a legal tax structure with the sole purpose of providing for your retirement. As a trustee, you need to set and follow an investment strategy that is appropriate for your risk profile and that has been devised to provide for your retirement needs.
It is not something you can set and forget. You need to research your investments, make sound investment decisions and budget for expenses such as professional accounting, legal and financial advice fees.
Basically, the key rules that apply to the SMSF legal tax structure include:
Once trustees reach retirement age, other considerations come into play. These include making sure members are paid at least the minimum pension.
It’s also important to plan for the possibility that a member may be unable to continue in their role in future. For example, a member may become mentally incapacitated due to dementia. In such a situation, you can switch to a public offer super fund or appoint a legal representative.
Insurance is another area you need to be mindful of. In an APRA-regulated fund, life and total and permanent disability insurance (TPD) are often included at competitive rates. However, the responsibility to arrange insurance cover rests with you if you have your own SMSF.
If you would like to discuss whether an SMSF might be suitable for you, give us a call. We can help ensure your fund meets its compliance responsibilities.