What is a SMSF?
SMSF is a private superannuation fund, regulated by the Australian Taxation Office (ATO) that you manage yourself. SMSFs can have up to four members. All members must be trustees (or directors, if there is a corporate trustee) and are responsible for decisions made about the fund and compliance with relevant laws.
If you set up a self-managed super fund (SMSF), you’re in charge – you make the investment decisions for the fund and you’re held responsible for complying with the super and tax laws.
An SMSF is a legal tax structure whose sole purpose is to financial benefits to members in retirement and their beneficiaries on death. It has its own Tax File Number (TFN), Australian Business Number (ABN) and transactional bank account, which allows the fund to receive contributions and rollovers, make investments and pay out lump sums and pensions. All SMSF investments are made in the name of the fund and are controlled by the trustees. As a trust, an SMSF requires a trustee. There are two trustee structure options:
- Corporate trustee– a company acts as the trustee and each member is a director. This structure allows simpler recording and registering of assets, providing administration efficiencies and flexibility in membership. Company establishment and ongoing fees are applicable with this structure.
- Individual trustee– each member is appointed as a trustee, with a minimum of two trustees required.
As an SMSF trustee, you are responsible for making investment decisions and ensuring implementation of an investment strategy for your fund. SMSFs also have strict administrative obligations that require you to maintain records, provide financial statements, complete a tax return and organise an independent audit. For this reason, many trustees engage SMSF specialists to help them manage their accounting, auditing and tax reporting, as well as provide financial and investment advice. However, they always remain completely responsible for the decisions and administration of their fund.