Self Managed Super

What is self managed superannuation?

In Australia, the preferred national system for planning and contributing to self funded retirement, including pensions is Superannuation. While a particular individual may have a high net worth, the Australian Government provides significant tax savings and benefits for retirement planning using an approved method of Superannuation.

A SMSF is your own personal Superannuation Fund that gives you total control over how your Super Benefit is invested. An SMSF is perfect for the Investor who prefers to make their own Investment Choices for their retirement rather than leave their Superannuation to be invested by others. Unlike membership to larger superannuation funds where an individual may be limited in a direct say as to the specific investment decisions, timing of asset purchases and disposals in the fund, self managed superannuation enables a far more transparent and direct involvement in the day to day investment decisions and therefore the overall performance of the fund.

As a result, self managed superannuation has increasingly become an attractive option.

A Self Managed Superannuation Fund (“SMSF”) is a specific type of trust permitted under Australian law where money and/or assets are held and managed on behalf of up to four members to provide future retirement benefits.

Subject to certain exceptions, all members of the fund must be trustees of the fund or directors of the fund’s Corporate Trustee.

The rules of every SMSF are set out in its Trust Deed, the operation of which is subject to Australian superannuation law.

A SMSF can invest in a wide range of assets including investment properties, shares and managed investments. However there are certain restrictions on some types of investments.

Who Controls a SMSF?

The Trustees (being you the member/s) control the SMSF and make all the Investment decisions for the SMSF. The Trustees are also responsible for complying with all legal obligations including ensuring that the SMSF prepares and lodges an annual tax return with the ATO. It is important to understand that the SMSF Trustees do not own the SMSF assets but are simply responsible for the administration, investment and operation of the SMSF.

Who Owns the Assets in a SMSF?

The Members (trustees) own the SMSF. Importantly the SMSF Members have a proportional Interest in the SMSF assets based on contributions and Rollovers made to the SMSF. This means that if one Member contributes 100% of monies to the SMSF and a second Member contributes no monies, then the Member making the total contributions to the SMSF will own 100% of the SMSF. SMSFs can have a maximum of 4 Members who must all be Trustees.

You must not take your Super Benefit unless you meet a Condition of Release

When you establish a SMSF with SUPERNATION you are in full control of all the Investment decisions of the SMSF. This means that you have full access to the SMSF Bank Account established for you with the ANZ Bank as part of the SMSF Setup Process. As an SMSF Trustee you must ensure that Super monies are only invested for your retirement and not illegally accessed by you to be used for personal purposes. You can only access your Super Benefit for personal purposes when you meet a condition of release such as “Retiring” or reaching at least age 55. SUPERNATION provide education to all clients to avoid accessing your Super Benefit before you are legally allowed.

Investing in accordance with the SMSF Investment Strategy

Prior to Investing your Super Benefit, it is a requirement under current Super Laws that a SMSF formulate and give effect to an investment Strategy. An Investment Strategy is simply a plan for making, holding and realising SMSF Investments that reflects the SMSF’s Objectives (eg increasing the value of all Members Benefits). SUPERNATION ensure you meet this requirement by providing a Standard Investment Strategy for your SMSF as well as extensive education.

The rules of a SMSF are contained in the Trust Deed

The rules of a SMSF specifying what the SMSF can and cannot do are outlined in the SMSF Trust Deed. When you apply to establish an SMSF we will mail to you an “Establishment Package” including the SMSF Trust Deed for your review. You have one month to review the Establishment Package and the Trust Deed to ensure that it meets your expectations. The Trust Deed provided by SUPERNATION is expertly drafted by Maddocks Lawyers and is fully up to date allowing you to do all things allowed by current Super Laws.

Annual Compliance Requirements

As a client of SUPERNATION you are not required to provide source documentation relating to most of your SMSF Investments. That is SUPERNATION receive electronic confirmation of all your ANZ Transactions and Broker trades your SMSF makes, so no records are required from you each year about these Investments as we already have access to them. Importantly the information we receive is only electronic transaction data and we have absolutely no access to your Accounts. Only you as the SMSF Trustee can login and transact on the Accounts. This gives you total peace of your mind your super monies are totally secure. At financial year end you will be required to provide information to SUPERNATION to attend to the SMSF annual compliance requirements. This includes rollover documentation and contribution details. To guide you on the information required, SUPERNATION will send you an annual checklist each year to ascertain the investments your SMSF has invested in and what additional information we require. Where applicable we will request certain information to be provided to finalise your SMSF annual compliance requirements. The Annual Compliance Checklist is typically sent in July each year and must be returned by October each year.

SMSF – The Largest Superannuation Sector

The SMSF Sector has been around for more than 30 years and is Australia’s largest Superannuation Sector by number of Funds and asset size. As at 30 June 2010, there were approximately 430,000 SMSFs, representing 99 per cent of all Superannuation Funds. SMSFs represent around 30 per cent of total Superannuation Assets. The SMSF Sector has over 800,000 Members. The SMSF sector has seen rapid growth in recent years, increasing from $132 Billion to $339 Billion in the five years to 30 June 2010, an annualised growth rate of 20 per cent. This is not surprising when we consider the total control a SMSF provides as well as the dramatic fee savings! The Australian Taxation Office (ATO) regulates SMSFs ensuring that all SMSF’s comply with Super Laws.

No Minimum Balance

A common rule of thumb in the Superannuation industry is that you should have $200,000 in Super Benefits prior to establishing an SMSF. Some administrators actually require you to have a minimum amount in order to commence a SMSF, usually $100,000 or more. There is actually no legal minimum balance to establish a SMSF. You can establish a SMSF with any amount desired.