What is a SMSF?

A superannuation fund is a Self Managed Super Fund (SMSF) if it meets the following conditions:

  • It has less than 5 members;
  • Each individual trustee of the fund is a member;
  • Each member of the fund is a trustee;
  • No member of the fund is an employee of another member of the fund, unless those members are related;
  • No trustee of the fund receives any remuneration for his or her services as a trustee

A SMSF can also have a company as trustee (known as a corporate trustee) if:

  • Each director of the company is a member of the fund;
  • Each member of the fund is a director of the company; and
  • The fund has less than 5 members, no member is an employee of another fund (unless related) and the trustee does not receive remuneration for their services as a trustee

A SMSF has the sole purpose of providing benefits to members in retirement or to their beneficiaries on death.

As all members are trustees, members control the entire running of the SMSF, thus where the "Self Managed" term comes from. You (as the trustee) manage the investments, make decisions, it's the trustee responsibility to ensure compliance with relevant legislation. It is not a set an forget. However, Rogerson Kenny SMSF Accountants can play a major role in assisting you (and do with the majority of our SMSF clients) in the day to day running of the SMSF.

How does a SMSF work?

A SMSF is established much the same way as a normal trust.

A trust deed is required, trustees are appointed, members apply and are confirmed, ABN, TFN and GST (if necessary) are applied for with the ATO, an investment strategy and death benefit nomination forms are completed, an accountant and auditor are appointed and then the fund is ready to open a bank account.

Once the bank account is open, fund's from other super funds (industry / retail) can be rolled in to the new SMSF. This works by completing the rollover form, then once approved, a cheque is sent to the trustees of the SMSF, who bank it and are then free to invest in allowable assets.

The SMSF's bank account is the hub of all activity. Rollovers and contributions (personal, employer, etc) come in, pensions and expenses are paid out. Assets are purchased from there and investment earnings are banked. The most common investments in SMSF's are:

  • Listed shares
  • Property (business real property and residential property)
  • Managed Funds
  • Term deposits
  • Cash
  • Unlisted shares or units
  • other investments

There is an annual requirement to have the SMSF audited and a tax return lodged. The ATO is the regulator of Self Managed Super Funds and pass the responsibility of auditing each SMSF to approved auditors, who will report to the ATO and trustees any breaches of the SIS Act.

How Does a SMSF Work?

  • Contributions and Rollovers are directly added to a members balance
  • Benefit payments are directly taken from a members balance
  • Investment earnings and expenses are allocated on a pro rata basis, based on the percentage of funds a member holds
  • Investments are held in the name of the Trustee(s) for the benefit of the Self Managed Super Fund
  • The bank account is the hub of the Self Managed Super Fund
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