Self Managed Superannuation Funds.

A Self Managed Super Fund (SMSF) works like any other super fund, with the crucial difference that the responsibility of managing the fund, (including its investment decisions and legal responsibilities) rests solely with the trustee (member).

What is an SMSF?

A Self Managed Super Fund (SMSF) works like any other super fund, with the crucial difference that the responsibility of managing the fund, (including its investment decisions and legal responsibilities) rests solely with the trustee (member).

Self Managed Superannuation Funds have many benefits; they offer the greatest amount of control and flexibility regarding investment options compared with other kinds of managed funds.

However, setting up and operating a Self Managed Super Fund is a major financial decision, and it requires your time, skills, and a significant amount of capital given the annual costs (financial advice, accounting, and auditing) associated with maintaining the fund and ensuring it complies with all the legal and tax requirements.

Self Managed Super Funds can invest in stocks of listed and unlisted public companies as well as privately-owned companies. They can also invest in residential and commercial property.

Setting up an SMSF.

You will need a good Self Managed Super Fund accountant to set up your SMSF correctly. A Self Managed Super Fund accountant will be able to help you setup the fund so that is eligible for tax concessions and can receive contributions and ensure it will be as easy as possible to administer.

Given the heavy time costs associated with running a Self Managed Super Fund, a good SMSF accountant will be able to alleviate as much of the burden as possible and ensure your fund complies.

You will need to do the following to set up an SMSF:

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choose individual trustees or a corporate trustee

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appoint your trustees or directors

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create the trust and trust deed

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check your fund is an Australian super fund

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register your fund and obtain an ABN

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setup a bank account

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prepare an exit strategy

What can an SMSF invest in?

Self Managed Super Funds do not necessarily outperform industry super funds. While it is true SMSFs offer the potential for greater returns they also carry risk of greater losses.

As trustee you have freedom to create and implement your own investment strategy, however you can also seek professional advice and employ a financial adviser to help you with managing your investments.

We have strategic relationships with several of Sydney's foremost Financial Planning firms and can put you in touch with the one that we think is right for you, whatever stage you are at, whether it be accumulation or pension phase.

Annual Compliance for SMSFs.

As trustee of the SMSF you have several administrative obligations, including:

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appointing an SMSF auditor

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valuing the fund's assets

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lodging an SMSF return annually

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lodging Superannuation transfer balance account events

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keeping records

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notifying the Australian Taxation Office of any changes

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regularly checking your SMSF registration status (to learn more about how to do this, check out the ATO's website)

Buying Property with your SMSF.

You can buy property via your SMSF, however there are several rules that you must comply with.

The property itself must:

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meet the 'sole purpose test' of solely providing retirement benefits to fund members

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not be acquired from a related party of a member

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not be lived in by a fund member or any fund members' related parties

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not be rented by a fund member or any fund members' related parties

If your SMSF purchases a commercial premises, it can be leased to a fund member for their business. However, it must be leased at the market rate and follow specific rules.

Is an SMSF right for me?

The answer depends on your financial situation, your goals, and whether you desire greater control and oversight regarding the assets your super savings invest in. The ongoing costs of running an SMSF can be high. These include accounting, tax, audit, and legal fees, as well as the costs of financial advice if you choose to seek professional advice regarding your investments.

Of all the costs, the value proposition varies most in the area of financial adviser. When it comes to the makeup of the SMSF's investments, poor financial advice can be disastrous. Given you will rely on the super savings to provide for you well into your retirement it is crucial that you seek a professional with a strong track record and who will act in your best interests.

For many Australians, a regular industry superfund can be more cost effective and beneficial. We strongly recommend seeking professional advice when considering whether you should set up an SMSF.

How much Super do I need to start an SMSF?

There is no official minimum balance required for starting an SMSF and if you ask 10 different accountants or financial advisers you are likely to receive 10 different answers.

A better question is how much will it cost you to set up and run an SMSF and will the freedom of greater control over the investments of the fund result in a high chance of higher returns?

Considering the costs of running an SMSF compared with another type of super fund, it usually only becomes cost-effective once you have a balance of $250,000 or more. You will need to pay the annual supervisory levy to the ATO and arrange for an accountant to prepare the financial statements and tax return, and conduct an independent audit, in addition to financial planning fees, if you decide to engage a licensed financial adviser to manage the investment strategy of the fund.

About Causbrooks.

We have looked after the accounting and compliance needs of SMSFs for hundreds of clients over the last two decades and have many years of experience delivering quality SMSF accounting services.

If you are after an SMSF accountant, look no further. Get in touch with us to set up a consultation or use the contact form on this page to inquire whether our services are right for you.

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