Like other superannuation funds, a self-managed super fund is simply a way of saving for later in life so people don’t have to rely on Government pensions.
There are some particular differences between a traditional superannuation fund and a self managed one.
Most Australians pay into a superfund that is managed by somebody else. This could by an industry super fund, an employer stand-alone funds or what is called “retail funds”. In contrast, a self-managed super fund is fund where the member of the fund is also the trustee and beneficiary. This means that they run the fund for their own benefit.
An advantage of setting up your own SMSF is that you can invest your superannuation according to your own preferences. You may be able to follow some innovative investment strategies such as investing in art or commercial property, as long as your investment is compliant with the rules and regulations issues by the Australian Taxation Office (ATO).
SMSF Set Up
However, an Self Managed Superannuation Fund set up also has a lot of red-tape associated with it. All self-managed superannuation funds are required to comply with the trust deed and the laws and rules that apply to SMSFs. The compliance is monitored by the ATO and if a self managed superfund is found to be non-compliant severe penalties can be issued.
Because the rules and regulations that govern the SMSF set up and maintenance, many people choose to work with an accountant to set-up and manage their SMSF. Accountants who specialise in self managed superannuation already know the documentation and administration work that is required for setting up a fund. They are also experienced in selecting and managing investments and the administrative matters that are involved.
The trustee of a SMSF is required to keep records, procure the annual audit and report the funds activity to the ATO. All these administrative matters can be easily handled by a professional and helps to take the stress out of having an SMSF.
The income of superfunds, including SMSFs is generally taxed at 15% as long as the fund is compliant with the applicable rules and regulations.
Working with an experienced accountant and SMSF auditing expert to help manage your SMSF set up and ensure ongoing compliance of your self managed super fund will help to grow your superannuation so you are well set up when you retire.