Expert SMSF insights
Self-managed super 101 - the basics
By Marjon Muizer
What is an SMSF?
An SMSF is a trust that you control for your retirement which could offer more flexibility than other superannuation structures.
Through your SMSF you can invest in many different types of investments. But remember it is a superannuation fund, and with that comes a number of obligations that need to be fulfilled.
It also has all of the taxation benefits that legislation provides. While you are still accumulating, your SMSF’s income is taxed at a flat rate of 15%, with capital gains tax generally being 1/3 less again – at just 10%. Once you start drawing a pension from your SMSF the tax rate on all income and capital gains is nil for that pension account.
Note: we call it a “pension” but it has nothing to do with the government age pension. It’s just an income stream paid from the fund.
How does an SMSF work?
The SMSF can have up to 4 people in it. You and your spouse, for example, can be members of the SMSF. As a member you must become a trustee or set up a company as the trustee that the members are the directors of. The trustees of an SMSF “control” the fund and make all the investment decisions.
Control is a funny word.
The real control is that you, as trustees, have control over your future. This is your money for your retirement and for your family. The control a SuperConcepts-administered SMSF gives you is the ability to see your financial future more clearly. The trustees are also responsible for complying with all legal obligations. Our job is simply to work alongside of you to make sure what needs to get done, gets done.
Remember as a trustee, you are entrusted with the care of the assets for your future. This is not an obligation to take lightly; there are rules, compliance and processes that need to be adhered to (we at SuperConcepts can help you with these).
What are the features of SMSFs?
An SMSF is one where you, as a trustee and member, have responsibility over the management, investment and administration of your super fund. SMSFs are quite different from other super funds because they’re run by you, for you and any other members of your SMSF. SMSFs are established for the purpose of building retirement savings.
A super fund (except in the case of a single member fund) is an SMSF if all of the following apply:
- The fund has up to four members
- If the trustees of the fund are individuals, each individual trustee is a member
- If the trustee of the fund is a corporation, each director of the corporation is a member
- Each member is a trustee of the fund or a director of the corporate trustee of the fund
- No member is an employee of another member, unless they are related
- No trustee of the fund is paid for any trustee duties or services performed by the trustee in relation to the fund and
- No director of the corporate trustee is paid for their trustee duties or services as director in relation to the fund
It is also possible for you to set up your fund with only one member.
SMSF structures can be quite simple or complex depending on your needs. There’s a lot to consider, but you can outsource aspects, such as administration, to save you time and free you up to focus on what’s important to you.
What are the benefits of having an SMSF?
You make the key decisions and you’re in charge of where you invest your money.
Flexibility & choice
You construct your fund's investment strategy, and the choice of investments is far greater than what other super arrangements can offer. You can invest in property, direct shares, cash, term deposits and much more.
You are in control of what services you require and how much you pay for them.
There are potential tax savings in SMSFs depending on your personal circumstances and investment strategy.
You can include insurance in your SMSF to protect your income and assets, for example life insurance, total and permanent disability (TPD) and income protection.
Your SMSF can be an effective estate planning tool, by specifying who you want to leave your money to.
Your SMSF can be passed down from one generation to another.
How do you set up an SMSF?
The general process of setting up an SMSF involves creating a trust deed, appointing trustees, completing ATO forms, setting up a bank account, rolling over your super, setting an investment strategy and so on. SuperConcepts can help you with this process.
What type of investments can you make?
SMSFs can invest in a broad range of assets. Regulations require the trustee/s to establish and implement an investment strategy taking into account such matters as risk, return, diversification, cash flow and liquidity for the “sole purpose” of generating benefits for the members while adhering to proper commercial standards, as well as the consideration of insurance for members.
Common types of investments in SMSFs are:
- Shares and other listed securities including exchange traded funds (ETFs)
- Separately managed accounts – where a share portfolio is constructed and managed by a professional investment manager based on your needs
- Managed funds – covering most asset classes including Australian and international shares, property, alternative assets, fixed interest and cash
- Term deposits
- Direct property – including business, residential, commercial and retail property
- Other assets such as derivatives, unlisted shares and collectables (for example artworks)
Often the hardest thing is to find someone to answer your questions. Contact SuperConcepts today on 1300 023 170 to find the right SMSF solution for you.
Stay ahead of the game. Know the best strategies and how the latest regulatory changes affect your SMSF compliance. Sign up for SMSF news and insights from Australia’s top experts. A must for advisers and accountants.
Receive regular insights from our experts
Please complete all fields