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What is A SMSF and how to SETUP One
An SMSF is a trust that helps people save for retirement and lets members take control of their superannuation investments. This legally regulated structure overseen by the Australian Taxation Office (ATO) enables individuals to take full control of their retirement and future financial matters. What distinguishes an SMSF is that its members also serve as trustees, holding the responsibility of ensuring compliance with superannuation laws.
The SMSF allows up to six individuals as members, all serving as trustees, or, if there’s a corporate trustee, as directors.
The SMSF specifically allocates the funds for retirement purposes.
In recent years, SMSFs have experienced remarkable growth in Australia, with nearly 600,000 SMSFs and over 1.1 million members overseeing assets totalling $868 billion, constituting approximately 26% of all assets within the super system.
Opting for an SMSF provides an excellent opportunity to achieve flexibility and control over retirement. However, it comes with significant responsibility, requiring substantial time and effort to ensure proper setup and management.
What is a SMSF?
A Self-Managed Superannuation Fund (SMSF) operates as a trust with the exclusive goal of offering retirement benefits to its members. It empowers members to personally oversee their superannuation investments for retirement.
Who can set up a Self- Managed Superannuation Fund?
An Australian resident over the age of 18 can set up an SMSF. Individuals seeking more control over their superannuation investments typically establish their own Self-Managed Superannuation Fund.
How many members can a SMSF have?
An SMSF can have up to six members. This is beneficial for families or small groups who want to pool their superannuation balances together.
Steps involved in setting up an SMSF
The process involves checking eligibility, deciding trustee structure – individual or corporate, establishing a trust deed, appointing trustees, obtaining a tax file number (TFN) and an Australian business number (ABN) for the fund, and setting up a bank account in the fund’s name and preparing in investment strategy.
Costs associated with running an SMSF
An SMSF cost includes initial setup or establishment fees, annual accounting and audit fees, ATO supervisory levies, charges tied to investment holdings, and ongoing administrative costs. If using autoSMSF, you will pay fix setup cost. Check our fixed cost under Services.
Self Managed Super Fund trustees responsibilities
Trustees of an SMSF are responsible for managing the fund’s investments, complying with relevant laws, keeping accurate records, and ensuring the fund is solely for the purpose of providing retirement benefits to its members.
Where can a smsf invest
Members of a Self-Managed Superannuation Fund (SMSF) exercise complete control over their investment decisions, with a diverse range of options available.
These include investing in shares (both Australian and international), residential and commercial properties, overseas ventures, cash, bonds, term deposits, physical commodities, collectables, and personal use assets.
Note that members cannot personally utilize collectable items, such as artwork, wine, or jewellery; they can only lease them to entities like corporations or art banks because of their volatile and illiquid nature.
SMSF can invest in business investments with non-related parties.
Additionally, SMSF investors should consider crucial factors like maintaining separation between SMSF and personal assets, ensuring investments reflect market value, conducting arm’s length transactions, avoiding financial assistance to members or their relatives, and adhering to the sole purpose of providing retirement benefits in accordance with the SIS Act.
Investing in a Self Managed Super Fund
SMSFs can invest in a wide range of assets including cash, term deposits, shares, property, managed funds, collectibles (under specific regulations), and more. However, there are restrictions and regulations that must be followed.
SMSF and LRBA
Yes, under certain conditions, an SMSF can borrow to invest in property or assets through a Limited Recourse Borrowing Arrangement (LRBA), subject to strict borrowing rules.
Investment in Crypto
Yes, SMSFs are allowed to invest in crypto assets. Adding crypto to your SMSF can diversify your investments, offering a chance for higher returns and exposure to an innovative global asset class. While there are risks like price swings and regulations, getting professional advice could benefit your financial goals.
Buying precious metals or bullions in SMSF
You can invest in gold or silver in your SMSF in different ways. You can choose Gold or Silver ETFs, which track metal prices without needing to physically own them. Another option is holding coins, but it comes with extra rules and insurance needs. If you prefer simplicity, buying gold or silver bars is common. Just think about what suits your investment goals and how much risk you’re comfortable with
Shares and Self Managed Super Fund
In an SMSF, you can invest in shares in two ways: listed or unlisted. Listed shares are traded on stock exchanges, providing easy buying and selling. Unlisted shares are not on public markets, less liquid, and often involve longer-term commitments, like private companies.
What are managed funds and how a SMSF invest in these funds?
Managed funds pool money from various investors for diversified investments. In an SMSF, trustees choose suitable funds, apply for units, and entrust professional fund managers for ongoing management. Periodic reports and distributions provide updates on performance, emphasizing the need for careful research and compliance with SMSF regulations.
Buying property with your Self Managed Super Fund
You can only buy property through your SMSF if you comply with the rules. The property must meet the ‘sole purpose test’ of solely providing retirement benefits to fund members. A residential property cannot be acquired from a related party of a member.
What is the minimum amount to set up a SMSF?
Setting up a Self Managed Superannuation Fund does not require a minimum amount.
But ideally, the total combined superannuation balances of all members should be above $100,000. This is to ensure that the ongoing management fees of the fund are covered by the invested funds.
Can you do your own SMSF tax return?
You can lodge a paper annual return by downloading the SMSF annual return and SMSF annual return instructions from the ATO website for the relevant year.
Even if your SMSF is straightforward, it’s crucial to engage a professional SMSF accountant. This is because SMSF finances are different from regular finances, and a good understanding of SMSF terms and rules is needed to fill out the paperwork correctly.