A self managed super fund (SMSF) is a form of superannuation fund that can offer members greater control over their retirement savings than other types of superannuation funds such as industry or retail super funds. This includes wider investment choice and greater control over investments and the ability to pay retirement benefits, such as pensions and annuities, directly from the fund.
Self managed super funds must be established for the sole purpose of providing benefits to fund members on retirement. Or, if the member dies before retirement, a benefit to that member’s dependants. This is referred to as the Sole Purpose Test.
Why establish an SMSF?
An SMSF can provide many benefits including:
- greater control over your retirement savings with the ability to develop your own investment strategy and make decisions on when to buy and sell individual investments
- a wide choice of investment options including corporate bonds, managed investments, listed shares, listed investment companies (LICs), exchange traded funds (ETFs) and direct property
- potential tax advantages over other forms of super, and
- potentially lower annual fees than retail and industry funds.
What are the requirements for establishing an SMSF?
To establish an SMSF, the fund must meet the following conditions:
- have fewer than 5 members
- each individual trustee of the fund must also be a member of the fund
- each member of the fund must be a trustee of the fund
- no fund member can be an employee of another fund member, unless they are related, and
- no trustee of the fund can receive remuneration for their services as a trustee.
An SMSF can alternatively have a company trustee (known as a corporate trustee). Each director of the trustee company must be a fund member, and each fund member must be a director of the company.
There are some exceptions involving single member funds and minors.