Self-managed super funds are financial ways to save for your retirement. However, the principal difference between other funds and an SMSF is that the members of the SMSF are also the trustees; which means that they are responsible for its running and are responsible for complying with the superannuation and tax laws. The probable number of SMSFs in Australia nears about 596180, which is a 15% increase over 5 years.
The combined total of members in this sector has reached up to 1.119 million members with an amount of $676 billion, which is 25% of the 2.7 trillion invested in superannuation. Therefore, it is beneficial to set up an SMSF financially, however, one should consider the responsibilities also.
The benefits and responsibilities of running an SMSF
Several key factors differentiate between the self-managed superannuation funds from other funds. First of all, they can serve as a great mean of managing your retirement savings, with the prospect for more control, greater options of factors to choose from, and lower costs. However, the decision to set and run a self-managed superannuation fund should not be taken lightly.
First of all, each member of the SMSF should be a trustee of the fund, either as an individual trustee or as a director of a corporate trustee. Next in line, as a trustee, the members will have to take the responsibility for the fund’s performance and have to comply with certain rules of the SMSF. The chance of the money not being managed wisely can give rise to the poor performance of the fund and the chance of non-compliance will also have to be considered wisely. There are several responsibilities to undergo if you decide to assume the role of the trustee. Some of them include;
- Determining the fund members
- Launch of the trust and Trust Deed
- Setting a bank account
- Cataloguing the account with the Australian Tax Office or ATO
- Constructing an asset policy
- Creating a plan after the end of the SMSF.
The other duties of the SMSF can be given as follows;
Determining the applicability of the SMSF
As said before, the SMSF can be rewarding if managed properly. However, all of the superannuation options needed to be considered before setting a fund up. Moreover, the fund should be suited to your circumstances, and the time the trustee spends to manage the account should reflect in the better performance of the fund than the others. The fund should be viable in terms of the available balance of the fund and the cost of running it. The fees you need to consider an expense are usually the following;
- Set-up fees
- Ongoing accounting and administration.
- Legal and tax advice
- Audit fees, the ATO supervisory levy
- Investment-related fees
- Manual fees.
- Compensation for the time spent of the trustee.
The balance of the fund should be generated and spent wisely, and for diversification, the amount should be kept in ample amount. A small balance may not be sufficient here.
Understanding the basis of SMSF
There are several sides of the SMSF on which the structure of the SMSF will be determined. The particular requirements will change according to the way the fund is set up, or whether it has a single member, individual trustees, or a corporate trustee. For more information, one can consult a qualified professional. The same care will have to be taken for the preparation of the trust deed, more so, as it is a legal document; so, it must be understood and compiled properly as it will set the rules of the operating of the fund, along with the structure of the fund, the strategy for investment, the beneficiaries, and how the benefits will be paid. Each of these points and their decisions should be correctly documented and considered.
Compliance with superannuation regulations
Among the other responsibilities of a trustee, the regulations that need consideration and smsf compliance should be determined correctly. Some of the legal guidelines that should be associated with the superannuation funds are mentioned below:
- The Income Tax Assessment Act 1997 (ITAA 1997).
- The Tax Administration Act 1953 (TAA 1953).
- The Corporations Act 2001.
- The provisions of superannuation law, including (i) Superannuation Industry (Supervision) Act 1993 (SISA), and Superannuation Industry (Supervision) Regulations 1994 (SISR).
- Other required general rules.
The list of duties does not end here. To ensure that all the rules are complied with properly, you have to complete the following tasks;
- Preparation and lodging your fund’s annual return with the ATO by preparing economic-financial records and accounts that meet the accounting values, recording member assistances, and reimbursing the SMSF supervisory levy.
- Generation and keeping of wide-ranging records, including correct tax and secretarial records and proceedings, regarding all trustee meetings and conclusions (about investments or any other matters related to the fund), trustee declarations identifying their commitments and accountabilities, and duplicates of all information given to the members.
- Arrangement of an annual audit by an approved SMSF auditor.
Appointment of the administrator
Some SMSF representatives appoint an administrator who manages most of the submission responsibilities and routine running of the fund. The choice of administrator is vital and considerations should be given to both the fee structure and working protocol with the administrator. The SMSF Service Perth you will get from a proficient administrator can be listed as:
- Well-timed and exact advice
- Honest about their fees.
- Provision of secretarial, broadcasting, record-keeping, and official support.
- Arrangements decreasing the paperwork and simplifying the businesses with third-parties.
- Update of the changing regulations and running consistent agreement checks.
- Assisting closely with the auditor of the fund.
- Explaining the rules and regulations that can help in the decision-making process of the funds.
Other roles of the trustee
The different duties of the trustee of an SMSF are not limited to these options only. The funds would require a purpose of running, must be invested wisely in the market, and must be topped up within the legal maximum limit, or the cap. It would be better to hire a professional to handle the funds and look after the compliance of legal or other matters.
