A self managed super fund(SMSF) is a superannuation trust structure that provides benefits to its members upon retirement. The main difference between SMSFs and other super funds is that SMSF members are also the trustees of the fund.
The difference between an SMSF and other types of funds is that the members of an SMSF are usually also the trustees. This means the members of the SMSF run it for their benefit and are responsible for complying with the super and tax laws.
Thinking about self-managed super
If you set up a self-managed super fund (SMSF), you’re in charge – you make the investment decisions for the fund and you’re held responsible for complying with the super and tax laws. It’s a major financial decision and you need to have the time and skills to do it. There may be better options for your super savings.
An SMSF must be run for the sole purpose of providing retirement benefits for the members or their dependants. Don’t set up an SMSF to try to get early access to your super, or to buy a holiday home or artworks to decorate your house. These things are illegal.
It’s best to see a qualiﬁed, licensed professional to help you decide. The Australian Securities and Investments Commission website has information about choosing a financial adviserExternal Link.
Your self-managed super fund (SMSF) needs to be set up correctly so that it’s eligible for tax concessions, can receive contributions and is as easy as possible to administer.
To set up an SMSF you need to:
- Consider appointing professionals to help you
- Choose individual trustees or a corporate trustee
- Appoint your trustees
- Create the trust and trust deed
- Check your fund is an Australian super fund
- Register your fund and get an ABN
- Set up a bank account
- Get an electronic service address
- Prepare an exit strategy
Contributions and rollovers
As an SMSF trustee, you can accept contributions and rollovers for your members from various sources but there are some restrictions, mostly depending on the member’s age and the contribution caps.
You need to properly document contributions and rollovers, including the amount, type and breakdown of components, and allocate them to the members’ accounts within 28 days of the end of the month in which you received them.
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You need to manage your fund’s investments in the best interests of fund members and in accordance with the law. And you need to separate your fund’s investments from the personal and business affairs of fund members, including your own.
Visit our ATO CommunityExternal Link to ask a question and read moderated answers about investing.
Find out about:
- Your investment strategy
- Sole purpose test
- Ownership and protection of assets
- Restrictions on investments
- Carrying on a business in an SMSF
- Tax on income
Generally your SMSF can only pay a member’s super benefits when the member reaches their ‘preservation age’ and meets one of the conditions of release, such as retirement. The payment may be an income stream (pension) or a lump sum, depending on the circumstances.
Find out about:
- Preservation of super
- Conditions of release
- Innovative retirement income stream products
- Death of a member
- Lump sums and super income streams (pensions)
Payments of benefits to members that have not met a condition of release are not treated as super benefits – instead, they will be taxed as ordinary income at the member’s marginal tax rate. If a benefit is unlawfully released, we may apply significant penalties to you, your SMSF and the recipient of the early release.
Note that the operating standards, investment restrictions and other rules and regulations that apply to SMSFs in the accumulation or growth phase, continue to apply when members begin receiving a pension from the SMSF.
To wind up your fund:
- complete any requirements that the trust deed specifies about winding up the fund
- pay out or rollover all super (leaving a sufficient amount to pay final tax or expenses if required)
- appoint an SMSF auditor to complete the final audit
- complete and lodge the final SMSF annual return (including wind up details)
- pay any outstanding tax
- after all expected liabilities have been settled and requested refunds are received, close the fund’s bank account.
Once a fund is wound up, it can’t be reactivated.
The breakdown of a relationship between one or more members of your SMSF may affect the ability of a member to effectively undertake their trustee/member obligations. If a member chooses to leave your SMSF as a result of a relationship breakdown, their benefits must be rolled over to another complying super fund. Your SMSF does not have to be wound up, but it may need to be restructured to continue to meet the definition of an SMSF.
Administering and reporting
As a trustee you have a number of administrative obligations. You need to:
- appoint an SMSF auditor
- value the fund’s assets
- lodge SMSF annual returns
- report transfer balance cap events
- lodge Superannuation transfer balance account reports
- keep records
- notify us of changes.
Approved SMSF auditors have a critical role in helping to maintain the health and integrity of the SMSF sector through the annual audit of each SMSF.
Find out about:
- How to contact us for help
- SMSF videos
- SMSF case studies
- Early engagement and voluntary disclosure
- Establishing whether gainful employment has ceased
- Paying a lump sum benefit
- Starting an income stream at 60
- Death benefit lump sum payments
- Disqualified trustee as a result of dishonesty conviction
- Improvements to LRBA assets
- Life insurance and buy-sell agreements
- Questions and answers
- SMSF technical
- How to report contributions that you roll over – self-managed super funds
- Interest in a super fund
- Limited recourse borrowing arrangements – questions and answers
- Returning contributions
- SMSF – transition to retirement income streams
- Co-contribution recovery notice
- PCG 2016/5 frequently asked questions
- Understanding super interests in an SMSF
- Pension standards for self-managed super funds
- Transitional rules and in-house assets
- Keeping good records
- SMSFs: Minimum pension payment requirements – frequently asked questions
- Timing of a pension payment
- Exempt current pension income
- SMSF deductibility of expenses
- Stopping schemes to illegally access super
- Tax treatment of transfers from foreign super funds
- Division 293 tax – information for super funds
- Giving practical advice to SMSF investors
- Excess contributions tax – administrative penalties
- Notice of intent to claim a deduction
- Recent changes to electronic lodgment of the SMSF annual return
- Employee share scheme options and acquisition of shares by self-managed super funds
- Funds: starting and stopping a pension
- Fund rules intended to prevent excess contributions tax
- Speeches and presentations
- ATO regulatory framework – engagement, visibility and assurance
- Fledgling SMSFs – the first 18 months of an SMSF’s life
- SMSF update – AIOFP National Conference
- SMSFs and the ATO: key issues and updates
- Superannuation heading towards July 2017
- ATO presentation: superannuation funds
- SMSF Association Speech by James O’Halloran 2018
- Journey through reform for ATO and APRA superannuation funds
- Assurance and governance for large superannuation funds – ATO perspective
- Trust and confidence in self-managed superannuation funds: our common purpose
- Administration issues under the transfer balance cap
- Seeking approval of education courses
- SMSF checklists
- Past webinar recordings
- Transfer balance cap: online TBAR lodgments for agents webinar recording
- Transfer balance cap and transfer balance account reporting webinar – November 2018
- The use of reserves by self-managed super funds webinar – May 2018
- Helping clients who have exceeded their Transfer balance cap – April 2018
- Transfer balance cap event-based reporting webinar: How to complete the Transfer Balance Account Report (TBAR) form
- SMSF Professionals – Event-based reporting webinar November 2017
- Capped defined benefit income streams webinar – May 2017
- Transition to retirement income streams webinar – April 2017
- Transfer Balance Cap Introduction – March 2017 Webinar
- SMSFs Super Changes Webinar February 2017
- SMSF Professionals November 2016 update
- SMSF early engagement and voluntary disclosure service – April 2016
- Valuation guidelines for self-managed super funds
- SMSF webinars
- How to elect to be non-deductible (or revoke election)
- Approved SMSF auditor checklist
- Alerts for changes made to SMSF information
Source Australian Taxation Office https://www.ato.gov.au/Super/Self-managed-super-funds/