SMSF can offer the members of the super fund the ability to 'self-manage' their superannuation. This means that as members of a SMSF, they are also acting in the role as a trustee having an active role in the management of the super fund.
The trustees of the SMSF will control all aspects of the operation of the super fund, including making investment decisions and executing those decisions.
The trustees operate the SMSF's bank account, members may contribute to the SMSF, make investment decisions and invest accordingly. The SMSF can also pay benefits in retirement phase. The SMSF can also purchase life insurance policies to protect members in the event of death or incapacity.
The trustees cannot be paid for performing their duties as trustee of the SMSF.
Funding the SMSF
Initially, members of the SMSF may organise rollovers of all or some of their existing superannuation money into the SMSF and may start contributing to the SMSF. The SMSF can accept superannuation contributions from members' employer and all other contributions, including personal contributions.
During the accumulation phase, the goal is to grow your superannuation and maximise returns within an acceptable level of risk as stated in the SMSF's investment strategy that you have formulated. You, as trustees, will invest accordingly having regards to members' objectives and circumstances.
At the centre of your SMSF is a bank account. Contributions, rollovers and investment incomes are deposited into the SMSF's bank account. The money in the bank account are used to make investments in accordance with the investment strategy. The trustees decide on the investments, and the timing of acquisition and disposal of investments.
Life insurance
Tax deductible insurance policies can also be purchased to protect members. The SMSF can obtain the following tax deductible cover for members:
Although it is not compulsory to obtain life insurance for members, the trustees of the SMSF must determine and regularly review whether the SMSF should hold a contract of insurance that provides insurance cover for members of the SMSF.
Keep your SMSF compliant
It is important to manage the SMSF separate to your own affairs. Ensure that the SMSFs assets are kept separate from trustees/ members own assets, and all SMSF's accounts and assets are held in the name of the SMSF.
It is also important to ensure that money not be withdrawn from the SMSF earlier than is legally permitted, as it is meant for retirement.
Do not gain a current day benefit from the SMSF. This means the SMSF cannot lend money to yourself or any other trustees, or any relatives or related entities. It also means the SMSF cannot invest in entities or businesses related to the trustees, including entities or businesss related to relatives of the trustees.
As trustee of your SMSF, you must ensure that the SMSF is operated in accordance with the trust deed and superannuation laws. Superannuation laws impose certain standards on trustees, including:
The trustees must ensure that financial statements comprising a statement of financial position and operating statement are prepared for each financial year, and lodge the SMSF's income tax and regulatory return (Annual Return). Superannuation Accounting Services can prepare these for your SMSF.
More details about SMSF accounting and taxation lodgement.
