A self managed super fund (SMSF) is a similar to superannuation fund that offers member's more control over their retirement savings than any other type of superannuation fund such as industry or retail super funds.
What is SMSF exactly?
A
self managed super fund (SMSF) is a super fund controlled by its trustees and regulated by the ATO. There cannot be more than four members and must be run for the sole purpose of providing death or retirement benefits for the members or the members' dependents. Each member in this scheme is a Trustee or Director. There are three main pillars of SMSF, they are:
A safety net consisting of a means-tested Government age pension system
Private savings generated through compulsory contributions to superannuation
Voluntary savings through superannuation and other investments
The employees could access their preserved benefits only if they reached 55 years of age. However, there made a change in this scheme after legislation was passed in 1999, an employee's preservation age depends on their date of birth. The following table give the relation of the age concerned with SMSF account.
Date
of Birth
|
Preservation
age
|
Before
1 July 1960
|
55
|
1
July 1960 – 30 June 1961
|
56
|
1
July 1961 – 30 June 1962
|
57
|
1
July 1962 – 30 June 1963
|
58
|
1
July 1963 – 30 June 1964
|
59
|
After
30 June 1964
|
60
|
Basic Requirement to set up a SMSF.
For establishing a SMSF one must have the time and skills to manage the fund along with a large amount of money in the fund to make set up and yearly running costs worthwhile
A self-managed super fund (SMSF) is a super fund controlled by its trustees and regulated by the ATO. There cannot be more than four members and must be run for the sole purpose of providing death or retirement benefits for the members or the members' dependents
To budget for ongoing expenses such as professional accounting, tax, audit, legal and financial advice
Plenty of time to manage the fund
Financial experience and skills so you are more likely to make sound investment decisions
Separate life insurance, including income protection and total and permanent disability cover
Risk And Laws
The trustee of an SMSF solemnly responsible for all investment decisions and the associated risks, as well as ensuring compliance with super and tax laws. He cannot access to some of the legal protection that applies to members of other types of super funds. SMSFs receive significant tax concessions and one must follow the tax and super laws to be eligible for these concessions.
Benefits of SMSF
SMSFs offer 4 major advantages:
1. More control over investments.
2. Greater investment flexibility.
3. Generally lower fees than industry and retail funds.
4. On average, better performance than industry and retail funds.
Criticism
The interaction between superannuation, tax and pension eligibility is too complex for most Australians to understand easily. It is very difficult to make considered decisions such as whether to invest excess funds in super or reducing a mortgage. Trustees have a duty to invest in the interests and for the benefit of the member. It is also criticize by some people to be unconstitutional, and have long term negative financial implications on lower income bracket households.
A self-managed super fund (SMSF) is a super fund controlled by its trustees and regulated by the ATO. This scheme was a part of a major reform package addressing Australia's retirement income policies to encourage the people to put more money as a saving for their future. Four or less than four members team can be form in this system and that are to be run for the sole purpose of providing death or retirement benefits for the members or the members' dependents.
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