What is a Self-Managed Super Fund

A Self Managed Superannuation Fund (SMSF) is a type of superannuation fund established for the sole purpose of providing retirement benefits to its members or to their dependants, if a member dies before retirement. The difference between an SMSF and other types of funds is that there are less than 5 members of an SMSF and the members are also the trustees of the SMSF. Trustees are responsible in making the investment decisions for the fund and for ensuring the fund is compliant with the super laws.

What are the Benefits of having a Self Managed Super Fund?

Cost Advantages  An SMSF operating expense ratio declines as the size of a fund increases. From analysing the SMSFs that we provide services to, we have found that management expense ratios on average is below 1% of the fund balance.

A common question raised is how much the members' super balances should be before considering establishing an SMSF. ATO  statistics from the 2016 year show that the median assets of SMSF established that year were $245,000. 

Investor Choice and Control

An SMSF gives members complete control over their own investment decisions. Trustees must have an investment strategy in place that sets out the fund's investment objectives and specifies the types of investments the fund can make. SMSFs can also own assets not generally available within other super funds. For example, they can hold property directly or hold instalment warrants, which are a form of derivative with gearing built into them for shares and property. They can also acquire business real property from members and other related parties (at market value).  The property can then be leased back to the member's business (at commercial market rates). 

Estate Planning

Superannuation is not an estate asset but superannuation can be used as an estate planning vehicle to direct benefits to specific beneficiaries. For example, superannuation can be used to provide an income stream to a surviving spouse or a lump sum of money to children from a previous marriage. Adult children can be introduced as members of an SMSF at inception or at a later date. This can be a way of providing liquidity to the fund to pay benefits to older members while preserving assets held by the fund. Carefully structured Estate Planning can result in very effective outcomes. 

Creditor Protection 

Superannuation is protected from creditors, and given an SMSF can buy a member's business property, this can be a very effective vehicle for asset protection. However, if they are transferred to the SMSF with the sole intention of avoiding creditors, then this protection does not apply.  

Choosing Individual Trustees or a Corporate Trustee

The trustees of an SMSF are responsible for ensuring that the fund complies with the governing rules of the trust deed and the super law. All members of the SMSF must be either individual trustees or directors of the corporate trustee. Where an SMSF has one member only then a corporate trustee must be established.

 Individual Trustees    Corporate Trustee
Each member of the fund must be a trustee and each trustee must be a member of the fund.   Each member of the fund must be a director of the company and each director of the company must be a member of the fund.
There must be a minimum of two trustees. One trustee must be a member of the fund with the other trustee holding a nil member balance.   May have a sole director company that is also the sole member of the fund.
Ongoing administrative requirements and establishment costs are less because there are no ASIC fees.   ASIC charge a fee to register the company and a nominal annual review fee. This annual fee is reduced when the company is solely established to be the corporate trustee of a SMSF.
All assets of the fund will be held in the name of the trustees 'as trustees for' the fund. If an individual trustee is removed or added you must change the titles of the SMSFs assets. This can be costly and time-consuming.
  When a member leaves or joins the fund they cease to be or they become a director of the corporate trustee. As the company name does not change, the title to the SMSFs assets is unchanged.
A fund must always have at least two individual trustees. If one was to pass away a new individual trustee must be appointed otherwise the fund is in breach of the super rules.   A company continues in the event of a member's death. With a corporate trustee, control of an SMSF and its assets are more certain in the event of the death or incapacity of a member.
Fund assets must be kept separate from any assets members hold personally. This may be risky where assets are held in individual trustees names.
  Assets held in a company name are easily identified as being separate from members' personal assets.
If super laws are breached, administrative penalties are levied on each trustee. The more trustees, the greater the potential penalty.   If super laws are breached, administrative penalties are levied on the corporate trustee only, not individual directors.

Trustee Obligations

As trustees you are responsible for running the fund and making decisions that affect the retirement interest of each member including yourself. As trustee you must:

  • Act honestly in all matters concerning the fund
  • Act in the best interests of all fund members when you make decisions
  • Manage the fund separately from your own affairs
  • Know, understand and meet your responsibilities and obligations
  • Ensure that the SMSF complies with the laws that apply to it

You can appoint other people to assist or provide services to your fund such as an accountant, tax agent, administrator or financial planner. However, the ultimate responsibility and accountability for the fund's actions lie with the trustees.

Setting up a Self-Managed Superannuation Fund

Determine a name for the SMSF (and Corporate Trustee)   An SMSF is a special type of trust and therefore requires a Trust Deed to be established to create it. Brentnalls SA will arrange for a lawyer to draft the fund's trust deed. If a corporate trustee is required this will be established with ASIC at the same time as the SMSF and appointed as trustee of the SMSF.  
Register the fund   Brentnalls will apply for an ABN and TFN, and request for the SMSF to be a complying fund with ATO. We can also register the fund for GST if required.  
Setup a bank account   You will need to open a bank account in the name of the trustees 'as trustees for' the fund to manage the fund's operations and accept cash contributions, rollovers of super and income from investments. This account is used to pay the fund's expenses and liabilities. You do not have to open a separate bank account for each member. Each member will have their own member account within the fund showing their contributions, share of fund investment earnings and payments of any super benefits.  Pile of coins surrounding a tree with a focus on contributions to your superannuation.
Employer contributions (if applicable)   In order for your fund to receive contributions from employers, it needs to be able to receive the contributions and associated SuperStream data electronically. Brentnalls SA can provide this service to your fund. An employer will need the following information about your SMSF in order to pay your contributions into your SMSF:
                    - SMSF
                    - ABN
                    - SMSF Bank account details (BSB and account number)
                    - Electronic service address
Rollover existing superannuation   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. Before requesting to rollover your superannuation balance from another super fund provider, it is important to review any insurance cover that is attached to your current super policy. This can be reviewed by Brentnalls SA on your behalf. It is also important to check for any "untaxed element" in the fund as it will be taxed at 15% when rolled to the SMSF.  

Costs of Establishing and Running a SMSF

Brentnalls SA are able to facilitate the setup of the SMSF and liaise with the lawyers to prepare the legal documents. We have found the average costs to set up a fund with a corporate trustee are as follows:

    Cost (inc GST) 
SMSF Trust Deed   $475
Corporate Trustee – new company setup   $405
ASIC registration fee – new company   $469
Registration & Establishment of SMSF (including bank account & rollovers)   $550-$1,100

The annual compliance costs (accounting, tax & audit) for an SMSF depend on the size of the fund, the types of investments made by the fund and the number of transactions undertaken. Brentnalls SA use specialist superannuation software to help reduce the annual compliance costs for a SMSF making our fees very competitive.
At Brentnalls SA, we have a dedicated Super & Wealth division which focuses on services to clients with SMSFs.  We can provide financial advice, SMSF compliance & administration services as well as advice regarding superannuation strategies and retirement planning.   
Our main focus is on reviewing performance of your fund and managing ways to maximise your after tax returns. We action this with one on one meetings with all clients, where possible, to help trustees understand the benefits of implementing certain strategies such as commencing transition to retirement pensions, re-contribution strategies, contribution splitting strategies and all matters on estate planning. We also provide quarterly newsletters with an invitation to in-house client events on superannuation & wealth creation topics.

If you have any queries in relation to superannuation, running or establishing a SMSF, please contact your Brentnalls SA advisor.

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The information provided in this information sheet does not constitute advice.  The information is of a general nature only and does not take into account your individual financial situation. It should not be used, relied upon, or treated as a substitute for specific professional advice.  We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances.
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