You probably have heard of a self managed super fund or shortly known as SMSF. And this is not a surprise since today the SMSF is one of the fastest growing sectors in Australia. More and more people are setting up their SMSF and if you are the one that is also interested, your first step is to find out what is a self managed super fund exactly. This is a super that provides financial remuneration to all its members during their retirement. The main difference between other super funds and the SMSF is that in SMSF, members are also trustees which number can vary from one to four. There are two trustee structure options:
- Individual trustee where each of the members is appointed as a trustee.
- Corporate trustee where a company acts as a trustee and each of the members is a director.
The main goal of SMSF and its establishment is to provide financial benefits for its members when they reach their ages for retirement. Any member has his own TFN - Tax File Number, ABN – Australian Business Number, and transactional bank account. The individual bank account is needed so the members can receive rollovers and contributions, pay out pensions or make investments.
SMSF trustees have their responsibilities for ensuring implementation of the fund's strategy and for making investments. Self managed super fund also have some administrative obligations that require trustees to provide financial statements, maintain records, organize an independent audit and complete a tax return. Because of this, many people are hiring professional to manage their tax and auditing reporting, their accounting as well as to provide them with professional investment and financial advice. Although they use professional services like these, trustees are still completely responsible for their decisions.
- Self managed super fund offer a lot of benefits for its trustees compared to traditional funds. Here are some of them.
- SMSF provide its trustees with the opportunity to reduce income tax on capital gains and investment income.
- SMSF provide a high level of flexibility when it comes to asset selection and investment choices.
- Self managed super fund provide flexibility in relation to the use of pension income streams.
- As a trustee, you have a complete control over your investment portfolio.
- You can transfer tour personally owned shares directly into superannuation.
- You have the ability to own your business real property but not operating assets.
- Yes, with SMSF you can borrow or gear an investment via LRBAs – limited resource borrowing arrangements.
Now when know what is a self managed super fund you need to find out whether you are the right candidate for setting up an SMSF. Running your own super is great, but it is not the best choice for everyone. Because of this, make sure you consult with a professional.
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