Self-Managed Superannuation Funds – how do they work?

Thinking about how to save for your retirement? Then you might want to consider the Self-managed Superannuation Fund (SMSF) in which you will also be a trustee responsible for compliance with the super and tax obligations while running the fund for your own benefit.

With an effective investment strategy and objective, you can effective control over the fund, which is also flexible enough to enable you invest in various assets, such as, direct property, managed funds, shares as well as bank deposits. How do our SMSF services work to bring about the benefits that lie within? Here’s how:

i.         Developing the SMSF

The first step is to set up your fund by selecting the trustees, identify the fund’s residency as well as creating a trust deed, which outlines the rules governing the establishment and operation of the fund. Creating the SMSF also entails registering it with the Australian Taxation Office (ATO) where you opt for it to undergo regulation.

ii.         Receiving contributions

Being an SMSF trustee entitles you to receive contributions from different sources on behalf of your members. However, the scope of contributions is often restricted by contribution caps, which limit the amount a member can contribute annually. Also, contributions may be restricted by the age limit set by the fund.

iii.         Payment of benefits

When one of the members reaches his or her ‘preservation age’, he is entitled to receive his or her super so long as the member fulfils one of the conditions for release – such as retirement. Cashing of benefits is also compulsory upon the death of a member. This should be done as soon as possible.

iv.         Winding up the SMSF

The life of your SMSF may come to an end if all the members leave it or the entire benefits have been paid out. While winding it up, you need to fulfil any requirements of closing up as outlined in the trust deed. A certified SMSF auditor will also be called in to conduct a final audit before final annual return for the fund is lodged to ATO – complete with details of the wind-up. The end of the fund means it can never be reactivated, which is often underlined by closure of its bank account.