The SMSF sector is the largest segment in Australia and its popularity and growth over the past few years has been astounding. For many people who are well informed and committed, a self managed super fund can be a very powerful way to save for their retirement. SMSF has become a very popular fund for many reasons, such as giving people more control and choice over their investment decisions, providing more flexibility around estate and tax planing, etc.
The basic for this retirement fund is that it has no more than four members and all of the members are trustees or directors of a fund. Regardless of how appealing it sounds, SMSF is not for everyone. Whether you should set up an SMSF depends on the money available for investment and skills and knowledge. If you believe an SMSF is ideal for you, then do take advantage of this retirement solution as it offer many advantages:
- More control
- Flexibility
- Control over operation and design
- It can continue after member’s death
- Cost savings
- Tax concessions
- Advantages for small businesses.
To benefit from all these advantages, it is important to follow certain ATO rules and regulations. For example, there are certain SMSF residency rules that need to be carefully considered and fallowed in order to ensure your SMSF is managed correctly and is in compliance with the ATO. Otherwise, you will face penalties. The three most important SMSF residency rules are:
Established in Australia – This rule means that SMSF needs to be established in Australia as well as all assets of the SMSF.
Central control and management – The central control and management of an established superannuation fund needs to be in Australia.
Contributions – This SMSF residency rules states that all contributions must be made inside Australia.
Aside from the SMSF residency rules, the superannuation trust deed is also a key element of any SMSF. The superannuation trust deed is a document that outlines the rules and establishes the SMSF. Every SMSF must have a superannuation trust deed which should be updated regularly in order to keep up with any changes in legislation. The superannuation trust deed can be modify at any time, but members must fallow the rules set out in the original superannuation trust deed. Not every superannuation trust deed is created the same, which is why it is imperative to rely on the professional to prepare this document for you. Make sure you create a superannuation trust deed that gives you the opportunity to maximize the potential of your SMSF.
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