Self-managed super funds
Updated at 2021-09-19 11:15:29
Self-managed super funds (SMSFs) are a way of saving for your retirement. The difference between an SMSF and other types of funds is that the members of an SMSF are usually also the trustees. If you set up a self-managed super fund (SMSF), you make the investment decisions for the fund and you're held responsible for complying with the super and tax laws. It is a major financial decision and you need to have the time and skills to do it. There may be better options for your super savings.
An SMSF must be run for the sole purpose of providing retirement benefits for the members or their dependants. Do not set up an SMSF to try to get early access to your super, or to buy a holiday home or artworks to decorate your house. These things are illegal.
Your self-managed super fund (SMSF) needs to be set up correctly so that it is eligible for tax concessions, can receive contributions and is as easy as possible to administer.
To set up an SMSF you need to:
• Consider appointing professionals to help you
• Choose individual trustees or a corporate trustee
• Appoint your trustees
• Create the trust and trust deed
• Check your fund is an Australian super fund
• Register your fund and get an ABN
• Set up a bank account
• Get an electronic service address
• Prepare an exit strategy
Contributions and rollovers
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. You need to properly document contributions and rollovers, including the amount, type and breakdown of components, and allocate them to the members’ accounts within 28 days of the end of the month in which you received them. From 1 October 2021, to rollover any super to or from your SMSF, you will need to use SuperStream.
Generally, your SMSF can only pay a member's super benefits when the member reaches their ‘preservation age’ and meets one of the conditions of release, such as retirement. The payment may be an income stream (pension) or a lump sum, depending on the circumstances. Payments of benefits to members that have not met a condition of release are not treated as super benefits – instead, they will be taxed as ordinary income at the member's marginal tax rate. If a benefit is unlawfully released, ATO may apply significant penalties to you, your SMSF and the recipient of the early release.
To wind up your fund:
• complete any requirements that the trust deed specifies about winding up the fund
• pay out or rollover all super (leaving a sufficient amount to pay final tax or expenses if required)
• appoint an SMSF auditor to complete the final audit
• complete and lodge the final SMSF annual return (including wind up details)
• pay any outstanding tax
• after all expected liabilities have been settled and requested refunds are received, close the fund’s bank account.
• Once a fund is wound up, it can’t be reactivated.
This article is for informational purposes only and does not form part of our advice. This article is based on Australia Taxation Office guideline. Please contact our team if you need any assistance.
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