Self-managed super funds have grown strongly for many years. An SMSF gives you a single structure for your investments and your retirement savings.
Some people find the idea of running their own fund appealing. Others are put off by the rules and responsibilities that come with it.
Before setting up an SMSF, consider these points:
- Choose the trustee structure. Decide between individual trustees and a company as trustee. The choice affects cost, how penalties apply and what happens when members change.
- Members are trustees. Generally every member of an SMSF must be a trustee, or a director of the trustee company, and the trustees decide together how the fund's assets are managed.
- Tax on benefits. Benefits paid from an SMSF to a member aged 60 or over are generally tax-free. Different rules apply to younger members and to death benefits paid to some beneficiaries.
- Cost and balance. Many of an SMSF's costs are fixed, so the cost as a share of the fund falls as the balance grows.
- Follow the trust deed. Every member should read the trust deed and follow its rules.
- Review regularly. Trustees must review the fund's investment strategy regularly, and members should keep their estate plans up to date. Both shape the fund's future.
- Contribution caps. Contributions above the caps the law sets can mean extra tax. The caps change from time to time, so check the ATO's current contribution caps.
In short, the right super fund depends on how much control you want over your investments, and how much risk you are willing to take.
If you're a trustee, or thinking of becoming one, talk to your accountant or a licensed financial adviser.