Guide to Self Managed Super Fund (SMSF)

Super Funds

SMSFs require careful consideration as a major financial decision in one’s life. There are many ways to approach the question “What is SMSF?”, but if I’d have to put in all in one sentence, I’d say that it’s a long-term investment whose popularity is growing each second of each day. In order to establish SMFM, one needs a professional guidance, time and skills. Once your SMSF is set up, you, as trustee, get to control the investment of the contributions as well as the fund earnings.

Your SMSF must have a trust deed that complies with the governing rules for conducting the fund operation. Also, an investment strategy has to be implemented and reviewed regularly. The rules and regulations must be followed in order to protect the fund and the benefits that await you in retirement days.

During the time of making contributions to the fund you will be in the accumulation phase. It is important to mention that the rules and regulations that apply to the accumulation phase will go on when one or more members retire, however, there are also several additional rules that apply exclusively to the retirement phase.

Your SMSF must comply to the rule of having a sole purpose. This indicates that your fund must be  kept for the sole purpose of accumulating retirement benefits to your members, or to their dependants if a member passes away prior to the period of retirement. As a trustee, you need to make sure that your SMSF complies with the sole purpose rule/test thoroughly and at all times while it exists, including the time when you’ll be accumulating fund assets and paying benefits of members during the retirement phase.

Core purposes of SMSF that help answer the “What’s is SMSF?”

  • to be able to pay benefits to members on or after retirement
  • to be able to pay benefits to members once they have reached a prescribed age
  • to be able to pay benefits to members upon a member’s death. (This may include the necessity of the benefits being transferred on to a member’s dependants or on to a legal representative).

Ancillary purpose

Implemented in the following circumstances:

  • termination of the member’s employment with an employer that had made certain contributions to the fund for them
  • termination of employment due to ill-health (whether physical or mental),
  • death of the member after retirement in which case the benefits are transfered to the member’s dependants or legal representative
  • death of the member after reaching a prescribed age in which the benefits are transfered to the member’s dependants or legal representative
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