Know About Self-Managed Super Funds
Self-managed super funds (SMSFs) have been becoming increasingly popular in the recent times. Simply out, it is a type of fund that allows it trustees to formulate their own investment strategy and invest the funds anywhere they see it. Moreover, when you are running your own super fund, you have access to wider range of investment options and potential assets as any other fund. The members of the fund manage and run the fund solely for their benefit.read more here!
Factors Characterizing SMSF
Super-managed superannuation funds are not an appropriate option for everyone. Establishing, managing and administrating your own fund is a complex endeavor and as trustee of the fund, you must adhere to legal laws. It is an important financial decision, which warrants the need of time and financial skills. When you set up your fund, you should:
• Set up the fund with one to four members and each member should be the trustee of the fund.
• Ensure that trustees of the fund establish, execute and monitor an insurance strategy and an investment strategy. The investment options, which are many, include cash accounts, term deposits, managed funds, listed property, listed and international shares and direct property.
• Maintain comprehensive and detail records, regularly updated.
• Collect and gather an appropriate fund amount, generally starting from $ 200,000.
• Comply strictly with regulatory and compliance laws defined for trustees and the setting up of fund.
Note that these are not the only considerations. You can visit smsfselfmanagedsuperfund.com.au for more details.
Types of Pension Benefits
The sole purpose of the self-managed super fund is to provide retirement benefits. The funds cannot be used for any other purpose. The members can opt for two types of pensions, as follows:
• Account-Based Pension: It gives you unrestricted access to your balance, but how long the fund may last depends mainly on the investment returns on the assets and the amount you take out. You are required to withdraw a minimum amount each year, based on age.
• Transition-to-Retirement Pension: It is available to members who have reached preservation age, which is 55 years at present, but has not retired. This account is run in a same way as a regular account-based pension; however, you cannot take out a lump sums amount or more than 10% of the account balance each year. There is also a requirement of a minimum amount withdrawal.
Sole Purpose Test
Your SMSF needs to fulfill the sole purpose test to qualify for the tax concessions available to super funds. It implies that your fund can only be used for the sole purpose of providing retirement benefits to its member or to their dependents in case of a death before retirement. If you or any other member directly or indirectly receive a financial benefit from the investment decisions and arrangements, you are likely to fail the sole purpose test. When your fund is invested in collectables such as wine or art, the members cannot use it or access it. The most common reasons for failing sole purpose test are:
• Investment offering a pre-retirement benefit to a member,
• Providing financial help to family of the members, and
• Giving a pre-retirement benefit to someone proving detrimental to the fund.
There are numerous benefits of establishing and running your own super fund, but there are many factors to consider and various details to work out before you can take your final decision. You can consult a professional advisor to help you determine if it is suitable for you and your circumstances. Educate yourself about all the requirements, conditions and risks associated with the self-managed super fund and make an informed decision.
Category: Funds Management