How does it operate?

Self managed super funds (SMSFs) work like any other super fund but the responsibility of managing it rests solely with the trustee (you). Establishing and operating a SMSF is a major financial decision. After all, with this type of fund you’re both a member and a trustee. This means you have control over and responsibility for your fund’s investment decisions. You also have to manage the fund’s legal responsibilities.

The trustee can be either an individual or a trustee company. Individual trustees are generally the most common. Where the individual option is chosen every member must also be a trustee. A fund cannot have a sole individual as a trustee, there must be more than one person as trustee if the individual option is chosen. To overcome this, a single member fund can appoint a second trustee provided the member is one of the trustees and the member is not an employee of the other trustee (unless they are relatives) or they can appoint a company as trustee. Where a trustee company is appointed, all members must be directors of the trustee company. A SMSF cannot have more than 4 members and all members must be Trustees of the fund. Therefore, you have a choice as to who becomes a member of the fund which may include your partner, members of your family, a business partner or friends. This means that the super balances of each member can be consolidated into SMSF.

There are 3 ways of transferring money or assets into a fund:

  • make a contribution to the fund
  • roll over existing superannuation benefits into the fund
  • purchase assets by the trustee of the fund

Another benefit of a SMSF is the ability to consolidate your superannuation (particularly if you have a range of super funds). Consolidating your funds can save on the high fees you pay for managed funds to manage your money.

At Wise Owl Accountants, we can help you with running your fund and meeting all of the requirements.

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