Foreword
Managing your own super is a big responsibility. Super is meant for your retirement, so there are special rules about how it is managed and when you can access it.
The Australian Taxation Office (ATO) regulates self-managed super funds (SMSFs). The Australian Securities & Investments Commission (ASIC) regulates financial services and company laws to protect you.
The ATO and ASIC want to make sure anyone considering setting up or joining an SMSF has the information they need to make the right decision.
If you want to manage your own super, there are many factors you need to think about. To work out whether an SMSF is right for you, it is important you take into account the following matters:
- Consider your options and seek professional advice.
- Make sure you have enough assets, time and skills to run your own fund.
- Keep up to date with the super and tax laws and understand the risks.
- Tailor your trust deed and investment strategy to suit the members of your fund.
- Make sure you can meet your record-keeping and reporting obligations.
- Make sure you understand your annual auditing obligations.
There are strict rules that govern how you can use an SMSF and how you manage the fund's investments. Your fund must be maintained, at all times, for the sole purpose of providing retirement benefits to your members.
It can be difficult to manage an SMSF, so at times you might need to consult with professionals and advisers, which can add to the cost of running your own fund. You should consider if the costs and other regular fees and charges will affect the benefits you may get from having an SMSF. There are also member benefits and protections provided by Australian Prudential Regulation Authority (APRA) regulated funds that are not available to ATO-regulated SMSFs. For example, if you lose money in an SMSF due to investment fraud, you will not have access to any special compensation schemes as you would with an APRA-regulated fund.
Starting an SMSF is a very important decision, so we recommend you see a qualified and licensed professional to help you decide if it is the right super fund for you.
Chris Jordan
Commissioner of Taxation
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Greg Medcraft
Chairman, Australian Securities & Investments Commission
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Self-managed super and you
Like other super funds, SMSFs are a way of saving for your retirement. Generally, the main difference between an SMSF and other types of funds is that members of an SMSF are the trustees. This means the members of the SMSF run it for their own benefit.
SMSFs are not suitable for everyone, and you should think carefully before deciding to set one up. It is a major financial decision and you need to have the time and skills to do it. There may be other, better options for your super savings.
This publication provides you with some practical information if you are considering an SMSF for your super savings. Licensed financial advisers, tax agents and accountants can also help you understand what is involved.
If you decide that an SMSF is the appropriate vehicle for your savings, you need to ensure the fund is set up and maintained correctly so that it is eligible for tax concessions, can pay benefits and is as easy as possible to administer. Setting up a self-managed super fund (NAT 71923) provides you with some basic information on this and the steps you need to follow to set up the fund correctly.
Once your SMSF is established you, as trustee, control the investment of the contributions and fund earnings. Your SMSF must have a trust deed that forms part of the governing rules for operating the fund. You must also prepare and implement an investment strategy and ensure it is reviewed regularly. There are rules and regulations that you must follow to ensure the fund's assets are protected to provide benefits in retirement.
While contributions are being made to the fund it is considered to be in the accumulation phase. The publication Running a self-managed super fund (NAT 11032) explains the responsibilities and obligations of trustees operating an SMSF.
When one or more members retire you, as a trustee need to understand and follow the law and regulations governing the payment of benefits. The payment standards contained in the legislation and regulations, the sole purpose test and the preservation rules ensure that money in the fund is paid to members in the appropriate manner.
Paying benefits from a self-managed super fund (NAT 74124) is designed to assist trustees who are required to make payments out of their SMSF. It also provides information for funds that have members in both the accumulation and retirement phase. It is important to note that the rules and regulations that apply to funds in the accumulation phase continue when one or more members retire; however, additional rules apply to the retirement phase.
You should continually reassess the circumstances of the fund and each individual member to determine whether an SMSF is still the most appropriate option for your retirement savings. In some cases, you may find that you no longer have the capacity to deal with the complexity or the time required to manage your SMSF.
You may decide that it is not cost-effective to continue to run your own fund. Depending on the circumstances, it may be necessary to transfer member benefits to another complying super fund.
Other reasons why you might wind up your SMSF include when all the members have left the SMSF (for example, they have rolled over their benefits to another fund or have died) or all the benefits have been paid out. Winding up a self-managed super fund (NAT 8107) details the process you need to follow to wind up your fund.
Last Modified: Tuesday, 7 May 2013