How Is An SMSF Structured?

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If you want to take control of your retirement savings and financial future, a Self-Managed Super Fund (SMSF) could be an excellent option.

SMSFs offer greater flexibility and control over your investments, but it’s essential to understand their structure before diving in.

In this article, we’ll break down the critical components of an SMSF structure.

Or you could download our guide to SMSFs.

The structure of an SMSF

An SMSF is essentially a trust. A trust is an arrangement where one party (either a person or a company) holds assets for the benefit of another party – referred to as a beneficiary or a member in the case of an SMSF.

Let’s take a closer look at the basics of an SMSF:

The trustee(s)

The trustee is the individual, persons (up to six members) or company appointed under the trust deed to hold and invest the fund’s assets for the benefit of fund members.

You can choose to have individual trustees (in which case all fund members must generally be trustees) or a corporate trustee (i.e. a company), in which case, all members will generally be directors of the trustee company.

These trustees make investment decisions, manage compliance, and ensure the fund operates within the law. Most importantly, they must act in the best interests of the fund’s members.

The fund

The SMSF is a trust established under the trust deed to provide retirement benefits to the fund’s members.

Trust Deed

A trust deed is a legal document that establishes the SMSF’s rules and objectives. It outlines how the fund will operate, the rights and responsibilities of members and trustees, and the procedures for making contributions and withdrawals. These are the terms of the trust.

The trust deed is a crucial part of the SMSF structure. It should be carefully drafted and reviewed by a legal professional.

The members

The members are the beneficiaries of the trust.

SMSFs are designed for a small number of members, typically family members. Each member is also a trustee, which means they have a direct say in how the fund’s assets are invested and managed.

This structure ensures that decisions align with the members’ retirement goals.

Assets

SMSFs can invest in various assets, including cash, shares, property, and managed funds. However, these investments must comply with the fund’s investment strategy and the Australian Taxation Office (ATO) regulations.

For example, the title of fund assets must be in the name of the current trustees as trustees for the fund. With a corporate trust, you don’t have to change the ownership of the investments every time a new director is appointed. However, with individual trustees, the ownership names of the fund assets need to be changed with the share registry, bank or land titles office whenever there is a change of trustee.

This complicates operations where there is death or divorce. All personal assets must also be kept separate from SMSF assets. Keeping a close eye on these regulations is crucial to avoid penalties.

Investment strategy

One of the key benefits of an SMSF is the ability to create a tailored investment strategy.

One of the key benefits of an SMSF is the ability to create a tailored investment strategy.

This strategy outlines how the fund’s assets will be invested to achieve retirement goals. The SMSF fund can also be utilised in tax planning.

It’s essential to have a well-thought-out strategy that considers risk tolerance, diversification, and long-term objectives.

Compliance

SMSFs are subject to strict regulatory requirements imposed by the ATO. Compliance is essential to maintain the fund’s tax concessions and avoid penalties. Trustees must ensure the fund complies with contribution limits, investment restrictions, and reporting obligations.

Professionals like SMSF auditors, accountants and lawyers can help you with SMSF compliance. However, these professionals may be limited to their profession for advice.

A licensed financial adviser with specialist SMSF knowledge can help you:

  • make an informed decision about whether an SMSF is suitable for you
  • set up and run your SMSF
  • decide on an appropriate trustee structure for your SMSF
  • understand the penalties for SMSF non-compliance.

Outsourcing an SMSF specialist to ensure you align with compliance requirements could save you in the long run.

Annual audit

Every year, SMSFs must undergo an independent audit by a qualified auditor. The auditor ensures that the fund’s financial statements and compliance meet legal requirements. This audit is a crucial step in maintaining the fund’s compliance status.

Reporting

SMSFs must report their financial and member information to the ATO annually. This information is used to assess the fund’s compliance with superannuation regulations. Accurate and timely reporting is essential to avoid penalties.

Understanding the Structure of an SMSF in Australia

A Self-Managed Super Fund is a structured and regulated retirement savings vehicle that gives Australians greater control over their superannuation investments.

Understanding its key components is vital for successful SMSF management.

Seeking professional advice from financial advisors, accountants, and legal experts is highly recommended to ensure your SMSF operates smoothly and within the bounds of Australian superannuation laws.

By following these guidelines and clearly understanding the SMSF structure, you can work towards a more secure and prosperous retirement.

If you want to set up an SMSF, contact Rispin Group today at 03 9674 3680 or email us at admin@rispin.au to discuss how we can help you with your SMSF or investments.

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