You may not realise it, but superannuation is one of the most important savings vehicles you will have in your life. While most people have their ‘super’ managed by a retail, industry, corporate, public offer or public sector funds, self-managed superannuation funds (SMSF), also known as DIY funds, are the largest and fastest growing sector of the Australian super industry.
So today just a little information about what happens within your super fund and also what it means to have an SMSF.
What is a super fund?
Super is a way of saving for your retirement. While you are working, your employer pays 9.5% of your gross ordinary earnings into your super account. You can also make further contributions to build up your superannuation balance while you are working.
Your super fund manages this ‘money’ while it is in the superannuation system, from accumulation through to retirement or providing those benefits to your loved ones if you pass away. While your super is building up over time, your super fund is undertaking a range of administrative tasks for your super, including:
receiving contributions for members from employer(s), own contributions and/or government co-contributions
investing these moneys in a broad range of asset classes that the fund allows including shares, property, fixed interest and cash deposits
receiving investment earnings and/or capital gains
paying expenses such as insurance, management fees, administration fees, investment management fees, performance fees and other fees such as advice fees, investment switching fees and buy/sell spread fees and taxes ie tax on contributions and the net earnings of the fund - 15%
paying lump sum and/or pension benefits to the members according to superannuation rules and fund rules
A superannuation fund is not a legal entity, but a type of trust with a trustee appointed who is responsible for holding the superannuation assets on behalf of its members. Trustees are directly accountable for the prudent management of members’ benefits, and make, implement, and document decisions about investing assets of the fund, and to carefully monitor the performance of those assets.
What is an SMSF?
An SMSF is simply a private superannuation fund whereby the members of the Fund are also the trustees. This means the members/trustees of the SMSF run it for their benefit and are responsible for complying with the super and tax laws.
If the trustee/s of the fund:
are individuals, each individual trustee of the fund is a member of the fund and each member of the fund is a trustee of the fund
is a company, each director of the company is a member of the fund and each member of the fund is a director of the company
Also, no member of the fund can be employee of another member of the fund unless the members are relatives
With an SMSF, the members/trustees are responsible for those ‘administrative tasks’ mentioned above but as trustees, they have complete control over how the fund is run as long as they stay within the superannuation rules and the fund’s all-important Trust Deed which sets out the rules of the fund. Trustees can decide what investments are made and what other professional service providers are used such as SMSF administrators, accountants, auditors, financial planners, solicitors, stockbrokers, and insurers.
Contact HelloLedger if you would like to find out more about SMSFs and how to get the most out of your SMSF.
📱 0490 033 038
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