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Self Managed Superannuation Funds

Typiacally people operating businesses would prefer to contribute to a super fund which they managed themselves with the assistance of their accountant and financial adviser. In this way they can control what investments are made, subject to the investment restrictions in the SIS Act, and keep management fees at a minimum.

In the last 10 years or so, many people who do not run businesses but work in traditional employer/employee positions (as they approach retirement age) are eligible to set up their own SMSF and pay their concessional and non-concessional contributions to those funds.  A person would only take this course of action if their advisers recommended him or her to do that having regard to all relevant considerations including the size of their expected super benefits in such a fund.  In other words, a SMSF is not for everyone but as there are more than 500,000 SMSFs in operation, there are many people who consider the benefits make the decision worthwhile. The basic rules for SMSFs are:

  1. the trustee of a SMSF can be an individual or company, but a company is preferable and the indications are that the Government may move to require a corporate entity be the trustee of a SMSF;
  1. if there is no corporate trustee, the members must be the trustee and if the individual has a spouse, then the spouse may also be a trustee;
  1. if there is a corporate trustee, then generally speaking all of the members of the SMSF must be directors of the corporate trustee and in certain circumstances a “relative” of the member can also act as a director without needing to be a member of the fund;
  1. it is important when a SMSF member’s Will is being drafted that the quantum and control of the member’s death benefit payout is carefully considered and appropriate documentation set in place to ensure that the member’s wishes in regard to his death benefits are put into effect; and
  1. In view of the very technical approach taken by the court in Munro v Munro, a member should take great care to ensure that any BDBN he or she makes is effective and strictly complies with all formalities ( e.g. signing formalities).

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