What is a Superannuation Fund?

A Superannuation Fund is a fund which invests member's funds primarily to provide for their retirement.

The superannuation fund will have trustees who hold and control the fund assets for the beneficiaries (or members) who are ultimately entitled to the fund's assets.

What is a Self Managed Superannuation Fund (SMSF)?

A self managed superannuation fund (SMSF) is a complying superannuation fund under the Superannuation Industry (Supervision) Act 1993 which has:

  • fewer than five members

  • each individual trustee of the fund is a fund member

  • each member of the fund is a trustee

  • no member of the fund is an employee of another member of a fund, unless those members are related, and

  • if the trustee of the fund is a body corporate each director of the body corporate is a member of the fund.

You are able to obtain a number of advantages by arranging your own Self Managed Superannuation fund.

What are the advantages of managing my own fund?

There are several advantages of a self managed fund. The main advantages are control over your fund, cost savings, tax savings and flexibility.

You control your self managed fund by deciding how your assets will be invested, therefore having control over the range of investments that suit you.

People generally set up SMSFs because they like the sense of freedom and the opportunity to control their own affairs that the SMSF environment provides. They generally use the fund as one part of an integrated strategy to build assets that will provide their retirement income.

What can my SMSF invest in?

The objective of the investment is to grow and generate retirement benefits for the members. The exact types of investment in which a SMSF fund can invest in is not stated in legislation. The aim is to protect the assets aganist overexposure to undue risk and some investment practices are restricted.

What is the "sole purpose test"?

The object of the sole purpose test is to ensure that regulated superannuation funds (SMSFs) are maintained for the purpose of providing benefits to members upon their retirement, or their dependants in the case of the member’s death before retirement. The trustee of a regulated superannuation fund must comply with the sole purpose test to be eligible for the taxation concessions available to a complying superannuation fund.

An SMSF must be maintained for at least one of the following core purposes:

  • paying benefits to members on or after retirement from gainful employment

  • paying benefits to members when they have reached a prescribed age, or

  • paying benefits to members on the member’s death. (This may require the benefits being passed on to a member’s dependants or legal representative).

What are the Trustees' Administrative Obligations?

SISA Superannuation Industry (Supervision) Act 1993 (SISA); contains covenants or rules that impose certain requirements on trustees and are deemed to be included in the trust deed of every regulated fund. These covenants reflect the duties imposed on a trustee under trust law in general. They require trustees to:

  • act honestly in all matters;

  • exercise the same degree of care, skill and diligence as an ordinary prudent person;

  • act in the best interest of the fund members;

  • keep the assets of the fund separate from other assets (e.g. the trustee’s personal assets);

  • retain control over the fund;

  • develop and implement an investment strategy;

  • allow members access to certain information.