A Self-Managed Superannuation Fund (SMSF) is a type of superannuation structure that allows members to control and manage their own funds. Unlike other superannuation funds, members have autonomy over the choice of investments they can make.
A SMSF must comply with the requirements of the Superannuation Industry (Supervision) Act 1993 (Cth) and relevant tax laws. Compliance is necessary to take advantage of income and capital gains tax concessions which have been implemented by the Government to encourage people to save for their retirement.
The activities of an SMSF must be conducted through a trustee because the fund itself is not a separate legal entity. Each member of an SMSF must also act in the capacity of trustee whether this be as an individual or through a corporate entity.
It is important to consider the trustee structure of an SMSF from the outset. Whilst changing the trustee structure at a later stage is possible, additional administration and costs are involved.
Initially, an individual trustee structure costs less and there are fewer reporting requirements, such as those of a company under the Corporations Act 2001. However, there are many benefits of having a corporate trustee for your SMSF which in the long term, are likely to outweigh the associated costs and administration. Given that superannuation is a long-term strategy, these benefits should be carefully considered. The benefits include:
- Protection of the SMSF’s members;
- Administration advantages;
- Advantages for sole member SMSF’s; and
- Advantages for limited recourse borrowing to invest in real estate.
Establishing a corporate entity as trustee for your SMSF is well worth considering. The process is relatively straight-forward however certain requirements must be met for the SMSF to be considered a complying fund. It is also recommended that a sole purpose company be used as the corporate trustee which results in lower ASIC fees and assists in separating the affairs of the fund with any other activities.
Tim Hayter, Principal, Mid West Lawyers
This information is general in nature and should not be relied upon as legal advice. Formal legal advice should be sought for your particular circumstances.