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What Is A Self Managed Super Fund & How Does It Work?

If you’re curious about your retirement options, I believe that you would definitely benefit from looking into self-managed super funds. These have become rather popular and there seem to be quite a few good reasons for that. If nothing else, the mere idea that you have control over everything is enough to make this whole concept appealing.

In case you’re not familiar with the concept, you are probably curious to learn more about it. You can find a lot of useful sources online and check out a few websites such as and similar, in order to get all the information you need to understand the whole idea of self-managed super funds (SMSF). In this article, we’ll go through the basics of what this is and how it works. Hopefully, this will help you understand everything much better.

What Is A SMSF?

The name pretty much speaks for itself. A self-managed super fund is a private super fund that you can manage completely on your own. Simply put, you have total control over how your retirement savings are invested. Australians have quickly realized the benefits that come with this whole concept and they are increasingly turning towards this option instead of all the others that have been available so far. That’s making SMSFs rather popular day after day.

You might already be familiar with the other super funds that already exist, but there’s one significant difference between those and this one. I assume you can probably guess the difference, but let me make it clear, just in case you’re still a little bit confused. Unlike other super funds, SMSF members are also trustees. In other words, you’re the one who has complete control over the fund when it comes to tailoring it to suit your particular needs.

These funds can have between one and four members and they are primarily established to provide financial benefit to the members as well as the beneficiaries upon death. Members get their own tax file numbers and the Australian Business Number (ABN), as well as a transactional bank account, allowing them to receive rollovers and contributions, make investments and pay out pensions and lump sums. Basically, every investment is controlled by the members, i.e. the trustees. Go here to understand the whole process better.

How Does It Work?

The purpose of an SMSF is to provide income to a person upon retirement or to beneficiaries upon death. As a member, i.e. a trustee, you are the one responsible for figuring out an investment strategy for the fund. Usually, people go to a financial advisor to help them formulate that strategy, simply because these experts are much more knowledgeable on the world of finances.

As you might have already guessed it, SMSFs require a trustee and there are two structures available. Those are known as corporate and individual trustees and there are differences in how things work depending on this structure. Let’s take a quick look at these two types, so that you can understand which one might be right for you.

Individual Trustees

Basically, this is when the members of the SMSF are individuals, most likely a husband, a wife and potentially children. There have to be at least two trustees, chosen and appointed by the member. In this case, the individuals are legally responsible for making decisions regarding the fund. Assets are held in the name of the trustees who need to make sure that the fund stays compliant at all times.

Company Trustees

In cases when an individual wants to be the only member and decision maker regarding the fund, or when they don’t have anybody to appoint as the second trustee, they usually turn towards the second option. This is when a company is established in the name of that member and he or she is appointed as the director. That option tends to be the easiest one regarding the administrative part.

Of course, there are some additional costs when it comes to this option, as well as additional paperwork. Still, when everything is done the right way, no issues will arise and this option will prove to be an amazing one for the sole member of the fund. SMSFs in general have proved to be rather beneficial for numerous Australians. Even though it might all sound confusing in the start, there are a lot of sources that can explain SMSFs to beginners and I’m sure that you’ll quickly get the hang of it.

Who Can Be A Member Or A Trustee?

I suppose that this is the question you’ll have once you start thinking about setting up your own SMSF. That is a logical question to ask, especially if you opt for the individual structure and you need at least one person to act as a trustee. Let us now quickly check who is eligible for being a member or a trustee, so that you know if the people you probably already have in mind can assume that position.

The simplest answer I can give you is that anyone over the age of 18 is eligible to become a member of an SMSF. Of course, the logical requirement is that they are not under any legal disability. Still, there are some other limiting factors that might disqualify a person, which means that you’ll have to keep in mind more than just their age. Reasons for disqualification include:

  • Convictions of offences involving dishonesty

  • Civil penalty orders under the SIS act

  • Insolvency under administration

  • Undischarged bankruptcy

Keep in mind that a person can also get disqualified by the regulator. Since things are probably much clearer to you know that you’ve read this article, I assume that you are more confident about what to do when it comes to your retirement and the SMSFs. It’s pretty clear that these funds are becoming increasingly popular and their popularity has to do with their effectiveness, success and the benefits it provides to its members. Make sure to get more information if needed before applying for the process.

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