So You Think You Might Start A SMSF?
A Self-Managed Super Fund (SMSF) is when a member is in charge of their own super fund. You are not only responsible for your investment strategy but also liable for all the fund’s statutory and legal requirements. Not all people are suited to run their own fund – you need a sound knowledge of the how super funds work. Before you start your own SMSF, there are a few things to consider.
Q: How Much Money Do I Need To Start A Fund?
A: There is no minimum amount needed to start a fund, but some experts in the field believe you need about $200,000. If it is less than that, issues could arise with the ability to cover the set-up and running costs of the fund.
Q: Is there a limit on the number of people who can belong to the SMSF?
A: Yes. There is a minimum of one member and a maximum of four allowed in an SMSF. All members must be involved in the fund, so therefore all members have to be trustees. All trustees are responsible for the fund and must be actively involved equally in making decisions when it comes to running the fund.
Q: What are the costings when running a SMSF?
A: It depends on the size of the fund, but a general rule of thumb is that is should not cost more than $3,000 a year to run (not including the audit fee, which can go as high as $800). It will depend on the type of tax issues you might run into during compliance processes.
Q: How much money can be put in the fund?
A: For before tax contributions (concessional), any member over 50 years can put in a maximum of $50,000. Those under 50 years of age can put in $25,000. For after tax contributions (non-concessional) the figure is up to $450,000 over a three-year period (or $150,000 a year). Any amounts over those limits will mean you will have to pay more tax.
Q: Can My SMSF Borrow Money?
A: Only in special circumstances. Such an example would be to meet the payments owed to members, or something similar. Even then you are limited to your borrowings in that the amount needed cannot exceed 10 percent of your fund’s assets. There is a a medium called a Bare Trust, which is designed to limit a fund’s exposure when buying property assets.
Q: What Type Of Investments Can A SMSF Make?
A: It depends on what you have laid out in your fund’s investment strategy. It can vary but is not limited to just Australia. This strategy lets all parties know what the objectives of the SMSF is and takes into consideration the expected returns, growth strategies, risks involved and the diversity of the port folio. You do have to be aware that there are limitations with regards to investing in businesses or entities that are related to the SMSF’s trustees.
Q: Where Can I Get More Information?
A: Contact Us to speak to one of our SMSF professionals
Mandalay Wealth Management Pty Ltd 2011 | ABN 31 132 276 576 | AFSL 331535