When you have a Self-Managed Superannuation Fund, it is important to know the ins and outs as this can save you time, money and a lot of headaches down the road. Here are 5 key rules for your SMSF.
1. Understand the definition of an SMSF
When setting up your SMSF, it is vital that you understand what it is and what it does. An SMSF is a type of superannuation fund that offers you more control over your retirement savings. The fund also has specific regulations, such as having no more than 4 members, and each of these members must also be a trustee. For more details, be sure to consult your financial advisor.
2. Make sure your SMSF complies with the Super Laws
It is critical that your SMSF comply with the super laws that are in place. These laws are what determine the eligibility of your SMSF to operate and accumulate funds legally. Without this compliance, you can’t keep your SMSF running and you can incur major fees. If at any point your SMSF does not meet the requirements then you are possibly subject to a 45% tax fee that will apply in future years. You could also be subject to less severe consequences such as your trustees paying a fee. In any case, it is an absolute must to consult your financial advisor when it comes to the handling of your SMSF.view latest information at http://www.theadviser.com.au/breaking-news/31634-industry-bodies-unite-in-fight-for-smsf-lending
3. Meet the Sole Purpose Test requirements
Before your SMSF can officially accumulate funds and you can start saving up for your retirement, you must pass a Sole Purpose Test. This test allows you to accumulate and maintain funds for retirement purposes as well as for ancillary purposes. This test is also what determines the ‘core purpose’ of your SMSF and shows that you are using your Self-Managed Superannuation Fund at the proper way. For example, you can say that your ‘core purpose’ in opening and running an SMSF is to provide retirement benefits for each member after they reach age 65. As long as your SMSF meets this core purpose requirement, the ancillary purposes are not as relevant.
4. Have the right paperwork
When you start up and are running an SMSF, there is a lot of paperwork involved. One of the big pieces you will need is your trust deed. This will outline for you all of the minimum regulations that your SMSF must meet in order to function properly. Some of these regulations include your commitment to act with honesty in all matters involving your SMSF, to keep fund assets separate, to manage your reserves responsibly, and to always act in the best interests of the members or beneficiaries.
In conclusion, when looking into starting and running your own Self-Managed Superannuation Fund, it is critical that you understand all of the different rules and regulations that are involved. With the help of your financial advisor and the resources you have at hand, you are sure to enjoy the benefits of your SMSF long into your retirement.