Superannuation SMSF

There is no guarantee that investments by a superannuation fund will produce benefits in terms of capital growth or income flow. As is well known from recent experience, many superannuation funds suffered capital losses during 2007/2008, and 2008/2009. Some of them lost as much as 40%.

However, what IS guaranteed is the tax advantage attached to superannuation contributions to a regulated superannuation fund.

It is a reasonable objective to maximise those benefits. What is not reasonable is for fund managers to put those funds at risk, in the objective of maximising short term income flow.

Many fund members have lost heavily as a result of such actions, and thus are delaying their retirement, while the fund managers, generally speaking, continue to do well.

The only real certainty about voluntary investments in superannuation is that your contribution is a tax deduction for you, which is taxed at 15% in the hands of the fund, which is usually less than the marginal rate (30% on earnings over $34,000 PA, and 40% on earnings over $80,000 PA) which would apply if you kept the money yourself. This applies whether you contributed to a fund managed by someone else, or to your own self-managed superannuation fund (SMSF).

The advantage of managing your own SMSF is that you set the investment strategy of the fund. You are required by law to define in writing the investment strategy of your SMSF. You can, and should, define a safe strategy which guarantees the value of those funds upon your retirement.

One disadvantage of an SMSF is that you lose the advantages of scale that are enjoyed by large funds. The books and statements of the fund must be audited once per year. This service might be a significant cost in relation to the size of the fund and its income. However, by managing your fund yourself, you are not paying big charges to have the fund managed by professional fund managers. You might need help from your chartered accountant, but you won't be paying a percentage of your capital to a fund manager.

The Australian Tax Office maintains a website which is a mine of useful information on the subject of establishing and maintaining a self-managed superannuation fund (SMSF). The ATO website supplies many useful forms, but not some ingredients of an SMSF, which we publish below: the trust deed; the investment strategy; the accounts; the members' register; minutes of trustee meetings; the appointment of an auditor; the member's application to join; and a request to transfer monies from another fund into the SMSF and its accompanying statutory declaration.

An SMSF includes a trustee who legally owns property (shares, money and/or real estate) on trust for the fund members, subject to the conditions of a trust deed, and superannuation law generally. The trust deeds published below are designed for single-member funds - in other words for you.