Before you go and decide to go for anything, you must first be able to understand exactly what it is and what it entails. One of the many questions that might be in your mind right now is what superannuation means. It is a term that is used to describe a long-term savings contract that can help you during your retirement. It provides you with income even if you are already retired by simply making contributions for a certain period of time in order for you to get it funded. The contributions that you make are used in investments so that they can increase them and the assets will be the ones that will be given to the different members when they retire, become seriously ill or disabled or when be given to their family when they die.
In a self managed superannuation fund or smsf, the funds are not managed by another party but by yourself. Usually it only has less than 5 members and each of the trustees are also a fund member. There are also no employees of another member of the fund unless they are family. Aside from the members, a company can also be enrolled as a trustee if the directors of the company are members. It is required for each member to also be a trustee to be sure that full involvement of each of the members in deciding as well as processing of the fund will be observed.
There are several advantages that people see when they run their own and they are as follows:
• To be able to have investment freedom
• They feel more secure about their money because they are also a trustee so they know what is really happening to the money they give for the fund.
• They can help in the management of the funds directly.
• Formal reporting requirements are less than those managed by the government.
• It offers a more flexible estate planning or retirement planning options for the trustees and members.
Although there are lots of advantages, not everyone can set up their own SMSF. This is because it requires at least basic knowledge about the legislation. If you truly want to set-up your own SMSF, you must be sure that you know a lot about it. It is advised that you get an experienced superannuation adviser and keep yourself well informed even before starting with it.
As a trustee of your SMSF, you are solely responsible in how you run the funds. There are rules to follow and the trustees should be well informed about their duties and do them. Failure to do their duties can lead to penalties. The responsibilities of the trustee would include providing the clauses of the superannuation trust deed, Supperannuation Industry Act 1993 provisions as well as other general rules under trust law or tax law.
Trustees have the right to delegate some responsibilities to an authorized personnel in their behalf but should they are still the one in control over the funds. Trustees must be accountable and responsible in running their funds.