Consider SMSF as a trust that is meant for the sole purpose of providing the members a decent source of income when they retire. Of course, family members and beneficiaries also reap benefits in case of demise of a member. Members in employment roles need to deflect their Superannuation contributions towards their allocated SMSF account. For the purpose, the SMSF need to possess an Australian Business Number (ABN), Tax File Number (TFN) and a bank account. Understanding how SMSF works is the first step to be able to take advantage of it.
SMSF – it’s your investment strategy
You can either choose an adviser or go the whole hog yourself in pursuit of your fund’s investment strategy. The SMSF arena runs in absence of prudential regulations applying to public offer funds and hence, the guidelines in regards to auditing compliance, administration and lodgement need to be taken seriously. Annual financial statements, members notices and statements, and record-keeping come within the arc of SMSF maintenance.
Auditing and penalties involved
Independent auditors are used to track the progress of SMSFs. Of course, they are also there to help detect any fraud through the exercise of professional critical assessment and scepticism. How auditors can report you to the ATO for tax avoidance, dividend washing, and unethical practice is a matter that can take up a whole chapter, but it necessitates saying that the penalties are harsh enough to dissuade you from the road of non-compliance with rules and/or misappropriation.
Who can be an SMSF trustee?
You can be an individual trustee or a company trustee of your SMSF. The former has some marked disadvantages. You can be a member of an SMSF if you have never been black-marked for breach of law, never been disqualified by a regulating authority, never been declared insolvent or bankrupt, and never been subject to a SIS penalty.
The roll-over that gets it all going
All you need to do to shift your existing Super into an SMSF is to go through a simple roll-over by applying to you old fund. You can then start using your SMSF as a tax saving wealth creation vehicle. From there you can contribute more into your SMSF but it needs to be suggested that you can attract penalties in the event of overdoing your contributions and breaching the caps.
Has the ATO ever imposed a penalty on you?