Understanding the Details of a Self-Managed Superannuation Fund

Posted on: 31 July 2015

A self-managed superannuation fund is a good way to save for retirement while still having complete control over your finances. Unlike other annual funds, when you choose a self-managed superannuation fund, you are responsible for handling how it operates and all decisions made by the fund itself. Note a few details about how this fund operates and what you should do to ensure it's set up legally and that the fund itself is protected.

1. Self-managed means self-managed

A self-managed superannuation fund is only good for those who have the time and expertise to check on investments for the fund, and to do this regularly. You will need to track the performance of the fund and then also track investments you might make for the fund itself. This can mean researching various investments every day and then moving the funds around daily in order for it to see maximum returns. Without this time spent managing the fund, your investments may languish or you may see little return on the investments themselves.

2. Each person is a trustee

A superannuation fund can have up to four members, but each works as a trustee. Each one will be legally responsible for ensuring that the fund is operating in a legal manner. This is important to remember if you want to create a superannuation fund with a coworker or business partner, as each of you will be legally responsible for the fund itself. Each may face fines if there are penalties incurred because of the fund's operation. 

3. Superannuation funds are for retirement only

Some funds you may set up can be accessed before retirement, but superannuation funds are for retirement benefits only. Before you decide on setting up such a fund, make sure you have adequate income and savings now, including insurance and other such emergency coverage. Don't assume you can access the fund for emergency reasons or before retirement, as this can mean penalties and fines.

4. The fund should be audited regularly

Because of the complications involved in managing superannuation funds yourself and the steep penalties you can face if they are mismanaged, it's recommended that they be audited regularly. There are auditors who specialize in such funds and who can ensure they are compliant with all legal statutes. Don't assume that because you're managing the fund yourself that you don't need to have an outside party audit them, but have this done regularly and especially if you manage the fund with another party.

Contact a local professional, such as Boyd & Associates, for more information.