It is a trust
A Superannuation Fund is a special form of trust and therefore the funds are held in trust by trustees on behalf of the members of the fund
Trustees The Trustees are the managers of the fund whose job is to make sure the fund is administered correctly. The trustee can be two or more individuals or a company. They are the legal owners of the assets and all assets must be held in the name of the trustee on account for the superannuation fund.
Members The Members are the people who have funds invested for them and are the beneficial (real) owners of the assets. However, the assets can only be legally passed over to the members when certain conditions of release are met. Each member has a separate member account (however, in most cases the funds are pooled for investment).
SMSF's have special rules that require that
• all members are trustees and
• all trustees are members
If the trustee is a company then all members must be directors of that company. If the fund only has one member there must be two individual trustees or a company of which the member is director alone or with someone else. Special rules apply for minors.
The trustee duties and responsibilities include:
• making sure the purpose of the fund is to pay retirement benefits to members
• to act in the best interest of all members
• to keep the money and assets of the fund separate from other money and assets (for example,
not mixing it with your personal assets)
• organising an investment strategy and making investment decisions
• accepting contributions and paying benefits (pension and lumps sums) in accordance with the rules
• ensuring administrative tasks such as lodging annual returns and record-keeping are done.
• Abide by the rules of the fund and the law.
The musts and must-nots that a trustee should know are on a following page.It is recommended that trustees avail themselves of professional help such as administration services (e.g. Bolin Accountants) and investment advisers. We are on hand to answer your queries and there is no such thing as a silly question.
The trustee can invest the funds in most types of investments such as shares, term deposits, managed funds, property etc. However, the trustees must determine an investment strategy that considers issues such as long term returns, risk, liquidity, diversity, the needs of the members and the trustees' abilities. This only means that the trustee must think about how they are going to go about the investment decisions – it's just a matter of planning. For example,the trustee shouldn't invest all the funds in land where there was no rent coming in when a member was about to start a pension. While it may be a great investment it would be inappropriate as the fund will need cash to pay the pension.
Also, the investments made must fit into the investment strategy made. The trustee can and should review the strategy regularly to take account changing circumstances.
All the investments must be made for the purpose of providing for the members in retirement and not for some other benefit. For example, while the fund can purchase artwork as an investment it cannot be used for personal use such as hanging it on the wall at home. Also, a fund can invest in real estate, but it cannot be used as a holiday house even if market rent is paid.There are some restrictions when it comes to purchasing investments which are outlined in the musts and must-nots section.
The members' balances are not part of their estate automatically on death. It is the trustees who make the decision on what happens to the balance. This can give some good flexibility and there are ways of ensuring that the remaining trustees do pay the funds to where the member wishes.
The fund has some annual tasks it must do:
• Prepare financial statements
• Prepare member statements
• Have the Fund audited
• Lodge the income tax/statutory return
• Pay any tax due and the Supervisory levy (paid to the ATO)
• Keep records
Bolin Accountants can help you complete these tasks
The costs will vary depending on how much you get professionals to do for you. However, you will have the following costs:
• Set up costs (once only) and then annually
• The administration service
• The auditors fees
• The supervisory levy
The administration and auditing fees depend on such things as the number of investments, the complexity of the investments and whether the fund is in pension phase. An indicative cost for an average fund in accumulation mode would be:
Initial Set up $ 650
Administration Fee $1,650
Audit Fee $ 420
Supervisory Levy $ 150
Important: This is not advice. Clients should not act solely on the basis of the material contained in this information sheet. Items herein are general comments only and do not constitute or convey advice per se. Further changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. The information sheet is issued as a helpful guide to clients and for their private information.