What is a SMSF?
To be a SMSF, a superannuation fund must comply with the definition contained in Section 17A of the Superannuation Industry (Supervision) Act 1993 (SIS Act). Key requirements are:
- It has a trust deed that meets the requirements of the SIS Act.
- The fund has 4 or less members
- Each member of the fund is a trustee
- No member is an employee of another member of the fund, unless they are related
- No trustee of the fund receives any remuneration for their services as a trustee
A Self-managed superannuation fund (SMSF), also known as DIY superfund, is simply a retirement vehicle used by individuals to hold retirement savings, but where the individual is willing and able to take on the responsibility and control of managing their retirement savings.
SMSFs perform the same role as other super funds, by investing contributions and making them available to members on retirement. The difference is, generally, that the members of SMSFs are also the trustees - they control the investment of their contributions and the payment of their benefits. With all members being trustees, they are in a position to ensure their interests as members are protected.
What is the sole purpose test?
All investments held by the fund must be purchased with the intention of providing benefits in retirement for the members, or for their dependants in the case of the member's death before retirement. This limits the purchase of some investments within the fund.
