If you are unaware about SMSFs, then you should know that it stands for Self-Managed Super Funds, and this very retirement program is also referred as DIY (Do It Yourself) super funds. This very retirement program or Fund is available in Australia. This very option is similar to various other superannuation funds.
In case of SMSFs, the investment is made by the members or trustee and only these members who have made an investment in the retirement program can get the benefits of this retirement program after their retirement. In case any of the members dies then the beneficiaries become eligible to gain the benefits from the smsf.
If you are still confused about other types of superannuation and self managed superannuation funds, then you should know the difference between them. The main difference between these two retirement programs is that in the later one the members also act as the Trustees. This means that they are eligible to implement and modify their investment strategy for their fund, manage the benefits and accept contributions.
Requirements of SMSF
There are certain requirements of SMSF, which has to be fulfilled, in order to gain the required benefits or the associated benefits of this retirement program. Some of the requirements have been enlisted below:
The very first one is that SMSF should be only maintained for the sole purpose of offering retirement benefits to the members of the SMSF. The investment should be made with the view of achieving a commercial rate of return in exchange of investment made and not for fulfilling private or lifestyle purposes.
The group of trustees should be of less than five members.
All the members of the SMSF should act as trustees.
A SMSF will not lend money or cannot provide any financial assistance to the members of SMSF.
There are a number of other requirements or rules which one has to follow for acquiring the numerous benefits associated with this very retirement program. A number of people are going for this option and the main reason because of which this option is getting more and more popular is that this option has a number of benefits associated with it. The numerous benefits associated with this option makes it more luring and convincing.
Like any other retirement program, this very program has its benefits and drawbacks. The risk of tax penalties because of noncompliance of the rules can harm your financial status therefore it is important that all the members of SMSF should follow the rules and should identify their responsibilities. Know this fact that SMSF is demanding as well as time-consuming therefore it will be wise to give it a good taught whether you will be able to handle this program or not before choosing this option.