Some of the most influential reasons for operating your own super fund (SMSF) is that it provides greater flexibility and investment choice. This is what makes a self managed fund so attractive and exciting.
What’s often over looked though are the regulatory and compliance requirements which come with managing your fund. Breaching these legal requirements can be quite onerous and is the sole responsibility of the fund trustees. The key compliance areas relating to investments include:
- Meeting the ‘Sole Purpose Test’
- In-house asset rules
- Conducting all transactions at arm’s length
- The prohibition of acquiring assets from related parties (unless real business property)
- No financial assistance or benefits to fund members and their relatives
The primary reason why the regulators have in-forced legislation around superannuation investment restrictions is because superannuation is designed to provide retirement benefits. The thinking behind this is that getting tax advantages from superannuation now could disadvantage the final result at retirement. Perhaps this is where sound professional advice and support could make a meaningful difference in operating an effective and compliant retirement fund.