Whether it’s a self-managed super fund (SMSF), industry super fund or retail super fund, there is a lot to consider when choosing a super fund that’s right for you. So, what’s the difference between them?
SMSFs are managed by their members, who are either individual trustees or directors of a corporate trustee of the fund. Regulated by the ATO, SMSFs have a maximum limit of six members. However, some states and territories restrict the number of individual trustees a trust can have. As SMSFs are a type of trust, it is worth obtaining professional advice to ensure your SMSF is appropriately set up to be compliant with the various tax and superannuation laws in place.
One of the key benefits of SMSFs is that the trustees have control over all investment decisions, including the development and implementation of investment strategies. In some instances, SMSFs can also be used for holding property, including ‘business real property’. However, this is not as straightforward as it may seem, and should only be considered with the assistance of an advisor.
If your SMSF is found non-compliant with tax and super laws, then the SMSF trustees will be held responsible and may be held personally liable for fines or penalties imposed by the ATO. Furthermore, the SMSF itself may not be eligible for the 15% tax rate and the fund would be subject to tax at the top marginal tax rate (47%) for year in which it is non-compliant.
Retail funds are owned by banks, insurance companies and private investors, and will generally have medium to high fees involved. Members do not receive any profit made by the retail funds. Retail funds usually have a wide range of investment options and are open for anyone to join.
Industry Super Funds
First established to protect Australian workers’ super from high fees and commission products, industry super funds are run to profit members and don’t pay any profits to shareholders. Industry super funds are governed by trustee boards comprised of both employer and employee organisation representatives.
Industry super funds have functioned better than retail funds in the 13 years up to 2017, as found by the Productivity Commission’s analysis. A key benefit of an industry super fund is the low management fees usually charged to members for managing their investments.
Other types of super funds
Other categories of super funds include public sector super funds created for government employees, and corporate super funds organised by an employer on behalf of their employees. These types of funds are quite rare and most that remain in existence today are closed off to accepting new members.
Always seek financial advice from your trusted advisor to determine what type of fund is best for you. Nexis can recommend advisors within our network to help you determine the best type of super fund for you.
If you would like us to facilitate setting up your SMSF or assist with SMSF compliance, get in touch today.