Self Managed Superannuation Funds (SMSFs) are funds established under a specific portion of the same laws that govern larger funds the Superannuation Industry Supervision Act 1993. A SMSF allows a small number of individuals (limited to 6) and is regulated by the Australian Taxation Office, not the Australian Prudential Regulatory Authority. Generally the Trustees (OR Trustee Directors) of the fund are the fund members and the members are all trustees (or Trustee Directors). Where there is a Corporate Trustee, the members are the directors of that company).
SMSFs have very different goals to large industry and retail superannuation funds and there are now 620,000 SMSFs with the largest percentage of trustee/members in the 35-50 age group. These are people who want to invest their compulsory superannuation, paid by employers, in their own way. Plus the ability to borrow and buy property in a SMSF has seen a huge take up by Gen X and millenials in using a SMSF.
In addition the tax rates for members taking their own private pension or a lump sum after age 60 is tax free. Moreover any capital gains or income earned on assets being held by the Trustee of the Fund is tax free giving the strange phenomenon that a pension only SMSF investing in Australian shares with franking credits may get a tax refund while paying no tax.
A SMSF is also beneficial for asset protection and estate planning. A member of a SMSF may provide the Trustee of the Fund with a binding death benefit nomination or preferably a SMSF Will. Over the past decade BDBNs have had a tough time in the Courts and are really for industry and retail superannuation funds not SMSFS. On the other hand a SMSF Will enables the member to enter into a contract with the Trustee on how their superannuation benefits are to be applied on their death. A good SMSF Will goes well and truly beyond an industry super fund BDBN and enables the appointment of the deceased member's executor to trusteeship to manage the disposition of the deceased member's superannuation benefits as well as ensuring the SMSF Will is carried out to the letter. Failure to do so may render the Trustee liable for all losses and also a potential criminal penalty.