Finance

Major differences between SMSFs and public offer funds

If you are planning to start SMSF, then it’s essential for you to know about the SMSF structure. If you need guidance from a specialist advisor in Melbourne, the leading SMSF providers at iCare Super can provide the assistance you need.

Here are a few differences between SMSFs and public offer funds.

  1. Members limit

There can be no more than four members of an SMSF as per the current rules and all members are trustees.

While public offer funds have no member limit.

  1. Responsibilities of members

 After setting up with SMSF, trustees have some responsibility like administration and compiling with regulatory.

In public offer funds, an unrelated trustee takes care of all the fund’s reporting, management, tax and investment responsibilities. A public offer fund may suit if you prefer to outsource the management of your super or have smaller account balances.

  1. Investment strategy

As a trustee of the SMSF fund, one can have more direct control over investment strategy. The member also has a choice of investments like direct shares, assets, property etc. All members should know specific restrictions on the type of assets a member can acquire in this type of Super fund.

Public offer funds

You cannot have much control as you can choose from the investment options which offered by your fund of choice. However, there is a wide range of investment options offered by public offer funds and some of them allow direct share investment.

  1. Borrowing

As a trustee, you can borrow to purchase assets such as shares and property. However, these regulations have several restrictions.

Public offer funds

Some of the Public offer funds may give an investment option that is internally geared.

  But trustees cannot borrow to invest inside a public offer fund.

  1. Costs

SMSFs are more appropriate for one who has a larger account balance.

There are many costs to set up the fund, which include establishment costs, ongoing administration and accounting costs, and investment costs.

Public offer funds

Generally, there is no cost in establishing an account in public offer fund, but their ongoing costs are set by each fund and relate to administration fees, investment fees and transaction fees.

  1. Regulation

The Australian Tax Office ATO has an important role in regulating SMSFs and an approved ATO auditor needs to be appointed to examine the SMSF’s financial reports and confirm compliance with super and tax laws.

Public offer funds

The Australian Prudential Regulation Authority (APRA) regulates public offer funds also small APRA funds. As members of this kind of funds are not trustees, in general, they do not deal directly with APRA.

  1. Fraudulent conduct or theft 

The Major difference between SMSFs and public offer funds

SMSFs cannot have access to Government financial assistance in the case of theft or fraud.

This can have terrible financial consequences when trustees are scammed and defrauded.

Public offer funds

In a public offer fund, members may be entitled to receive government financial assistance in the event of theft or fraud.

To manage your own super fund, get expert advice, iCare Super provides a premium SMSF administration, taxation, and compliance service to SMSF trustees, financial advisers, stockbrokers and accountants

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