What is a “SMSF”?

“SMSF” stands for Self-Managed Superannuation Fund and is a way of saving for retirement. They differ from other types of super funds in that the members of the fund are also the trustees. This means the members of the SMSF run it for their benefit and are responsible for complying with the super and tax laws. A SMSF must have fewer than 5 members and be maintained for the sole purpose of providing retirement benefits to the members or their dependants in the event of death. Check out our blog on setting up a SMSF here.


What can I invest in?

SMSF’s can invest in a wide range of assets as long as they are made on a commercial “arm’s length” basis. These include (but are not limited to) Australian and overseas shares, residential property, commercial property, artwork, wine, managed funds and term deposits. A fund cannot buy assets from, or lend money to, members of the fund or other related parties (there are some exceptions such as in-house assets, listed shares and commercial property). The fund also cannot borrow money except in very limited circumstances including limited recourse borrowing arrangements. Check out our blog on what you can invest in [...]


What is an in-house asset?

An in-house asset is an investment in or a loan to a related party, investments in related trusts and assets of the fund that are leased to a related party. Trustees cannot invest in an in-house asset where the market value of all in-house assets held by the fund exceed 5% of the market value of the total fund assets. Check out our blog on what an in-house asset is here.


Can my fund invest in wine, artwork and other collectables?

In short, yes. However there are strict rules around these types of investment and it is important they are adhered to. The assets must not be used (such as displayed on walls) by members of the fund or other related parties. They must also be stored off the private residence. They may be stored on other premises owned by a related party but the reasons must be documented (for example an office building may have a secure storage room that is temperature controlled) Collectables must be insured in the name of the fund within 7 days of the purchase. Ensure [...]


Can a super fund borrow money?

A fund can only borrow money in the following situations: The borrowing is for a maximum of 90 days and used to pay a member benefit. It must not exceed 10% of the fund’s total assets. The borrowing is for a maximum of 7 days to cover the settlement of a security. It must not exceed 10% of the fund’s total assets. The borrowing is under an instalment warrant or a limited recourse borrowing arrangement. Check out our blog on limited recourse borrowing arrangements here. 


What does a trustee need to consider in an investment strategy?

The investment strategy should be both meaningful and measurable. The investment strategy must consider the following: Risk and return – what is the risk profile of the members and the expected rate of return Timeframe – when the performance will be assessed Diversification – what type of assets will you invest in Liquidity and the ability to meet debts as they fall due – can the fund pay expenses and member benefits when required Insurance needs – have the trustees considered life and other personal insurance of the members The above must be documented and reviewed regularly by all trustees [...]


What is Preservation Age?

Access to super benefits is generally restricted to members who have reached preservation age. A person's preservation age is as per the below table: Date of birth Preservation Age (years) Before 1 July 1960 55 1 July 1960 – 30 June 1961 56 1 July 1961 – 30 June 1962 57 1 July 1962 – 30 June 1963 58 1 July 1963 – 30 June 1964 59 After 30 June 1964 60 Check out our blog on how your super can impact on your government age pension here.


What is the difference between accumulation phase and pension phase?

The key difference between the accumulation phase and pension phase is the tax paid on the associated earnings. Earnings on balances in pension phase pay no tax. This differs to earnings on balances in accumulation phase which pay tax at 15% on earnings, or 10% on capital gains where the assets is held for more than 12 months. Only members aged over preservation age are able to commence a pension and therefore take advantage of the tax concessions. They must draw the minimum pension to continue receiving these tax concessions.  Please see the preservation table. What are [...]


What are the pros and cons of individual trustees and corporate trustees?

Although a corporate trustee can cost more to setup and maintain, it is usually better than individual trustees. The table below identifies the differences between the two structures: Individual Trustee Corporate Trustee Sole Member Funds A single member fund must have two individual trustees Sole Member Funds A single member fund only needs a sole director of the corporate trustee Additional Administration Costs Administrative burden in the event of a change of trustees such as a new member or a departing member. This is because all assets must be in the name of the trustees as trustee for the super [...]


What are the new rules in relation to the $1.6m pension transfer balance cap?

The $1.6m transfer balance cap limits the amount of superannuation savings that can be transferred from accumulation phase to retirement phase from 1 July 2017. This includes existing pensions. Earnings associated with the pension transfer balance account will be tax free however tax will be imposed if the transfer balance cap is exceeded. However please remember each individual’s circumstances are different. Check out our blog on Lump Sums vs Pension Payments here.

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