Industry resources

Find answers to frequently asked questions below. If you don’t find something you’re looking for, please feel free to contact us here for further information.

What is a “SMSF”?2019-03-25T16:43:55+08:00

“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?2019-03-25T16:45:18+08:00

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 here.

What is an in-house asset?2019-03-25T16:48:12+08:00

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?2019-03-25T16:41:04+08:00

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 you can obtain insurance prior to purchasing the assets. The assets can be leased however this must be to an unrelated party on commercial terms.

And finally, in the event the assets are to be sold an independent valuation must be obtained by a professional.

Check out our blog on investing in collectables here.

Can a super fund borrow money?2019-03-25T16:52:11+08:00

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?2017-05-17T14:52:25+08:00

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 of the fund.

What is Preservation Age?2019-03-25T16:59:13+08:00

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
What is the difference between accumulation phase and pension phase?2017-05-17T15:56:02+08:00

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 the non-concessional and concessional contribution caps under the new rules?

From 1 July 2017 the non-concessional contribution cap reduces from $180,000 to $100,000. This will also affect the “bring forward” provisions.

The concessional contribution cap will reduce from $30,000 to $25,000. Those aged over 49 will have their cap reduced from $35,000 to $25,000. The table below compares the current rules to the rules from 1 July 2017:

Type To 30 June 2017 From 1 July 2017
Concessional $30,000 (or $35,000 if over 49) $25,000
Non-concessional $180,000 (and bring forward of $540,000 when eligible) $100,000 (and bring forward of up to $300,000 when eligible)
What are the pros and cons of individual trustees and corporate trustees?2017-04-05T11:45:56+08:00

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 fund. All titles to assets will need to be transferred to the new trustees.

Administrative Efficiency

Administrative efficiency in the event of changing members. The assets are already held in the corporate trustee name therefore simply requires the directors to be updated when there are changes to the members.

Ceases Upon Death

Added difficulty for succession and estate planning. When a member of a two member fund passes away a replacement eligible trustee will be required which may be difficult to find.

Continuous Succession

Perpetual succession and estate planning made easy as when a member passes away the current structure can simply continue. The trustee does not need to change.

Less Asset Protection

Where a party sues an individual trustee for damages, their personal assets may be exposed

Greater Asset Protection

Companies are subject to limited liability which provides greater protection in the event a trustee suffers any liability

What are the new rules in relation to the $1.6m pension transfer balance cap?2019-03-25T17:02:42+08:00

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.

Do I pay tax on my pension drawings?2017-04-06T11:40:07+08:00

People aged over preservation age are eligible to commence an income stream from their super fund. Once a pension income stream recipient is aged 60 and over these drawings will be tax free.

However if under the age of 60 there will be tax on the taxable component of the drawings. This taxable component is made up of the concessional contributions made to the fund as well as associated earnings and can be found on your member statement. The taxable component of your pension received will be included in your individual tax return until you turn 60.

Who can make a contribution to superannuation, and what does the work test mean?2019-03-25T17:04:05+08:00

Anyone aged under 65 can make contributions to super as long as they have a super fund account. If you are over 65 you can still contribute to super as long as you meet the work test. This means you must have worked 40 hours in 30 consecutive days prior to making the contribution. A super fund can only accept Superannuation Guarantee contributions (your mandated employer contributions) after you turn 75.

Check out our blog on what the work test is here.

What is the “bring forward” rule?2019-03-25T17:06:32+08:00

The “bring forward” rule allows eligible members to bring forward the non-concessional contributions cap for the following 2 years. For the current 2017 financial year this means those aged under 65 can contribute $540,000 to super (3 x $180,000). They are then unable to contribute any non-concessional for the next 2 years.

From 1 July 2017 as the non-concessional cap reduces to the $100,000 the “bring forward” provision will allow eligible members to contribute up to $300,000. Members with super balances over $1.4m will have a reduced bring forward cap amount.

Check out our blog on Transitional bring forward rules here.

Can I roll my money in from overseas funds?2019-03-25T17:08:34+08:00

The ATO allows certain transfers from your foreign super fund into a complying Australian super fund. Depending on the foreign super fund you may have to pay income tax on the amount transferred and it may count towards the contributions cap.

To be eligible to transfer from a foreign fund you must be under 65 or over 65 and still working (working more than 40 hours in 30 consecutive days). The amount must not exceed the non-concessional contribution cap for that year.

If transferring amounts from a UK fund you must check that your fund is a qualifying recognized overseas pension scheme (QROPS) on the HMRC website. If it is not on the approved list you may have to pay up to 40% UK tax on the transfer.  If you are under 75 the UK government have imposed a lifetime allowance of £1million. Any amounts above this allowance will be subject to UK tax.

Check out our blog on UK Pensions here.

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