SMSF journey

Ensure the SMSF is administered properly and is a ‘Complying’ SMSF – loss of ‘Complying’ status could mean the SMSF loses the tax concessions that normally apply to super.

Meet certain obligations — responsibility ultimately rests with the SMSF trustee (even if the trustee employs an accountant, solicitor or nancial planner to assist).

Trustees can face penalties including nes, bans and even imprisonment.

Sign a Trustee Declaration and lodge this with the ATO to acknowledge that the trustee understands their duties, obligations and responsibilities.
What is a trust deed? This document states the rules of the trust. This includes such matters as the details of the trustees, how they are appointed, their powers and the conditions for contributions and benefit payments.

The rights and obligations of the trustee are also set out in this document.
What is a bene ciary? A bene ciary is the bene cial owner of the trust assets. They are entitled to the pro ts and the assets of the trust.

Almost anyone can operate a SMSF, there are a few exceptions for individuals who are insolvent, have been convicted of a dishonest act or have been banned by the Australian Prudential Regulation Authority or the Australian Taxation Office. In these cases, an individual cannot be a trustee or a director of a trustee company. To start up a SMSF, an individual should already have money in superannuation and/or be able to make contributions to super.

A trust is a legal arrangement where the Trustee holds assets for the benefit of another (beneficiaries).

A bare trust is a trust under which the trustee has no active duties to perform except to deal with the trust properly as instructed by the beneficiaries.
It has a single trustee who holds an asset on behalf of a single legally competent beneficiary.

The beneficiary is also entitled to take actual ownership and control of the trust property. Although there are trustees, they are only effectively nominees and must act according to the beneficiary’s instructions.

What is a member? A member of a super fund is someone that makes contributions to the fund and then receives a benefit at retirement

A trustee is the legal owner of the trust assets. They handle the trust transactions and it is their name that appears on purchase titles and loan documents, however they do not benefit from the trust assets. They legally must act in the best interest of the beneficiaries as set out in the Trust Deed.

All SMSFs must have trustees and in turn all members of the fund must be appointed trustees. Anybody aged over 18 can be a trustee as long as they have not been convicted for an offence involving dishonesty, are undischarged bankrupts, or mentally unstable.

a. A SMSF provides control over superannuation assets and gives the trustee the flexibility to decide how funds are invested and how the fund operates.

b. Control and flexibility that trustees have over the tax position of the fund. Through either strategic investment planning tax can be signifcantly reduced (and in some cases, totally eliminated with refunds paid from the ATO), particularly for those in retirement.

c. For those members nearing the pension phase, the SMSF allows the most seamless transition from accumulation into flexible income streams with the ability to take tax free income streams on retirement.

d. Allows for flexible and a number of contributions including personal, employer, spouse contributions and rollovers.

e. Subject to the investment rules, you may be able to transfer certain assets that are currently held in your name into the SMSF in place of cash contributions (transfers pay be subject to stamp duty and tax).

f. SMSFs provide the ability to package very tailored insurance solutions for members over and above the standard schedule based solutions.

g. Investing in a SMSF has tax advantages that make superannuation a powerful wealth creation strategy. A Self-Managed Superannuation Fund enjoys the lowest rate of tax of any entity structure in Australia. The fund pays a maximum rate of 15% and maybe reduced by offsetting other tax credits.

h. A SMSF fee structure may deliver substantial savings when compared with other retail superannuation funds.

i. A SMSF can be structured to be used for efficient estate planning.

j. New legislation enables a SMSF to borrow to purchase certain assets.

k. A member(s) ‘fund assets’ are normally protected from creditors in the event of litigation or bankruptcy

a. A great deal of responsibility is placed on trustees of SMSF(s).All decisions, operations and compliance is the responsibility of the trustee.

b. Non-compliance by the fund could potentially lead to tax penalties on the fund and prosecution of the trustees.

c. The costs to run a SMSF might outweigh its benefits. Accounting and Audit fees are typically not based on how much super is in the fund, so the SMSF could be paying out a large percentage of the fund in fees.

d. Some level of investment expertise will be required when running a SMSF. Trustees need to keep abreast of what is occurring with the fund investments be cause at the end of the day, it is the trustees responsibility.

e. Just because your friend has one, or they seem popular at the moment – doesn’t mean a SMSF is for everyone. If individuals don’t have expertise or time, don’t have a lot in super – then it’s probably not for them.

f. Some SMSFs are established specifically to buy a single valuable asset such as real estate. This means the fate of the fund depends on the performance of that asset.