Wealth Creation, Tax Minimisation and Asset Protection should be paramount to your strategic thinking. The importance of the correct structure to hold your investment in could mean the difference between paying and not paying hundreds of thousands of dollars in tax over the longer term. It could also mean shielding your investment from creditors.
Note: this is not a financial advice
An SMSF has less than seven members. Each individual Trustee of the fund is a fund member, and each member of the fund is a Trustee. No member of the fund can be an employee of another member unless those members are related and no Trustee of the fund receives remuneration for his or her services as Trustee.
A Trustee of an SMSF must act in accordance with the clauses of the superannuation fund trust deed. A key area of responsibility for Trustees is investment management. There are duties and responsibilities Trustees must consider when making investment decisions for the SMSF. These rules aim to protect and increase member benefits for retirement purposes. It is important that Trustees seek appropriate financial advice when making investment decisions for the SMSF.
From July 1, 2007 all new trustees (and directors of corporate trustees) of a SMSF are required to sign a declaration, in the approved form, within 21 days of becoming a trustee or director. The declaration aims to ensure that they understand their obligations and responsibilities.
There are several trust laws and legislative requirements involved in setting up an SMSF. These include obtaining a trust deed; appointing Trustees; electing to become a regulated fund; and obtaining a TFN and ABN.
Our superannuation team will attend to all the paperwork required to get the SMSF structure established and will assume management of the process for you. The team will attend to ordering the structures, handling any queries from you, and finally sending the documents to you for signature. They will also apply for Tax File Numbers, ABN (if applicable), GST (if applicable), paying all stamp duty on the documents and attend to all lodgement of forms to the various institutions to avoid penalties.
We will also attend to getting your SMSF approved as a Complying Fund by the Australian Taxation Office (ATO). This may take several weeks before approval is granted.
Once you receive the completed documents from Small Business Works, and while you are waiting for the approval from the ATO, take your Trust Deed to the Bank and open a cheque account in the name of (for example) John & Mary Smith as Trustee of the Smith Superannuation Fund. This will allow the SMSF to accept contributions and rollovers. The bank account will be a temporary holding account until the Trustees decide where they would like to invest the money.
Once the bank account is opened and you have received approval from the ATO that your SMSF is a Complying Fund, you can receive rollovers from your other superannuation funds. Contact your existing superannuation fund and request a rollover application form, complete it and submit it ASAP. It can take anywhere from two to four weeks, depending on the fund, to process your rollover. The processing of rollovers from other superannuation funds is out of our control, so please be prepared for a four-week turnaround. Your old super fund can electronically transfer the rollover money into your Superannuation fund’s bank account.
It is important that Trustees are aware of the minimum standards relating to the acceptance of contributions.
The Trustees of every fund are required to prepare and implement an investment strategy for their fund. This strategy must take into consideration the following:
INVESTMENT RESTRICTIONS (Sole purpose is to provide for retirement benefits)
An SMSF is:
There are very strict rules about where an SMSF can and cannot invest its money. A breach of those rules allows for jailing for misappropriation of funds. You cannot, for example, use the account like a normal personal bank account, drawing money from it when you need it and returning the funds later. This is unacceptable.
You cannot make use of investments of the fund for personal purposes or be seen to be receiving a benefit from the investments before you retire. For example: some people have used the funds to purchase artwork and make use of these paintings in their own home. This is strictly not allowed. Investments in an SMSF are to be maintained at an arm’s length basis If you have a concern, please contact us on 03 8759 5532.
Your SMSF accounts are audited and, should you breach the Superfund rules, the Superfund will be deemed non-complying and can be taxed at the highest tax rate of 45%. You also face penalties or jail if your actions are found to be in breach of the rules.
There are a range of administrative obligations placed upon Trustees of SMSFs. These include:
Since the SMSF is audited, Trustees must maintain the appropriate records. These include computer accounts and / or excel spread sheets; bank statements; cheque butts; share documents; details of all investments and expenses; receipts; rollover documentation; contracts of sale; and valuations. Please contact your Client Manager for further information.
Note: This is not an advice to setup a SMSF. You take your own decision on this or get personal advice. S & H Tax Accountants can only setup SMSF based on the Trustee instructions.
S & H Accountants Pty Ltd T/a S & H Tax Accountants
Phone: 03 8759 5532
Mobile: 0466 744 704
info@sahtax.com.au
Cranbourne Office
L1 63B High St Cranbourne VIC 3977
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