Self Managed Superannuation Funds (SMSF)

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

WHAT IS A SELF MANAGED SUPERANNUATION FUND

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.

TRUSTEE DUTIES

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.

SETTING UP A SELF MANAGED SUPERANNUATION FUND

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. Along with Self Managed super fund registration, it is important to ensure everything is set up correctly from the beginning to avoid compliance issues later.

Our superannuation team provides complete self managed super fund accounting support and will take care of all the paperwork required to establish your SMSF structure. We manage the entire process for you, including ordering the structure, handling your queries, and sending documents for signature. As part of our smsf accounting services, we also apply for Tax File Numbers, ABN (if applicable), and GST (if applicable), pay any required stamp duty, and lodge all necessary forms with relevant institutions to help you avoid penalties.

We will also assist in getting your SMSF approved as a Complying Fund by the Australian Taxation Office (ATO). This approval process may take several weeks, and our team ensures everything is handled accurately and efficiently to keep your fund compliant.

BANK ACCOUNT

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:

Invest in such a way as to maximise member returns having regard to risk.
Appropriate diversification of investments.
Ability of the fund to pay benefits on retirement.

INVESTMENT RESTRICTIONS (Sole purpose is to provide for retirement benefits)

An SMSF is:

Prohibited from loaning or providing financial assistance to members or a relative.
Prohibited from borrowing [there are exceptions to the rule in limited circumstances].
Prohibited from purchasing assets from members unless:
- The assets are Listed Securities.
- The asset does not exceed 5% of the total fund assets.
- The asset is Business real property.

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:

Lodgement of yearly Income tax returns.
Lodgement of Member Contribution Statements and payment of annual levy.
Arranging Annual Audit by an approved Auditor.
Maintain adequate records.
Maintain and update Investment Strategy.
Trustees must notify ATO of a winding up.

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