A Self Managed Superannuation Fund is required to lodge a tax return each year and also to have an audit performed each year. With this in mind, we would recommend that a client has a balance of at least $200,000 in their SMSF for it to be cost effective when compared to wholesale or industry superannuation fund offerings.

Your SMSF the members account balances are pooled. Therefore partners with $200,000 in total could have sufficient funds to consider establishing their own SMSF.

The main advantages of having a SMSF include:

• Freedom! You can decide which assets the SMSF invests in, including direct shares and direct property. Compared to large superannuation funds who make all the investment decisions without your input.
• There are more opportunities for you to maximise your own personal tax strategies.
• You can choose to administer and manage the Fund, or outsource some or all of the tasks to your financial planner and accountant.
• There can be significant cost savings, through accessing the economies of scale. Many of the costs of running a SMSF are fixed (eg. accounting costs, other compliance costs) regardless of the level of assets within the fund.
• SMSFs can provide specific, long-term  estate planning. Many large funds allow you to nominate who you would like to receive your accumulated superannuation benefit on your death, but the ultimate decision is made by the trustee. However as you are the trustee of your own SMSF, you can control how the proceeds are dealt with upon your death.

The main disadvantages of having a SMSF include:

• As you are the trustee, there are various duties  and responsibilities  imposed by legislation. Non-compliance carries severe penalties! However, the majority of these obligations can be met with the assistance of your accountant and/or financial adviser, so long as you adhere to the ground rules and work within the framework.

Yes, you can! Which generally allows you to combine your existing fund balances by rolling them into your new fund. Make sure you get specific advice before doing this, though.

A member is a person who either has super contributions made for them or who receives benefits from the fund. Once a member retires, they generally have the option of receiving either lump-sum payment, a pension, or a combination of both.

The trustee is a person (or a corporate trustee) who is  responsible for ensuring the fund is managed according to Superannuation Industry legislation. If the trustee is a company, then each director of the company must be a member of the fund.

The benefits of having a Corporate Trustee include:

• Majority banks require a Corporate Trustee when the Fund plans to borrow in order to acquire assets.
• If the SMSF has a Corporate Trustee, then should there be a change in trustees the necessary changes to relevant documents/share trading accounts/bank accounts  is much simpler.
• Should the Fund have a breach of the legislation, then generally a Corporate Trustee pays just one penalty to the ATO whereas individual trustees could each expect to pay a separate penalty.

A fund can only have up to four members. You can add members after the fund is setup, so long as you don’t exceed the maximum number.

The main purpose of the SMSF’s investments strategy must be to generate and grow retirement benefits for the members. Any investment decision must consider the relevant risk and return, and avoid unnecessary exposure.The fundamental rule: all the investments must pass the “sole purpose test” and “arm’s length” approach.

The trustees must separate the Fund’s assets, from their own personal or business assets.

Some of the investment restrictions and limitations include:

• lending money to members and relatives
• acquiring assets from ‘related parties’
• borrowing (unless within very limited parameters)
• investing in ‘in-house’ assets
• assets cannot be used for personal or business purposes

Yes, via “Limited Recourse Borrowing Arrangements”.  Borrowing money to acquire a permitted single asset, or a collection of identical assets, having the same market value (that are together treated as a single asset), which the fund is not otherwise prohibited from acquiring, may be allowable.

The structure of the Fund, and the manner in which the borrowings must be organised to comply with legislation, is imperative. Before embarking upon this strategy, you must engage specialist professional advice, otherwise you could incur significant establishment costs without achieving the benefits!

If you are attracted by the potential benefits of having your own SMSF, then ensure you do it properly first go!

As each person’s circumstances are different, there is no one textbook solution for everyone. Please contact us to arrange a meeting where we can discuss the main parameters and determine if a SMSF is your optimal strategy.