Please find below frequently asked general questions. If you have any specific question or one that is not addressed below, please feel free to contact us
A self managed super fund (SMSF) is a trust structure that can be used to manage your superannuation contributions and retirement savings. A self managed super fund can consist of one to four members and the structure can either have an individual a trustee or a corporate trustee. SMSF’s are created for the sole purpose of providing financial benefits to the members upon retirement. The benefits can also be allocated to the beneficiaries upon death of a member. A SMSF can be a very powerful tax advantageous vehicle but it’s important to understand the compliance and administration requirements required by the members of the fund.
Some of the benefits of having your own SMSF are:
- Greater control and visibility of superannuation savings.
- Investment choices in cash, term deposits, shares, managed funds, ETF’s and property.
- Tax advantageous depending on your personal circumstances and investments.
- Lower administration costs allowing more to be invested in your fund.
- Greater capability for estate planning and commercial property benefits.
A member of a super fund is someone that makes contributions to the fund and then receives a benefit at retirement. The benefit can be in the form of a pension or a lump sum payment. It is also possible to have a combination of both. Most people can set up their own SMSF for their superannuation guarantee and personal contributions. Employees who are not eligible for super choice may only be able to use an SMSF for personal contributions.
You cannot be a member of a SMSF if you:
- Are under 18 years ol
- Have criminal convictions relating to dishonest behaviour.
- Are an undischarged bankrupt.
- Have committed a serious breach of the SIS Act.
A SMSF trustee is the person that is responsible for making sure that the fund complies with all the regulations and the sole purpose test. Other trustee responsibilities include managing the fund’s investment strategy, appointing an auditor and lodging all documents with the taxation department.
SMSF trustees are legally responsible for all decisions concerning the fund. Part of your responsibility as trustee is to ensure you understand the rules governing your fund and to keep abreast of any legislative changes. Other responsibilities include:
- Acting honestly in all matters concerning the fund.
- Exercising the same degree of care, skill and diligence as an ordinary person.
- Acting in the best interest of fund members.
- Retaining control over the fund.
- Keeping money and assets of the fund separate from other monies or assets.
- Developing and implementing an investment strategy.
- Providing members with access to certain information, such as the financial situation of the fund.
Administrative responsibilities include (SuperCentric has various solutions to handle any fund):
- Keeping accurate and accessible accounts for the fund. Accounts must detail the financial position of the fund and its transactions and must be kept for at least five years.
- Preparing an annual operating statement and annual statement of the fund’s financial position, which must also be kept for at least five years.
- Maintaining minutes of all trustee meetings and recording any changes to the trustees along with each member’s agreement to act as a trustee. Each of these documents must be kept for 10 years.
- Retaining copies of all annual returns lodged for a period of 10 years.
- Retaining copies of all reports given to members for 10 years.
- Reporting all contributions made to the ATO by specified dates each year.
Please feel free to contact us to see how we can handle all the administrative duties on behalf of your fund.
An SMSF can have a maximum of four trustees, however the trustee must be a member of the fund.
You can establish either a Multiple Member Fund, or a Single Member Fund. The trustee can be either a company, or an individual. If the fund has 2-4 members, it is necessary that they are all trustees or directors of the trustee company. With a single member fund, the member and another person who is not an employer, can be trustees of the SMSF. Alternatively, there may be a trustee company and the member may be the sole director. There are other rules surrounding acceptable trustees for single member funds so please feel free to contact us if you have further questions.
SMSFs can only invest in assets that meet the sole purpose test, which means they must be for the core purpose of providing benefits for retirement. This means trustees cannot derive any current day benefit from assets purchased. SMSFs are also allowed to provide benefits for ancillary purposes such as financial hardship or compassionate grounds subject to super rules and regulations.
- Voluntary contributions from you
- Rollovers or transfers of your benefit from another superannuation fund
- Employer contributions made to you.
- Spouse contributions
It depends on what age bracket you are in. If you are under 65, you can make both employer and personal contributions. You may also be able to make spouse contributions, if eligible to do so. If you are between 65-74 you are entitled to make employer contributions and personal contributions.
However, you would have to have been employed for a minimum of 40 hours, at least 30 days before making the contribution.
SMSFs can accept concessional contributions and non-concessional contributions. Concessional contributions are those that a tax deduction has been or will be claimed for those contributions. Concessional contributions can be accepted for members at any time regardless of their age and number of hours worked.
Non-concessional contributions include:
- Superannuation guarantee contributions.
- Employee personal contributions.
- Self-employed personal contributions (where no tax deduction has been claimed).
- Other personal contributions and spouse contributions.
There are limits on the types of non-concessional contributions an SMSF can accept:
- Members under 65 can accept non-concessional contributions where they have quoted their tax file number.
- For members between 65 and 69 you can accept non-concessional contributions if the member is gainfully employed (worked at least 40 hours within a period of 30 consecutive days in the current financial year), or non-concessional contributions if the member has quoted their tax file number.
- For members between 70 and 75 you can accept employer or member contributions if the member is gainfully employed, or member contributions if the member has quoted their TFN or the contribution is received on or before 28 days after the end of the month the member turns 75. You cannot accept spouse or voluntary employer. contributions.
- For members 75 and over you cannot accept any non-concessional contributions.
Generally, you can receive the benefits under the fund, upon retirement or death. However, you may be entitled to access the funds earlier, if falling under an exception. Some include, permanent incapacity, severe financial hardship or other compassionate grounds.
Members can access their super benefit tax-free at the age of 60 as a lump sum or pension. Members who want to access their super as a lump sum or commutable retirement income stream will need to be retired and of preservation age. A commutable income stream provides the flexibility to convert an income stream into a lump sum at a later date. Your preservation age depends on your date of birth.
|Your Date of birth||Your preservation age|
|Before July 1960||55|
|July 1960 to June 1961||56|
|July 1961to June 1962||57|
|July 1962 to June 1963||58|
|July 1963 to June 1964||59|
|After June 1964||60|
If you are aged between 55 and 60, you can ease yourself into retirement under the Government’s Transition to Retirement rules. This way you can continue working full or part time while drawing an income from your super.
If a member of a fund dies, their benefits under the fund will be distributed in accordance with the terms of the trust deed. The trustee is usually the one that pays their funds to the deceased member’s dependents or their estate. However, if the member has given a binding nomination, the trustees must then pay the benefit to that nominated person.
Note: under some trust deeds this nomination may lapse at 3 years and will have to be renewed.
Yes, with an SMSF you can organise life and total and permanent disablement cover to insure the members of the fund. The SMSF pays the cost of the insurance and claims it as a tax deduction, which can make the costs of insurance more tax effective.
Note: Your existing superannuation fund may already include insurance cover. It is recommended, before setting up a SMSF, that you seek independent advice about the insurance consequences of transferring your superannuation from your current superannuation scheme.
As explained by the ATO the regulations that came into operation on 1 July 2014 does not allow SMSFs to provide insurance for a member unless the insured event is consistent with one of the following conditions of release:
There are limits on the types of non-concessional contributions an SMSF can accept:
- Terminal Medical Condition
- Permanent Incapacity
- Temporary Incapacity.
There are three levels of taxation on SMSFs.
If the money paid into your super has yet to be taxed, it will attract a 15% tax on the way into the fund. This is known as concessional or salary sacrifice contributions. There is no contributions tax if your money has already been taxed. This is called non-concessional contributions.
Tax on earnings
While in the accumulation phase, the income you earn on your investments within your SMSF is taxed at a maximum rate of 15%. Capital gains are also subject to income tax.
When the SMSF is in the pension phase, all income and capital gains are tax-free.
Tax on benefits
There is no tax on lump sum super or pension benefits paid to people age 60 and over, provided a condition of release has been satisfied.
If you roll your benefit into a superannuation income stream product, you pay no tax on investment earnings (which includes any realised capital gains). You will also pay no tax on your income payments if you’re over 60 or have satisfied a condition of release. If you have reached your preservation age and are under 60, your pension may be taxed at your marginal tax rate. A 15% tax rebate may apply.
According to ATO, an LRBA requires an SMSF trustee to take out a loan from a third party lender. The trustee then uses those funds to purchase a single asset (or collection of identical assets that have the same market value) to be held in a separate trust. Any investment returns earned from the asset are directed to the SMSF trustee. If the borrower defaults, the lender’s rights are limited to the asset held in the separate trust. This means there is no recourse to the other assets held in the SMSF.
Many SMSF’s are starting to implement an LRBA, however, as trustees you should always consider the quality of the investments you are making and whether your super fund can meet all future obligations under the LRBA. You should only consider this if your Trust Deed allows you to enter into this type of arrangement and such arrangement is consistent with the investment strategy of the fund. Always seek advice from your adviser or accountant prior to implementing an LRBA strategy.
Limited recourse borrowing loans may be presented to you in various ways. You may be given a product disclosure statement that talks about property warrants or instalment warrants. As with any investment decision, evaluate exactly what you are being offered. Don’t decide until you understand how the investment works. If you are not sure about what to do, you should get professional advice from a licensed financial adviser.
Residential property is prohibited when looking to transfer the property via a LRBA, however, the property can be purchased via an LRBA if the property is not owned by the members within fund. Commercial property can be transferred into the SMSF with certain conditions based on the investment, trust deed and borrowing limits. Prior to considering this as a strategy for your SMSF, its best to consult a professional advisor.
As per ATO, borrowing under an LRBA cannot be used to fund improvements. In saying that, money from other sources can be used to improve (or repair or maintain) a single acquirable asset. However, any improvements must not result in the acquirable asset becoming a different asset.
It is quite common that many SMSF’s execute a re-contribution strategy to minimise future tax liability. This strategy converts the taxable portion of your superannuation benefits into tax free components. This effectively results in the reduction of tax payable when your super is passed onto your beneficiaries following your death. In an SMSF, this strategy can only be implemented if the members meet the condition of release to access their superannuation benefits. Superannuation benefits are categorised into tax free and taxable components depending on how the original contributions made into the superfund. Benefit payments from the SMSF are either pension or lump sums, are paid with the same proportion as the tax-free and taxable components of your superannuation interest inside your SMSF. A Withdrawal and re- contribution strategy is simply withdrawal benefit from your existing taxable/tax free component, then making non-concessional contribution back into the SMSF to maximise the tax free component.
Note: Please always consult with your adviser or tax agent before you use the re-contribution strategy.
Assets belonging to a member can be transferred via an in-specie transfer into the SMSF as a contribution. Regulations limit such assets to Listed securities (for example, shares, units or bonds listed on an approved stock exchange or licensed market), Term deposits, Managed funds, Business real property and in-house assets, which, after being acquired by the trustees, would not result in the level of in-house assets of the SMSF exceeding more than 5% of the SMSFs total assets.
Where an asset is transferred into an SMSF in-specie, capital gains tax (CGT) may apply upon transfer. The value of an in-specie contribution will be the market value of that asset at the time of transferring the asset into the SMSF.
Members may be able to split certain contributions with their spouse, enabling them to boost their spouse’s super savings with some of their own. Sometimes it may be of particular benefit to low or non-working spouses by allowing them to control their own super and have their own income in retirement while also providing a benefit against any legislative risk. There are some restrictions on the type of the contribution eligible for splitting, age of the members and work test requirements.
It is recommended that specific advice on the benefits that it may provide be sought if super splitting is to be considered.
Many small business owners like to run self managed super funds (SMSF), but there are also some super funds that like to operate a business. While carrying on a business within an SMSF is not forbidden, there are strict regulatory provisions in place that can make running a business in super difficult. These provisions may prevent trustees from conducting business activities without breaking SMSF law.
As with any SMSF activity, the SMSF trust deed must reflect its ability to carry on a business. If the deed allows this, then the Australian Tax Office (ATO) will consider the activities of the trustee when determining compliance rather than whether or not a business is being conducted. The backbone to the SMSF provisions is whether any activity carried out by the SMSF trustees is done in accordance with the sole purpose test. Briefly, this means that the SMSF must be maintained for the ‘sole purpose’ of providing retirement or death benefits for its members or their dependents if they die before retirement. In order to determine if business activities breach the sole purpose test, the ATO will look at whether the carrying on of the business, instead of providing retirement benefits, is the sole purpose of the fund. In particular, the ATO will pay close attention to whether:
- the trustee employs a family member, their rationale for employment and the amount of remuneration;
- the business activity is commonly carried out as a hobby or pastime;
- the business activity has links to associated trading entities; and whether
- the assets of the fund are made available for the private use and benefit of the trustee and related parties.
Other regulatory provisions
- Investment strategy: The nature of the business activities and the manner in which they are conducted must be in accordance with the SMSF’s investment strategy.
- Loans and financial assistance: The business activities must not involve selling an SMSF asset for less than its market value to a member or relative of a member, purchasing an asset for greater than its market value from a member or relative of a member, acquiring services in excess of what the SMSF requires from a member or relative of a member, or paying an inflated price for services acquired from a member or relative of a member.
- Collectables and personal use assets owned by the SMSF can’t be displayed at the business premises.
- Understand each course of action: Every action undertaken in the course of running the business will need to be checked against all SMSF laws at every stage. Each case is taken on its own merits and therefore there is no blanket answer as to whether carrying on a business complies with all the SMSF provisions.
It is imperative that the trustees of the super fund fully understand the limitations of an SMSF as well as the needs of the business to assess whether it is possible to successfully run the business in the SMSF. This includes funding requirements, asset acquisitions, necessary connections with related parties and seeking legal advice where appropriate.
Super Centric is a full service SMSF administration and compliance provider. We are a boutique independent firm with no ties to any other company or institution. Our vision for Super Centric is to provide a premium SMSF administration service at costs that are affordable and fair as per the industry and the fund itself. We also provide technical assistance, facilitate the independent audit, ancillary SMSF compliance requirements, reporting methods and a customer focused approach to all clients working with us.
Super Centric provides fund establishment services and two models for ongoing compliance. The fees are dependent of the service option you choose for the fund. If you have any questions regarding our pricing model and service types, please call or email us and a member from our team will contact you within 24 hours.
Super Centric charges a fixed fee per fund and run on a monthly billing cycle. The reason for the monthly cycle is to ensure that the fund has been added to our administration platform and continuously monitored to ensure the fund is either up-to-date or closely up-to-date.
Our fees are fixed as per the two offerings we provide. You or your client have complete choice over the offering you opt for. Our fees also include the annual independent audit, liaising with ASIC and ATO for any communications regarding the SMSF. Please select from the links below to find our fees for SMSF Establishment and SMSF Administration.
As CPA and Chartered accountants, our staff are highly trained, experienced and all of the work is reviewed by senior staff members. Further to this, our firm has worked on and refined their internal process to minimize errors to ensure we provide a premium service with the highest quality. Our senior management team have a combined experience of 30 years in the industry working for blue-chip SMSF Administration firms, Financial planning firms, Fund managers and accounting firms.
All of our clients’ data will be kept confidential and would not be released without written consent or a requirement by legislation. SuperCentric has developed and stress tested their systems to ensure any risk or threat to data integrity has been minimized. Software including penetration testing has been also used to validate security risk and PC/Cloud hacking to our servers. SuperCentric has also partnered with Amazon Web Services, a premium and reputable web server provider with the highest industry standards with respect to data security and constant service time.
We have implemented various industry leading measures to ensure our clients data is kept safely, including;
- Highly controlled internet access ensures no capacity to send data from the server.
- Processing staff cannot send external emails.
- All removable data drives are disabled.
- Printing is highly controlled and must be authorised by a senior manager.
- Video surveillance and keycard access to the processing office.
- Access logging for both computers and work areas.