What restrictions are there around SMSFs and how strict are they?

Just like regular superannuation funds, there are lots of restrictions as to what you can invest in and how you can access your funds.  Assets or cash in your fund must be used strictly for retirement benefits only. You can’t finance your business, buy holiday homes you use, use purchased art assets to decorate your own home and that golf club membership you’ve been contemplating definitely doesn’t comply.

The ATO are vigilant on SMSF compliance. You must thoroughly understand the restrictions that apply specifically to SMSFs, otherwise it can mean your fund loses its ‘complying’ status.

If your fund is non-compliant, it can mean the low tax rate applied to superannuation assets no longer applies and the advantage of having created your super fund disappears.

  1. You must formulate a formal investment strategy and then adhere to it. You must also show evidence that the trustees have given serious thought to the fund’s assets, including taking into account the risk of investing in any different asset classes you choose.
  1. You must be vigilant against accidental misuse of funds. It is very easy to access SMSF assets as they often use the same type of bank accounts you would use every day for your personal needs. This means it is easy to accidently withdraw from the fund. All super assets need to be left until retirement and withdrawals are allowed only under limited circumstances.
  1. You can’t invest in assets that belong to friends or relatives. That means the trustees of the fund cannot use their super money to buy shares in their own (or each other’s) business, art collections or anything else. You cannot lend money to yourself or anyone else from your fund either.
  1. All transactions must be at arm’s-length or market rates. This means you can’t get a discount on an asset if it is bought from a friend or business associate. Full commercial rates must be paid.
  1. Gearing in Super is allowed under certain conditions. These conditions involve protecting other assets of the fund from default if the asset bought with borrowed money drops in value.
  1. Assets have to be held separately to personal assets. This means they have to be registered in the super fund’s name and actually be transferred.
  1. You, as fund trustee, are required to have a proper administration system with all paperwork available if requested. Annual tax returns and audits are needed.

Is there any difference between a family super fund (FSF) and an SMSF?

No, there’s no difference. They’re one and the same thing. Up to four members of your family can participate in the fund and obtain the same level of benefits. It also means that assets can be passed on through the fund providing a legacy for the next generation.

How much time do I really require for my SMSF?

If you’re looking to really manage the fund on your own, you’ll need a fair amount of time – especially in the early stages when you’re setting up your fund.

However, if you work with a licenced financial advisor to establish and manage your SMSF (in consultation with Mason Lloyd as the administrators of the fund, of course), it will require far less of your time.

Do I really need outside help – can it look after it myself?

If you’re really serious about it, it’s certainly possible for you to do it all by yourself. However, before you make that decision, you need to ensure you’ve got the time, the ability and the knowledge to manage your own super. Many people find it hard enough keeping up with their current managed super funds.

You’ll need to work out an investment strategy, select and then manage your investments well enough so they grow in value and meet your fund’s investment objectives. Potentially you may also need to insure some of your super fund assets.

You will also need to become a trustee of your own fund. Your fund must be correctly structured, and you’ll need to keep meticulous records to ensure you meet all reporting requirements (such as income tax and regulatory returns and reasonable benefit limits).

So how can you help me?

Whilst many people start off thinking they can do it, when they really investigate, they find managing their own super fund is just too complex to add into an already jam-packed personal schedule. After all, you’re busy doing what it is that you do that’s got you where you are today.

The good news is that you can still have the same benefits of your own SMSF, without the same level of hoop jumping.

What should I watch out for?

Don’t accept advice about which super funds best suits you or which investments should be in your fund unless it comes from a licensed financial advisor. Your advisor can provide licensed financial advice and Mason Lloyd can help you structure your SMSF properly and look after your fund’s administration and reporting.

If you need specific advice, you should discuss your specific circumstances with a qualified professional. Of course, we’d be delighted to chat further. You can call Kerry on 6023 1700 or get in touch via the form below.

Got a question? Get in touch

If you've got financial or business questions, or you just want to run something by us, we'd be delighted to really talk to you – in person, over the phone - call us on 02 6023 1700 - or you can use the form below and we'll get back to you.

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Mason Lloyd is licensed to provide superannuation advice only through SAN.

SMSF Adviser Network (SAN)’s details are as follows - website, AFSL number - 430062 & ABN 64 155 907 681. Mason Lloyd is the Corporate Authorised Representative and Kerry Lloyd is the Individual Authorised Representative (ARN - 00126027, ABN - 40 115 023 973). You can reach Kerry on 02 6023 1700 or via the form on this page.

About us:

Lloyd Accounting is a boutique accounting firm based in North Albury that operates with the sole purpose of making your tax and business affairs as easy as possible. For us, it's about really understanding what it is you're wanting to achieve and then using our experience and expertise to help facilitate that.

Please note - our new location:

Lloyd Accounting is now located at 932 Waugh Rd, North Albury, NSW.

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