A self-managed super fund (SMSF) is a trust structure designed to hold retirement savings for the benefit of its members. As trustees of their own fund, SMSF members have control over how their retirement savings are invested and managed.
While this provides greater flexibility and choice, it also comes with greater responsibility. All SMSF trustees must understand and comply with the rules and regulations governing SMSFs.
In this article, we’ll run through some of the main rules and regulations associated with running an SMSF.
The main rules and regulations applicable to SMSFs are set out in the Superannuation Industry (Supervision) Act 1993 (SISA) and the Superannuation Industry (Supervision) Regulations 1994 (SISR). These laws are administered by the Australian Taxation Office (ATO).
The SISA and SISR contain the general rules that all super funds must comply with. The rules cover things like eligibility, contributions, benefits and fund administration.
In addition to the general rules, SMSFs must also comply with the specific rules contained in Division 6 of Part 23A of the SISA. These rules are commonly known as the “SMSF sole purpose test”. The SMSF sole purpose test requires that an SMSF is maintained for the sole purpose of providing retirement benefits to its members or other benefits in relation to death or disability.
To ensure compliance with the SMSF sole purpose test, trustees need to have a clear understanding of what constitutes a “benefit” and what does not. For example, payments made to a member’s estate after their death are not considered to be benefits and are therefore not subject to the SMSF sole purpose test.
The ATO also has the power to issue directions and impose penalties on trustees who breach the super laws. By understanding and complying with the SMSF rules and regulations, trustees can be confident that they are meeting their obligations and maximising the potential benefits of having an SMSF.
SMSF rules and regulations are constantly changing. It is important to stay up to date with the latest changes to ensure you are compliant. Some of the most recent changes include:
These are just some of the changes that have been made to the SMSF rules and regulations in recent years. It is important to stay up to date with all changes, as failure to do so could result in hefty penalties from the ATO.
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Ancillary purpose is a term used in the context of Self-Managed Superannuation Funds (SMSFs). It refers to a non-core purpose or activity that is ancillary, or incidental, to the SMSF’s primary purpose which is to provide retirement benefits for its members. However, there may be other purposes that the SMSF trustees consider to be beneficial for the members, but which are not essential to achieving the primary purpose. These ancillary purposes can include things like providing death benefits, disability insurance cover, and/or income protection insurance cover.
Ancillary purposes are not allowed to conflict with the primary purpose of the SMSF. This means that they must be subordinate to, and supportive of, the SMSF’s primary purpose.
The ancillary purpose must also be specifically allowed by the SMSF’s trust deed. If the trust deed does not allow for an ancillary purpose, then it cannot be pursued by the SMSF trustees.
Ancillary purposes can provide significant benefits to SMSF members. However, it is important to ensure that they do not conflict with the primary purpose of the fund and that they are specifically allowed by the SMSF’s trust deed.
Fund investments in your SMSFs are investments that are not essential to the operation of the fund. They are typically made at the discretion of the trustees and can include things like shares, property or managed funds.
While fund investments can offer some diversification benefits, they also come with additional risks. As such, it’s important to consider carefully whether or not fund investment is right for your SMSF.
If you’re thinking about making an investment in your SMSF, there are a few things you need to keep in mind. Here’s what you need to know.
Making an investment in your SMSF is a big decision. There are a number of things you need to consider before making any decisions, so it’s important that you understand the risks involved and seek professional advice before proceeding.
SMSF regulations require residential properties to comply with their sole purpose requirements. A trustee is prohibited from acquiring property from SMSF members or their relatives and also letting those properties out. SMSF fund members are also prohibited from using the property as their home or letting them go on their own. The asset can then only be shared with another person without compensation other than the fund holder and his associates. The commercial property investing rule permits trustees to buy or lease members’ businesses.
In addition, one requirement in self-managed super funds is that every investment decision must be solely made to provide retirement (or death) benefits to their members specifically. This is called objective testing. If the SMSF fails to adhere to this sole purpose test it will lose compliance status and not be entitled to concessional tax rates resulting in the loss of its income.
There are a few different places you can find the SMSF rules. The ATO website is a great place to start, as they have a dedicated section for SMSF information and resources. You can also find the rules on the Australian Securities and Investments Commission (ASIC) website, as well as on the Department of Human Services website. If you’re not sure where to look, you can always ask your financial advisor or accountant for help.
If you have any questions about the SMSF rules, it’s best to speak to an expert. Your financial advisor or accountant will be able to give you the most accurate and up-to-date advice. You can also contact the ATO or ASIC for more information.
You can use your SMSF to borrow money to invest in certain types of property, but there are strict rules around this. You can only borrow money through a Limited Recourse Borrowing Arrangement (LRBA), and the borrowed funds must be used to purchase ‘single acquirable asset’. This asset must be held in a bare trust for the SMSF.
The asset purchased with borrowed funds cannot be used as security for the loan, and the loan must be repaid within a maximum term of 10 years. There are also strict rules around the interest rate charged on the loan, and how it is structured.
If you’re thinking about using LRBA to purchase an investment property for your SMSF, it’s important to seek professional advice first. A qualified accountant or financial adviser can help you understand the rules and assess whether this is the right strategy for your SMSF.
There are a few key things to remember when it comes to SMSF residency rules. First, an SMSF must be established in Australia. This means that the fund’s trustees must be resident in Australia, and the fund’s assets must be located in Australia.
Second, an SMSF must have at least four members. All of these members must be related by blood or marriage (including de facto relationships).
Third, an SMSF can only have one type of membership structure – either corporate or individual.
Fourth, an SMSF must have a trustee structure in place. The trustee structure will determine how the fund is managed and how decisions are made.
Fifth, an SMSF must have an investment strategy in place. This investment strategy must be approved by all of the trustees.
Finally, an SMSF must comply with super and tax laws. The Australian Taxation Office (ATO) has a number of resources available to help SMSF trustees comply with these laws.
If you’re thinking about setting up an SMSF, it’s important to make sure that you understand the residency rules. These rules are designed to protect the interests of Australian taxpayers and to ensure that SMSFs are managed in a way that complies with Australian law.
There are a few key things to remember when it comes to SMSF bank accounts:
You can trade shares in your SMSF as long as you comply with the rules and regulations set by the ATO. Here are some things to keep in mind when trading shares in your SMSF:
If you’re thinking of trading shares in your SMSF, make sure you understand the rules and regulations first. This will help you avoid any penalties or fines from the ATO.General Advice Warning
Gareth Lane is a successful entrepreneur, businessman, and owner of the digital marketing and web agency Concise Digital, based out of Perth, Western Australia. Concise Digital have solved over 60,000 digital / web problems for clients since 2005. Gareth is one of the founders of SMSF Mate.
Gareth is passionate about helping small businesses be more successful online by avoiding the pitfalls of digital marketing. He regularly runs live talks, workshops and meetups discussing Google, social media and all things digital marketing.
Gareth studied Business and Commerce at Curtin University, and has held board positions for a number of organisations, including serving as the President of the Western Suburbs Business Association and as a non-executive member of WA Business Assist. A true entrepreneur at heart, he started his first business at 13 and has created and run multiple successful businesses since.
Gareth enjoys good food, great wine and time in the sun when he’s not at his computer helping other businesses get ahead!
You can find out more about Gareth or connect with him on Linkedin here: https://www.linkedin.com/in/garethconcise/
Ashwin is an accountant and educator based in Perth, Western Australia. He is passionate about helping family owned businesses and startups. He is one of the founders of SMSF Mate and you’ll regularly see him on our podcast!
Ashwin is a managing owner and director of Eventum Consulting, a multidisciplinary firm helping clients with finance, succession planning and their tax needs. He also served as a lecturer in taxation and small business at the Central Institute of Technology, and has worked as an accountant at a number of well-known tax specialists.
Ashwin studied a Diploma of Business Education and a Bachelor of Commerce in Financial Accounting, Managerial Accounting and Corporate Finance, both at Curtin University, WA.
Ashwin is passionate about technology, and sees it as an enabler for his clients to grow truly sustainable and profitable businesses.
You can find out more about Ashwin or connect with him on Linkedin here: https://www.linkedin.com/in/ashwin-ramdas-72442919/
Or visit his website here: https://eventum.com.au
SMSF Mate is a unique website because it has ideas about how to approach SMSFs, insurance and other financial topics that come straight from first hand experience. It's much more useful than what you find on all the other financial websites that just offer generic info that you could easily get on the ATO's website. It's also nice to know there's no financial incentive behind the information, it's legitimately there to help people understand self-managed super funds and how to get the most out of them, not to get an affiliate commission from a broker or other financial services provider. The investment product information is also incredibly useful, I've never seen this kind of functionality on any other website that let's you look at such a wide range of products, sort by what info is most interesting or important to you, and subscribe to updates for different funds and financial products all in one place. Definitely worth checking out if you own or are considering an SMSF!
SMSF Mate provides a unique insight into superannuation and financial topics in a way that is easier to understand than conventional websites. The colloquial nature of the site makes it easy to understand and they often speak about complicated topics in lamens terms so I can wrap my head around them. The investment product information is a great way to research funds that I am interested in investing in with my SMSF and there is a lot of helpful information on the site for better structuring my investment portfolio. In comparison to other websites which offer similar information, SMSF Mate excels as the information is free to access whereas many other sites charge a subscription fee for the same thing. Overall, I think SMSF Mate is a great resource for SMSF trustees and is worth looking at for a variety of super-related topics. Thanks.