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INSERT LOGO WHAT IS A SELF MANAGED SUPER FUND? LEARNING OBJECTIVES  Superannuation is compulsory savings  The different ways of saving your super  Deciding if a self managed superannuation fund is for you  Understanding the requirements of setting up a SMSF 2

INSERT LOGO INTRODUCTION SMSF POPULATION TABLE - ANNUAL DATA[1][1] Jun-04Jun-05Jun-06Jun-07Jun-08Jun-09 Establishments30,23922,54724,19144,58432,49828,995 Wind ups4,8495,0884,9233,8624,5582,310 Net establishments25,39017,45919,26840,72227,94026,685 Total number of SMSFs278,244295,703314,971355,693383,633410,318 Total members of SMSFs534,941568,285604,333680,154721,469772,299 [1][1] 3

AVERAGE ASSETS TABLE ($) This table approximates the average assets per SMSF by:  Member; and  At the end of each financial year. These figures are estimates based on SMSF income tax and regulatory return form data, extracted on 7 July –042004–052005–062006– Average assets per member247,482292,086348,405480,303456,467 Average assets per SMSF476,074561,568668,722918,616858,259 4

Super is the way most Australians save money to retire. Usually, you start saving for your retirement when you start work and your employer pays super for you – the ‘super guarantee’. Generally, there are three ways you can save your super: 1.Australian Prudential Regulation Authority (APRA) regulated super funds - your super is pooled together with large numbers of other members and the fund professionally managed by trustees in compliance with super law. This is where most people have their employer paid super. 2. Retirement savings accounts ( RSA’s) - you have your own special deposit account with a bank or other deposit-taking institution. These are not commonly held. 3.Self-Managed Super Funds (SMSF’s) - you are responsible and the trustee of your own fund and need to comply with super law and make your own investment decisions. The Australian Taxation Office is the regulator of SMSF’s. [1] 5

Add logo here IS A SMSF FOR ME? You should carefully consider which option is best to provide for your retirement. If you’re thinking about setting up an SMSF, there are six points to consider to work out:  If this type of fund is right for you  The things you will need to do to set it up and run it successfully. 6

Add logo POINT 1: CONSIDER YOUR OPTIONS AND SEEK PROFESSIONAL ADVICE There are many professionals who specialise in SMSFs. They can provide advice to help you understand: ■What an SMSF is ■ The requirements for and the costs of setting one up and keeping one going ■ Your investment options and risks. They can also help you set up and run your fund if this type of fund is right for you. 7

Add logo FINANCIAL ADVISERS AND FINANCIAL PLANNERS  A licensed financial adviser will consider your personal situation and recommend a suitable product for you. By using a financial adviser, you get extra protection if anything goes wrong. TAX AGENTS AND QUALIFIED ACCOUNTANTS Tax agents or accountants can help you set up an SMSF and advise you on the establishment, operation, structuring and valuation of an SMSF. However, they cannot advise you about which super fund best suits you or which investments should be in your fund, unless they are also a licensed financial advisory business. Remember, if you decide to set up an SMSF, you will either be a trustee of the fund or a director of the company that is a corporate trustee for the fund. Therefore, you are legally responsible for all the decisions made even if you get help. A professional can provide advice and assistance but you’re ultimately you are responsible. 8

SMSF CAN BE USED STRATEGICALLY FOR  Estate Planning/intergenerational business succession planning  Asset protection  Strategies to minimize tax on death 9

Add logo POINT 2 MAKE SURE YOU HAVE ENOUGH ASSETS, TIME AND SKILLS Consider the amount of time, money and skill you’ll need to devote to managing your own super fund and whether it’s worth your while. Operating an SMSF means you’re responsible for the fund. You need to make sure you have enough assets, time and appropriate skills to: ■Make the best investment decisions ■ Meet all your obligations as a trustee of your fund. As a trustee of an SMSF, your primary responsibility is to ensure you have invested your fund’s money appropriately, so ask yourself the following questions ■ Am I a confident and knowledgeable investor? ■ Will an SMSF do as well as or better than other super funds after I pay all the costs? 10

ADD LOGO OTHER COSTS All SMSFs are subject to an annual supervisory levy designed to fund the regulatory costs of making sure funds comply with their super obligations. An annual levy of $150 is currently payable as part of the fund’s income tax liability. If you set up or join an SMSF, you need to make sure you have adequate life insurance in case you die or you’re unable to work because of an illness or accident. You should also consider the amount of time you will need to devote to managing your own super. 11

ADD LOGO POINT 3 UNDERSTAND THE RISKS AND LAWS All financial decisions carry risk, so it is important to think carefully about how you choose your investment options to balance the level of risk against the level of financial return. You also need to be sure your super investments are legal. It’s important to think carefully about how you choose your investment options when thinking about how to manage the risks associated with your investment options, we recommend you also consider: ■ Your age ■ What level of risk you are comfortable with ■ The objectives you have for your fund A QUALIFIED FINANCIAL PLANNER CAN PROVIDE ADVICE ON INVESTMENT OPTIONS 12

SPREADING THE RISK Avoid risking all your retirement savings in one or a few investments. By spreading your investments (diversifying) you can help control the total risk of your investment portfolio. If one or more of your investments perform poorly or fail, the other investments may be performing better to help cover the loss. Effectively spreading your risk means investing not just in different companies or different sectors of the market, but in different sectors of the economy. A QUALIFIED FINANCIAL PLANNER CAN PROVIDE ADVICE ON DIVERSIFYING YOUR INVESTMENTS 13

COMPLIANCE WITH TAX AND SUPERFUND LAWS  Super funds, including SMSFs, receive significant tax concessions as an incentive for members to save for their retirement. However, you need to follow the tax and superfund laws to receive these concessions.  The assets and money in your fund are solely for your retirement benefits, and are not to benefit you or anyone else outside your fund. This means that the personal use of funds for holiday homes, art to decorate your house, and your golf club membership almost certainly will not comply. 14

HIGH TAX RATE FOR NON-COMPLYING FUNDS A recent case[1] at the Administrative Appeals Tribunal found against a couple who ran their own SMSF. The couple borrowed money from their superfund to finance their small business. This loan breached the “ in-house assets rule” and were fined the maximum 45% which is assessed on the funds income of the year, excluding any un-deducted contributions.[1] A superfund asset will have an In-house asset (IHA) if it has any of the following with a related party: 1. A loan 2. An investment in the related party including a related trust 3. A fund asset subject to a lease or lease arrangement 4. Regulator decides that asset should be IHA There are a number of exemptions to this rule, including business real property and trusts set up for installment warrants. [1][1] dy1v.htmlhttp:// dy1v.html 15

FRAUDULENT SCHEMES Schemes that try to get your super money out of existing funds early are usually illegal and fraudulent. Because of this, if you are caught in one of these schemes you will pay heavy tax and legal penalties. IT IS RECOMMENDED THAT YOU SPEAK TO YOUR ACCOUNTANT AND FINANCIAL ADVISOR BEFORE JOINING SUCH SCHEMES 16

ADD LOGO POINT 4 MAKE SURE YOUR TRUST DEED AND INVESTMENT STRATEGY ARE TAILORED TO SUIT THE MEMBERS OF YOUR SMSF Regularly review whether the trust deed and investment strategy still meet the needs of your fund and update them when required. A QUALIFIED ACCOUNTANT CAN ASSIST YOU WITH ALL SMSF ADMINISTRATION AND A FINANCIAL PLANNER CAN ASSIST YOU WITH YOUR INVESTMENT STRATEGY. 17

TRUST DEEDS A trust deed is a legal document that sets out the rules for establishing and operating your fund. Together with the super laws, they form the fund’s governing rules. The trust deed needs to be: Tailored to your fund Correctly drafted to meet: Legal requirements The fund’s objectives The members’ needs AN ACCOUNTANT CAN ASSIST YOU WITH YOUR TRUST DEEDS 18

INVESTMENT STRATEGIES An investment strategy sets out the fund’s investment objectives and your plan to achieve them. It provides you and the other trustees with a framework for making investment decisions to increase member benefits for their retirement. Your investment strategy needs to take into account the personal circumstances of all the fund members including: ■Risk tolerance and attitudes to risk ■ Age One strategy may not suit every member, especially where the fund consists of people at different stages of life. In these situations you need to select and manage investments well enough so they grow in value and meet the investment objectives of all members. A financial planner can advise you on how to make asset allocation decisions by choosing from a range of investment assets including:  Cash  Bonds  Property  Shares. 19

ADD LOGO “DEFENSIVE” INVESTMENTS Often described as “defensive investments” Cash and bonds are investments, with practically no risk of losing money, and the returns may seem reasonably high. However, you will lose some of the return in taxes and some to the effect of inflation. These safer (defensive) investments don’t provide long-term capital growth. A FINANCIAL PLANNER WILL PROVIDE FURTHER ADVICE ON THIS FORM OF INVESTMENT 20

CAPITAL GROWTH INVESTMENTS Property and shares are capital growth investments and tend to be more tax effective. This means the value of your investment should grow faster than inflation, creating real wealth. However, capital growth is not guaranteed and there can be a lot of ups and downs over the investment time period. Each year, the amount and frequency of your gains or losses will be uncertain and could differ, perhaps significantly, from reasonable long-term estimates. Specific assets may lose value and never regain it. A FINANCIAL PLANNER AND A PROPERTY INVESTOR SPECIALIST CAN PROVIDE ADVICE AND ASSIST YOU ON THIS FORM OF INVESTMENT 21

ADD LOGO BORROWING STRATEGIES TO PURCHASE A PROPERTY IN YOUR SMSF  Restrictions on superfunds borrowing have been in place for over 20 years, however, in recent years these restrictions have been relaxed. PROHIBITED  Superfunds must not borrow or maintain existing borrowings ( there are some exemptions). 22

INSTALMENT WARRANTS – HISTORY Instalment receipts first appeared in Australia with privatizations of the CBA and Telstra 2 and 3:  Two instalments  If 2 nd not paid, government could take other assets to pay debt  Superfunds allowed to participate 23

INSTALMENT WARRANTS THE NEW RULES  Trustee may borrow money ( or maintain borrowing)  Purpose to acquire asset allowed to be purchased under SIS ACT  Asset is held on trust and trustee has beneficial interest  Trustee has the right to acquire legal ownership if one or two payments made after acquiring beneficial interest  Lender rights against trustee for default on borrowing and related charges is limited to rights relating to asset ( non-recourse loans) AN ACCOUNTANT CAN ASSIST YOU WITH SETTING UP THE NECESSARY STRUCTURE FOR AN INSTALMENT WARRANT. A SPECIALIST BROKER AND LENDER CAN ARRANGE FOR SMSF FINANCE. 24

POINT 5 MAKE SURE YOU CAN MEET YOUR RECORD KEEPING AND REPORTING OBLIGATIONS One of your responsibilities as a trustee of an SMSF is to keep proper and accurate tax and super records to manage your fund efficiently It’s a good idea to take minutes of all investment decisions, including: ■ Why a particular investment was chosen ■ Whether all trustees agreed with the decision AN ACCOUNTANT CAN ASSIST YOU WITH ENSURING THAT YOUR RECORD KEEPING AND REPORTING REQUIREMENTS ARE COMPLIANT 25

MAKE SURE YOU CAN MEET YOUR RECORD KEEPING AND REPORTING OBLIGATIONS  If, as one of the fund’s trustees, you invest the SMSF’s money in an investment that fails, the other trustee(s) could take action against you for failing to be diligent in your duties. However, if your investment decision was recorded in meeting minutes that were signed by the other trustees, you will have a record to show the other trustees agreed with your actions  You need to make certain records available to your fund’s approved auditor when they audit your fund each year  You may also need to provide accurate records to the Tax Office if they ask to see them  You need to report changes in certain aspects of your fund to the Tax Office when they happen and you also have annual reporting obligations. AN ACCOUNTANT CAN ASSIST YOU WITH THE ABOVE 26

POINT 6 MAKE SURE YOU UNDERSTAND THE AUDITING OBLIGATIONS You have a legal obligation to have your SMSF independently audited annually. You need to appoint an approved auditor, who will: ■ Provide you with a report on your SMSF ■ Report to the Tax Office if your fund has breached any super rules Approved auditors play an important role in maintaining the health of SMSF’s ROSE GUERIN CHARTERED ACCOUNTANTS IS QUALIFIED TO UNDERTAKE SMSF AUDITS. 27