1. Self Managed Super Funds
presenter
Barbara Smith CPA CFP
Technical Director, Taxpayers Australia
Executive Director, Superannuation Australia
June 2001

2. Small funds data Dec 2000 A force to be reckoned with:
About 215,000 small funds
Members: about 427,000
Assets held: $73 billion
Average assets per member: $147,500

3. Self managed super funds
have members, for example:
a single person
husband & wife
3 friends
4 family members
4 individuals in business together

4. If you want to start a SMSF
What you need to do:
decide on the trustee (company or members)
organise and execute the trust deed
admit members and arrange for contributions
Complete and lodge the Application to Register for a New Tax System Superannuation Entities to apply for a TFN & elect to be regulated + an ABN, and if required register for GST

5. Types of small fund Employer sponsored A personal fund
but still make sure the deed allows the fund to accept of employer contributions
Self Managed Superannuation Fund
Small APRA Fund

6. Who can be the trustee? The trustee(s) must be: for a SMSF
a company with all members being directors, or
individuals with all members as trustees, or
for a small APRA fund
an approved trustee

7. What are the SMSF trustee rules?

8. Advantages of SMSFs greater control of investments & tax management
‘I can do it better’
costs may be lower:
costs of a managed fund include entry, account-keeping and fund manager fees
cost of an self managed fund include set up fees, brokerage and stamp duty
Fund managers charge entry fees of up to 5% and up to 2% annual management fees.

9. SMSFs - Why not? If the fund becomes non-complying:
tax concessions are lost
can’t accept super guarantee contributions
assets - UCs are taxed at 47%
applies if trustee/members are non-residents
Should the gov’t be in the business of ripping off our retirement savings because of technicalities?
if not enough capital costs are higher
time & cost involved in compliance

10. Who cannot be a member of a SMSF?
A person who is an arms length employee of another member UNLESS
the employee is related to another fund member; or
is a director of the employer’s company
a disqualified person

11. Disqualified person rules

12. Deductible contributions
Age based for /01
under $11,388
$31,631
50 or more $78,445
Self employed ded’n $ % of excess up to age based limit
employees can claim this ded’n only if they receive 10% or less assessable + exempt income + reportable fringe benefits from employer providing support

13. Sole purpose of superannuation
to provide benefits on:
each member’s retirement
each member reaching 65 or more or
for each member’s dependants if the member dies before retirement or age 65

14. Investments You have a wide choice, but they must:
be commercial & arms length
comply with the fund’s investment strategy
not be to lend to or provide financial assistance to members or their relatives
generally not be from related parties
not be encumbered or acquired with borrowed money

15. Investments No related party can get an incidental benefit
No borrowings or charges
Can buy as tenants in common with a related party

16. Assets than can be acquired from related parties
Limited to
stock exchange listed securities, eg listed shares
5% of the fund’s assets invested in inhouse assets, ie a loan, investment or lease with a related party (but not a member or member’s relative)
widely held unit trust investments
+ for self managed funds business real property used 100% for business
Can be used 100% for member’s or member’s company business

17. Your investment strategy
An allocation of assets among the major asset classes that must consider:
risk
expected return
composition/diversification
attitude of members to various investments
liquidity requirements
payment of liabilities

18. Tax on a SMSF

19. CGT payable by the Super Fund
Indexation frozen at 30/9/99
For assets acquired before 21/9/99 and held for at least one year, the choice of including in assessable income either:
two-thirds the realised nominal gain, or
ALL of the difference between the disposal price and the frozen indexed cost base.
For assets acquired after 21/9/99 & held for at one year+, tax on 2/3rds of nominal gain

20. Tax credits in the SMSF
A super fund has $600 taxable conts + $600 capital gain + franked dividends + imputation cr $1000
Tax is calculated: /01
taxable contributions $600
Capital gain $600 x 2/3 $400
Franked dividends $660
Imputation credit $340
Taxable income $2000
Tax 15% $300
Less imputation credit $340
Imputation credit refund $40

21. Getting your hands on the money
When a condition of release occurs your super fund can pay you:
a cash lump sum
an allocated pension - pay yourself variable amounts
a complying pension - pay yourself a lifetime or fixed term pension
Death benefits:
tax free to your tax dependants with your RBL

22.
Questions?

23. Superannuation Australia’s services
DIY Superannuation Manual
+ quarterly updates to the Manual
+ practical seminars to walk you through
+ quarterly DIY Super Journal
+ telephone helpline speak to our experts when you need extra help
+ software BGL simple fund & BGL simple invest
+ books on superannuation & tax
+ trust deeds and updates

24. Members of Taxpayers Australia
enjoy benefits that include:
2000 & 2001 Tax Manual, over 800 pages
our fortnightly Taxpayer journal
discounted services & seminars
our telephone help line to clarify your tax or superannuation problems
ATO/government representation on taxation and superannuation issues