Self Managed Superannuation Funds

A self managed superannuation fund (SMSF) is an individual, family or small business based superannuation fund that consists of up to five members.

They are called self managed superannuation funds because when compared to other super funds, members are given a higher degree of control of the funds invested.

The SMSF is established under a Trust Deed, which is known as the SMSFs governing rules. The trustees of the fund must ensure that the SMSF is run in accordance with the Trust Deed and the law.

To qualify as a SMSF, a fund must comply with the appropriate definition as follows:

• It is a superannuation fund with less than five members

• All members of the fund must be trustees and all trustees of the fund must be members (special rules apply in this regard for single member SMSFs, SMSFs with corporate trustees and SMSFs with under-age members or members with legal disabilities)

• No member of the fund is an employee of another member of the fund, unless those members are related; and

• No trustee of the fund receives remuneration for his or her services as a trustee.

General characteristics of a SMSF

A SMSF gives you control over your superannuation investment. As a trustee you make the investment decisions and decide the risk profile for the required rate of return. BJ Love & Co. will help you decide the most appropriate investment strategy for your fund and have this documented.

Your fund can generally accept:

• Rollovers from all your existing superannuation funds

• Contributions from your employer

• Tax deductible contributions

• Undeducted contributions

• Eligible spouse contributions

• In specie transfers (subject to restrictions)

Concessional rate of tax  

• A 15% tax rate generally applies to the taxable income of the Fund, which includes employer and deductible personal contributions and Fund earnings

• A one-third discount generally applies to capital gains realised by the Fund on assets held for more than 12 months.

• If the Fund invests in shares, it may be possible to reduce the Fund’s income tax by using tax credits associated with franked dividends. Franking credits, which exceed the Fund’s income tax liability, may be refundable

Investment Flexibility

A SMSF gives you control over your superannuation investment. As a trustee you make the investment decisions and decide the risk profile for the required rate of return.

SMSFs commonly invest in:

• Listed shares

• Real estate (income producing)

> Residential

> Commercial

> Industrial

> Property Syndicates

> Business real property

• Unit trusts

• Investment bonds/ debentures/ bank bills

• Pooled superannuation trusts

• Interest bearing deposits / term deposits

Premiums (or a portion of your premiums) for Death and Total and Permanent Disability insurance may be tax deductible to the trustee of the Fund if paid from the Fund.

On your death, your spouse, children under the age of 18 or any other person who is wholly or partly dependent on you at that time could receive payments from your Fund tax free up to your Pension Reasonable Benefit Limit.

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Click here to download 'A guide for trustees running a self managed superannuation fund' published by the Australian Taxation Office.