Wealth Management and Protection

You are able to implement specific investment strategies that are tailored to your requirements and needs. Whilst there are set regulations and investment criteria that must be considered and adhered to, you essentially have control over the underlying investment selection of your superannuation entitlements.
Your SMSF could also make a larger investment in assets such as shares and property by using cash in your fund and borrow the rest.

Other tax advantages include:

• The concessional 15 per cent tax rate on earnings and contributions claimed as a tax deduction by you personally or by your business
• The effective 10 per cent tax rate on capital gains made on investments held for more than 12 months
• Rebates on contributions made on behalf of a spouse
• A concessionally taxed end benefit
• Paying Life insurance premiums through your SMSF (which are generally tax deductible to the Super fund)

Once the superannuation fund is paying a pension, the fund becomes exempt from tax. As such, all income and capital gains that are made by the fund are not subject to tax. You pay tax when you draw out your superannuation pension each year.

When you draw a pension from your superannuation fund, you can use an allocated pension. This means that your superannuation is allocated over your life expectancy. You are required to draw down a minimum pension and a maximum pension each year. You can also draw a lump sum, or a combination of the two. Your circumstances at the time of withdrawing your pension need to be considered before withdrawing any funds either as a pension of a lump sum.

The management control and flexibility generated through a SMSF continues to provide benefits when you commence drawing a pension. A SMSF provides flexibility and control over the investments that are utilised to provide a pension, and the manner in which the pension is drawn.

From 1 July 2007, if you are over the age of 60, any pension that you draw from superannuation is tax-free. As a result, there is more reason to keep your options flexible and enable you to take a tax-free pension upon retirement. New announcements were made in the May 2016 Federal Budget that may limit the value of assets held in your pension account to $1.6m. This is not yet law, so may not be passed.

• requiring trustees to complete certain educational requirements within certain timeframes
• disqualifying an individual from acting as a trustee or director of a corporate trustee
• imposing significant administrative penalties on individual trustees and directors of corporate trustees of up to $10,200 per breach
• applying through the courts to impose civil and criminal penalties, and
• giving notice to a trustee to freeze the SMSF’s assets where it appears that their conduct is likely to adversely affect the interests of beneficiaries.
  Setting up a Corporate Trustee helps minimise any penalties.

• Make loans or give financial assistance to members or relatives
• Acquire assets from related parties
• Borrowing by the fund and providing finance to a related employer

• Investments in related parties, including geared private unit trusts; and/or
• Investment in related parties, for example, leasing a holiday house back to members of the Super fund.

The Australian Taxation Office (ATO) requires new trustees to make a declaration that they understand their responsibilities and obligations as an SMSF trustee, including to:

• ensure that the SMSF is managed in compliance with the relevant laws and be responsible for and control the SMSF;
• maintain the fund for the sole purpose of providing retirement benefits to SMSF members, or to their dependents if a member dies before retirement;
• accept contributions and pay benefits (pension or lump sums) to members and their beneficiaries in accordance with superannuation and taxation laws and the SMSF trust deed;
• value the fund’s assets at market value for the purposes of preparing financial accounts and statements;
• have the financial accounts and statements for the SMSF audited each year by an approved SMSF auditor; and
• meet the reporting and administration obligations imposed by the ATO.

It is important that trustees understand that they remain responsible for managing the fund even if they outsource some or all of their responsibilities to external service providers.

• a lack of access to the Superannuation Complaints Tribunal to resolve SMSF complaints;
• using individual trustees as opposed to a corporate trustee; and
• a breakdown in the relationship of fund members, especially in circumstances where the membership structure of the SMSF is unusual.

It is important that trustees understand:

• the benefits associated with asset diversification and investing across a number of asset classes (e.g. shares, real property and fixed interest products) in a long-term investment strategy, such as improving the risk and return profile of an SMSF fund;
• there are some restrictions on SMSF investments and, as part of their obligations, trustees are prohibited from entering into certain transactions, such as lending the fund’s money, or providing financial assistance to a member of the fund or their relatives; and
• they should conduct a regular review of the SMSF’s investment strategy to ensure that the investment strategy continues to reflect the purpose and circumstances of the fund and its members.

• establishment costs (e.g. preparation of a trust deed and development of an investment strategy); and
• ongoing costs associated with operating an SMSF (e.g. annual administration and investment costs, the cost of outsourcing the trustee’s compliance obligations and statutory charges).

Please see Appendix H for more details and examples of the costs.

It is important to be aware of the process for winding up an SMSF and the likely costs associated with that process.