Superannuation
8. Self-Managed Super Funds
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 27 Aug 2015
- Self-Managed Super Funds (SMSFs) are quickly becoming popular in Australia as more people are setting up a SMSF to invest in the Australian property market.
- The Australian Tax Office (ATO) strictly regulates SMSFs and non-compliance may result in heavy pecuniary penalties (fines).
- The law imposes many obligations on the fund members and running a SMSF can be complex and time consuming. Therefore it is strongly recommended that you get financial and legal advice before setting up a SMSF. Our free Find a Lawyer directory may help put you in touch with the assistance you need.
- Many people believe that setting up a SMSF enables early access to super benefits. This is incorrect information and unlawful in Australia. Access to benefits under a SMSF follow the same rules as accessing benefits under a super fund.
- Basic rules about running your SMSF are as follows:
- you can have 1 to 4 members under a SMSF and each member is a trustee under the super fund;
- you need a large amount of money in your fund to manage its yearly costs;
- you need to comply with requirements under the law which include setting up a trust deed, financial investment plan and annual meetings;
- there are strict tax and audit obligations on fund members;
- you may be required to take out insurance policies under the fund such as life insurance, income protection insurance and total and permanent disability cover; and
- the Superannuation Complaints Tribunal does not have jurisdiction to hear disputes regarding a SMSF.
- To purchase a property through a SMSF you need to set up a bare trust. A bare trust is a company that can borrow money to fund your purchase. It is important to understand that SMSF property loans require higher deposits and come under strict conditions. For example you cannot borrow money to improve a property bought under an SMSF.
- Fund members or their families and relatives cannot live in the property purchased through the SMSF. You also cannot rent the premises to related parties.
- The property must be for the sole purpose of providing retirement benefits to the fund members.
- You cannot purchase the property from a party related to any fund member.
- All payments must be paid through the SMSF and therefore it is imperative that your SMSF can meet the loan repayments and all other annual costs. These include:
- deposit;
- legal fees;
- stamp duty;
- management fees;
- bank fees and premiums on loans; and
- agent fees.
- The Australian Tax Office (ATO) has a good selection of videos to help clarify key issues involved in setting up and running a SMSF. These can be accessed from https://www.ato.gov.au/Super/Self-managed-super-funds/In-detail/SMSF-resources/SMSF-videos/.
View more Information on Tax & Superannuation