Wealth Management and Protection – AustAsia Group

Self Managed Superannuation Funds: What are the Disadvantages?

AAG AustAsia — Thu, 17 Dec 2020 02:20:56 +0000

What are the Disadvantages?

While an SMSF can offer greater opportunities to take control of your retirement savings, there are some potential disadvantages you should also consider:

Considerations	Background and Explanation
1. Higher Costs for Lower Balances	Although SMSFs generally only become cost-effective if the fund has $200,000 or more invested, especially if you outsource and pay for most or all of the fund administration. However, if you want to invest into direct property, an SMSF is the only vehicle for super funds.
2. Greater Responsibility	When you set up an SMSF, you and any other fund members will generally need to be trustees (or directors of the corporate trustee) and will be responsible for meeting a range of legal and other obligations
3. Harsh Penalties for Breaches	The Australian Tax Office has the authority to impose various treatments to deal with SMSF trustees who have breached super laws. These include: 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.
4. Time Consuming	You will need to have enough time, knowledge and skills to manage your own super and meet your legal and other obligations.

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Self Managed Superannuation Funds: What are the Risks Associated with SMSFs?

AAG AustAsia — Thu, 17 Dec 2020 02:22:17 +0000

What are the Risks Associated with SMSFs?

Considerations	Background and Explanation
1. Responsibilities and obligations for SMSF trustees associated with running an SMSF	SMSF trustees need to comply with a number of obligations under the superannuation and taxation laws, as well as the trust deed. There may be various consequences—for example, loss of taxation concessions—if an SMSF trustee fails to comply with their obligations. Even if one trustee is less actively involved, all trustees are equally liable for the fund’s compliance with the superannuation and tax laws. 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.
2. Risks associated with an SMSF
a) Lack of insurance for SMSFs	Unlike APRA-regulated funds, SMSFs do not come with insurance. The potential loss of insurance benefits as a result of switching from an APRA-regulated fund to an SMSF is an important issue. SMSF trustees should consider whether it is appropriate to take out separate life insurance for members, including income and total and permanent disability cover, as part of the fund’s investment strategy. Although taking out this insurance will be at an additional cost to the SMSF, the risk of not having appropriate insurance is that it may leave members worse off in retirement.
b) Other risks associated with an SMSF structure	There may be risks, for example, associated with: 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.
3. The need to develop and implement an appropriate investment strategy for an SMSF	Developing and implementing an appropriate investment strategy is a serious responsibility for SMSF trustees. The trustee will ultimately remain responsible for the fund’s investment strategy even if they seek investment advice from an adviser. 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.
4. The time commitment and skills needed to run an SMSF effectively	Trustees can use external research or advice to develop their financial knowledge over time, but they remain ultimately responsible for ensuring that investment decisions are made and implemented according to the SMSF’s investment strategy.
5. The costs of managing an SMSF	The costs associated with managing an SMSF are potentially significant and should be considered to make an informed decision about whether an SMSF structure is a suitable superannuation vehicle for them.The costs of managing an SMSF include: 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.
6. The need to consider and develop an exit strategy for an SMSF	Trustees and members need to consider and develop an exit strategy for the SMSF in situations, for example, where the compliance requirements become too onerous or costly for the SMSF trustee. It is important to be aware of the process for winding up an SMSF and the likely costs associated with that process.
7. The laws and policies that affect SMSFs are subject to change	The taxation and superannuation laws and policies that apply to SMSFs may be subject to continual change, including changes to legislation, and regulatory policies and standards.

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Self Managed Superannuation Funds: How do I set up an SMSF?

AAG AustAsia — Thu, 17 Dec 2020 02:24:37 +0000

You tell us and we do the rest. Prior to this decision we will discuss and consult with you to ensure an SMSF is right for you and the objective(s) you are trying to achieve.

We will handle the process, summarised here, and provide you with all documentation:

Agree on the SMSF set up cost;
Agree on name for new Fund;
Set up the Fund and a Company as Trustee.
(Sample Name. XYZ Super Pty Ltd AS TRUSTEE FOR XYZ Super Fund);
Apply for ABN and TFN for the Fund;
Setup a new bank account for your SMSF;
Appoint us as the adviser so we can access your current fund details and review your current super position, including life insurance;
Organise rollover paperwork for both super and life insurance;
Organise new life insurance if the existing life insurance is not transferrable;
Receive the rollovers from the other funds;
We will provide you with some investment options for your money and start investing (Cash/Term Deposits, Shares; and/or Property); finally
Once your fund is setup, we will provide you with a Complying Fund Letter to give to your employer so future SG Levy contributions (currently 10%) are paid directly into your new SMSF.

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How can AustAsia Group Help with your SMSF?

AAG AustAsia — Thu, 17 Dec 2020 02:25:01 +0000

We are SMSF Specialists. We have over 180 SMSF clients and pride ourselves on our expertise and our ability to work closely with our clients.

Through AustAsia Accounting Services and AustAsia Financial Planning, AustAsia can assist you to develop your investment strategy, in order to satisfy the investment requirements governing SMSFs. We are able to assist in restructuring your business affairs so that you may hold your business premises in your super fund, invest in managed funds (includes share, bond, property and cash funds and a range of diversified funds) property syndicates, direct shares and a variety of other investments. They can compliment your existing investments or form the core of your super fund.

AustAsia Financial Planning holds an Australian Financial Services License issued by the Australian Securities and Investment Commission. We are licensed, qualified, and experienced in recommending and implementing Superannuation and investment strategies.

AustAsia Accounting Services is a registered tax agent, and is experienced and qualified to help you meet the legal requirements of a SMSF including record keeping, preparation of annual reports for the fund, and attending to the legislative requirements of auditing, tax returns and the compliance return.

If you would like to investigate this super option further, please contact us

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Investment Philosophy

AAG AustAsia — Wed, 16 Dec 2020 05:58:29 +0000

When providing advice we have an old saying:

Turnover and sales are vanity, profit is sanity, but cashflow is always king.

We concentrate on the cashflow of the company from the underlying business, to provide ongoing dividend income. We can then use the pool of cash, accumulating from dividends, to purchase other equities.

The key is to remain calm and stick to your investment strategy when sharemarkets are volatile:

Hold the course
If you react to short-term conditions, by selling your investments, any losses become permanent, and you will miss the growth opportunity as the market recovers. Remember, we focus on quality dividend income and this doesn’t change on a daily basis, although share prices do. Knee jerk reactions can take investors further away from their long-term goals.If your goals and circumstances haven’t changed, nor should your investment strategy.
Know your long term financial plan
You need to understand what your investment objectives are, to remove emotion (especially fear) from ANY investment decisions.

The sharemrket can be a roller coaster, so when markets tumble, the potential to earn impressive, long-term capital gains and good dividend income usually still remains.

At AAG, our investment philosophy has always been to source income paying investments that are sustainable in times of economic or political upheaval. Focusing on income allows an accumulation of funds to invest for your future.

Share Market Investment Strategy

There are many different sharemarket investment strategies, but ultimately they all aim to build wealth through share price growth and/or the generation of cash income from dividends. Most companies pay two dividends a year.

Before investing, you should consider your investment goals and tailor your strategy to suit. You should also have a clear idea of the circumstances in which you might need to change your strategy or sell shares.

Income, Growth or Both

Investment strategies commonly focus on income, growth or a combination of the two.

Income:Investing for income targets shares that pay high dividends. Using franking credits (see below) can also increase the value of dividends. At AAG we favour an income based strategy in the form of high dividend paying shares, targeting 5% dividend income (the gift that keeps on giving). We can then use this accumulating cash pool to choose other investments based on share prices at the time of investing.Many of the dividend income paying stocks that we target, also have a growth component.
Growth:Growth investing targets share prices growing at a rate higher than inflation. It favours investments that are likely to see strong capital growth rather than paying dividends. Investing solely for growth is an all-or-nothing strategy, what if you get it wrong? Not only will you erode capital, but you could also miss out on dividend income.
Combination of Income and Growth:In the current market environment, most of our share market investment strategies aim to achieve ~5% dividend income with ~3% growth. We believe this is a sound and responsible target that should outperform in the long term.
Franking credits:Some dividends are issued as fully or partly franked. This means they carry imputation or ‘franking’ credits. These credits can be used to achieve a tax offset or a reduction in the amount of tax to be paid. If your marginal rate of tax is lower than the company tax rate (30%), you may be able to use the excess franking credits to reduce the tax on other sources of income.

What about when markets are tumbling?

The fundamentals are sound, but it is difficult to “buy” when fear abounds, which is exactly the time that you should be buying. Any short-term market movements are emotional roller coasters that create buying opportunities. Price matters at precisely two times – when you buy and when you sell.Your long-term investment goals don’t change just because of short-term exaggerated market movements.

In Conclusion

AAG are always here to provide advice, guidance and/or specific stock recommendations. We have direct share market access via an Intermediary Agreement with Canaccord Genuity, enabling us to be certain of share buy and sell prices. We can “see” your share investments and provide timely advice on specific stocks if/when needed.

And always remember…

Skilled investors stick to their flight plan – stay the course and stay on target;
Look for gifts that keep on giving in the shape of dividend income paying streams;
Don’t waste any downturn – history has shown them to be only temporary;
Opportunities are always there, sometimes they just require a closer look; and
Have realistic market expectations.

For further information please see this White Paper:

Markets are Tumbling, Don’t Waste the Downturn

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Self Managed Superannuation Funds: What are the Advantages?

AAG AustAsia — Thu, 17 Dec 2020 02:18:47 +0000

What are the Advantages?

Considerations	Background and Explanation
1. Management Control and Flexibility	An SMSF provides superior management control and flexibility over your superannuation entitlements. As you are the Trustee of your SMSF you have effective control over the operations, investment selection, and overall management of the SMSF, even if some of these activities are outsourced. 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.
2. More Investment Choice	An SMSF is able to invest in most assets, similar to any other investors. Shares, commercial property, property syndicates, developments, residential property, managed funds, bonds, cash on deposit, mortgages and term deposits are some examples. Further investment examples are artwork, antiques and other collectible assets, as long as they provide for the retirement of the members.
3. Using An SMSF in your Overall Investment Strategy	An SMSF may, due to its tax advantage status, enable you to undertake different strategies outside of Super. Super may be invested in capital growth oriented assets to utilize the 10 per cent Capital Gains Tax concession while investing in income providing assets to assist your current needs. Using a personal gearing strategy (out side of your Super) can further enhance this approach. By using a gearing strategy you may receive a full tax deduction on the interest you pay and are only taxed 50 per cent of the nominal gain if the assets are held for 12 months or more.
4. One Fund for the Family	You can set up a fund for yourself and up to five other people and consolidate your super balances. This could enable you to invest in assets of higher value than if you set up a fund with fewer members, achieve greater estate planning flexibility, and reduce fund costs.
5. No Contribution Fees	When you make superannuation contributions to your SMSF you do not pay any contribution fees. Likewise, you do not pay any exit fees when you withdraw funds from the SMSF. Whilst a SMSF will pay investment fees for the actual investment of the superannuation entitlements, there are no contribution fees payable. This can result in a reasonably significant saving for your superannuation.
6. Tax Savings	With SMSFs you can take greater control over the timing of tax events such as starting a pension without triggering capital gains tax, when your superannuation assets move into pension phase. You may also have the option of transferring assets that you own into your SMSF. 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)
7. Flexibility When Receiving A Pension	The advantage of receiving a pension from your superfund is that a part of your pension is typically tax-free. The ATO recognises that as you have used your own funds to contribute to your superannuation fund, your investment is returned to you over the life of the pension. 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.
8. Greater Estate Planning Certainty and Flexibility	You can nominate who you would like to receive your super when you pass away without having to meet some of the constraints that apply to other super funds.

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SMSF vs Master vs Retail Super

AAG AustAsia — Wed, 16 Dec 2020 06:18:48 +0000

Comparison Summary of Various Superannuation Structures

Self Managed Super Funds – VS – Wrap/Master Trusts – VS – Industry / Retail Fund

The following table summarises the difference between the SMSFs and Wrap/ Master Trusts services:

Issue / Item	SMSF	Wrap / Master Trust	Industry / Retail Fund
Investment Choice	Unlimited.	Unlimited (except can only make investments, which are authorized by wrap/master trust. We have discussed this with the fund & are of the view that a master trust does not have sufficient investment choice for your purposes).	Limited to Managed Funds.
Investment Tailoring	You can buy direct shares or other investments and map the investments to your cash-flow needs (premium payments, property, life insurance).	No choice, as you are at the direction of the Fund Managers and the Fund Trustee.	No choice, as you are at the direction of the Fund Managers and the Fund Trustee.
Borrow to buy property or shares	Able to be done in SMSF.	Not possible.	Not possible.
Administration	You are responsible; however, engaging external providers assists in simplifying the tasks.	Administration completed by Administrator.	Administration completed by Administrator.
Pension Flexibility	Can pay two or more pensions. So, it is possible to combine an Allocated Pension and a Complying Pension. Can change investment managers and utilise underlying investments without having to change pension provider.	A master trust may allow both a Complying Pension and an Allocated Pension to be paid. You are committed to the same pension provider until the pension is exhausted. This may not suit your requirements if one provider changes their philosophies.	A master trust may allow both a Complying Pension and an Allocated Pension to be paid. You are committed to the same pension provider until the pension is exhausted. This may not suit your requirements if one provider changes their philosophies.
Binding Nominations	Yes – it means you can leave your superannuation benefits outside of your will/estate.	Yes – it means you can leave your superannuation benefits outside of your will/estate.	Yes – it means you can leave your superannuation benefits outside of your will/estate.
Additional Members	Both of you can join the fund, and on retirement, both receive a pension. This will not affect the existing pension arrangements.	Not possible. You both need your own Super Wrap/ Master Trust to pay your pensions.	Not possible. You both need your own Super Wrap/ Master Trust to pay your pensions.
Pool family assets	Great way to pool your super assets with a partner or extended family and pay one set of fees. An SMSF can have up to 6 members.	Not possible.	Not possible.
Tax strategies	Flexibility trustees have over the tax position of the fund. As you move towards retirement phase, many financial planning strategies can be used to help reduce overall tax.	Not possible.	Not possible.
Estate planning	SMSFs can allow you to control how your benefits are passed on upon death. With an SMSF, you can tailor a strategy suited to your family situation and intended beneficiaries.	More difficult than SMSF as the Superfund Trustee makes the decisions.	More difficult than SMSF as the Superfund Trustee makes the decisions.
Transaction costs	Investment costs typically range between 1.1% to 2.2% of the value of the transaction (depending on the transaction).	The buy/sell spread is typically 1.1% to 2.2% of the value of the investment.	The buy/sell spread is typically 1.1% to 2.2% of the value of the investment.

The ongoing costs of SMSF are similar to Master Trust/ Wrap services.

We are in favour of a Self Managed Superannuation Fund because the overall advantages of a Self Managed Super Fund outweigh the costs of establishing and operating a Self Managed Super Fund.

More Information on Self-Managed Superannuation Funds

What are the advantages?

In a Self-Managed Superannuation Fund (“SMSF”), you set up and, most importantly, manage and control your own Superfunds in order to maximize and control your retirement benefits. Hence, an SMSF gives you maximum control over your superannuation assets and the flexibility to tailor an investment strategy exactly suited to your individual needs. Using an SMSF makes it easier to integrate your superannuation into your overall investment and retirement planning. By adding family members to your SMSF, you can pool your super to enable you to invest more effectively.

Investing via an SMSF also has significant tax advantages. By investing through your super, you can take advantage of:

• The concessional 15% tax rate on earnings and contributions claimed as a tax deduction by you personally or by your business;
• The effective 10% 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 and benefit;
• Paying Life Insurance premiums through your SMSF (which are generally tax-deductible to the Superfund)

What can my SMSF invest in?

An SMSF can invest in most assets, similar to any other investor. Shares, commercial property, property syndicates, developments, residential property, managed funds, bonds, cash on deposit, mortgages and term deposits are some examples.

Your SMSF must invest for the sole purpose of providing for your retirement. Existing investment rules mean that the fund is unable to:

• 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

Further investment examples are artwork, antiques and other collectible assets, as long as they provide for the members’ retirement.

Existing Legislation requires that all financial transactions occur as they would if they were being conducted at arm’s length. The appropriateness of SMSF investments is now a key area of regulation, and the investments of an SMSF must consider the needs of the Fund’s members and their Risk Profile.

Legislation has been passed to prevent people from putting inappropriate investments into their SMSF to avoid paying their marginal tax rate on investment earnings. Inappropriate investments may include the purchase of equipment for leasing back to the business; for example, a dentist leasing dental chairs and equipment from an SMSF would, in our opinion, not be providing for retirement benefits.

Government legislation limits Super funds from having more than 5% of the market value of the fund’s assets invested ‘in-house’ assets. The major exception is where a fund acquires premises used for business purposes. This may mean that an SMSF may invest in commercial, industrial or retail property, ‘in-house’ includes:

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

One of the requirements of an SMSF is that assets of the Fund are to be kept separate from other assets that are owned by members, click here to read more.

Can my SMSF acquire my business premises?

Yes. Government legislation has removed restrictions that limited your SMSF ability to acquire your business premises. Your Superfund can now acquire your business premises at market value.

Who should have an SMSF?

SMSFs offer many advantages to small business owners and high net worth individuals. In our experience, SMSF are most cost-effective when assets in the fund exceed $150,000. The ongoing management and administration costs are at least $1,000 per annum. In Australia, the average fund has $280,000 in assets, and the average holding of each member is approximately $130,000.

An SMSF is best suited to those looking for maximum control over their Super assets and those who are prepared to accept the responsibility of being trustee and work at managing the investment. Generally, someone who is willing to take control of their Super and their retirement assets.

Using an SMSF in your overall investment strategy

Due to its tax advantage status, an SMSF may enable you to undertake different strategies outside of Super. Super may be invested in capital growth-oriented assets to utilise the 10% Capital Gains Tax concession while investing in income providing assets to assist your current needs. Using a personal gearing strategy (outside of your Superfund) can further enhance this approach. Using a gearing strategy, you may receive a full tax deduction on the interest you pay and are only taxed 50% of the nominal gain if the assets are held for 12 months or more.

What do I have to do regularly to run my own fund?

Each year you are required to:

• Ensure your fund is complying and entitled to the tax concession that applies;
• Lodge a combined compliance return and income tax return with the ATO;
• Keep records in a professional manner, and;
• Adhere to reporting requirements to avoid any loss of the funds concessionally taxed status.

AustAsia Accounting Services have expertise in meeting the administrative requirements of the SMSFs. We can assist you in meeting your obligations and requirements. The Superannuation Industry (Supervision) Act governs your responsibilities as a trustee. Your key responsibility is to provide retirement benefits for members. This usually involves formulating and giving effect to a written investment strategy that considers risk control, diversification and the profile and ages of members of the fund.

Key questions you may need to ask yourself before acquiring an investment for your SMSF are:

• Is the investment for the sole purpose of providing for my retirement?
• Is the investment consistent with my investment strategy?
• Does the investment breach any of the investment standards?
• Does the investment portfolio meet the needs and Risk Profile of the Fund’s members?

AustAsia Accounting Services can assist in developing investment strategies that meet the legislative requirements. AustAsia Financial Planning can assist you to source suitable investments for your SMSF, including property syndicates, managed funds, commercial property, shares and other investments.

What are the restrictions?

The Law requires an SMSF to have no more than six members and that all members must be trustees or directors of a corporate trustee. (If members are over 18.) No member of the fund can be an employee of another member of the funds unless the members concerned are relatives.

An arm’s length employee of a company, which contributes to the SMSF (in respect of its controllers), cannot be a member of the same fund as the controllers of the company.

How do I establish an SMSF?

AustAsia Accounting Services provide you with a solicitor approved trust deed that takes into consideration your needs and those of any other member of your SMSF. All parties involved must sign the trust deed. AustAsia Accounting Services will also supply you with an election notice form, which you need to lodge with the ATO in order to be treated as a complying fund. The ATO will provide the fund with a tax file number and an Australian Business Number.

How can AustAsia help you?

AustAsia Accounting Services and AustAsia Financial Planning can assist you in developing your investment strategy to satisfy the investment requirements governing SMSFs. We can assist in restructuring your business affairs so that you may hold your business premises in your super fund, invest in managed funds (includes share, bond, property and cash funds and a range of diversified funds), property syndicates, direct shares and a variety of other investments. They can complement your existing investments or form the core of your super fund.

AustAsia Accounting Services is a registered tax agent and is experienced and qualified to help you meet the legal requirements of an SMSF, including record keeping, preparation of annual reports for the fund, and attending to the legislative requirements of auditing, tax returns and compliance return.

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Self Managed Superannuation Funds: What are the Restrictions?

AAG AustAsia — Thu, 17 Dec 2020 02:21:38 +0000

What are the Restrictions?

Considerations	Background and Explanation
1. Membership Restrictions	The law requires an SMSF to have less than six members and that all members must be trustees or directors of a corporate trustee. No member of the fund can be an employee of another member of the fund unless the members concerned are relatives. An arms length employee of a company, which contributes to the SMSF (in respect of its controllers), cannot be a member of the same fund as the controllers of the company.
2. Investment Restrictions	Existing legislation requires that all financial transactions occur as they would if they were being conducted at arms length. The appropriateness of SMSF investments is now a key area of regulation, and the investments of a SMSF must consider the needs of the Fund’s members and their Risk Profile. Legislation has been passed to prevent people from putting inappropriate investments into their SMSF to avoid paying their marginal tax on investment earnings. Inappropriate investments may include purchase of equipment for leasing back to the business, for example, a dentist leasing dental chairs and equipment from an SMSF would in our opinion not be providing for retirement benefits.
2.1 Related Parties and Relatives	Your SMSF must invest for the sole purpose of providing for your retirement. Exiting investment rules meant that the fund is unable to: 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
2.2 In-House Assets	Government legislation limits Super funds from having more than five per cent of the market value of the funds invested in ‘in-house’ assets. The major exception is where a fund acquires premises used for business purposes. This may mean that an SMSF may invest in commercial, industrial or retail property. ‘In-house’ includes: 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.

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