A superannuation fund is a Self-Managed Superannuation Fund (SMSF), also called Do It Yourself (DIY) Super Fund where
- has fewer than five members;
- each individual trustee of the fund is a member;
- each member of the fund is a trustee;
- no member of the fund is an employee of another member of the fund, unless those members are related;
- no trustee of the fund receives any remuneration for his or her services as a trustee.
A trustee is a person, or a legal entity, responsible for running the fund and acting in the best interests of the members. As a trustee you need to manage the fund and its investments separately from your own affairs.
The choice of using a corporate trustee or individuals depends on a number of factors.
A corporate trustee is generally favoured because:
- It allows ease of change in membership
- Fund asset ownership does not change on member changes, and
- The corporate trustee survives the death of a member
Managing your own super is a big responsibility. There are strict rules that govern how you can use a self-managed superannuation fund (SMSF), how you can invest your money and when you can get at it.
However if you want to maintain a high level of control of your investments for retirement, a SMSF may be the right choice for you.
(a) Single member SMSFs, and
(b) SMSFs other than single member SMSFs.
Within each type of SMSF, the trustee of the SMSF may be a group of individuals or a body corporate.
A superannuation fund with only one member, where the trustee is a body corporate, is an SMSF if the member if the member is:
(a) The sole director of the body corporate
(b) One of only two directors of the body corporate and related to the second director, or
(c) One of the only two directors of the body corporate and not an employee of the second director, and
(d) No director of the body corporate can receive remuneration from the fund, or from any person for duties or services performed in relation to their position as a trustee of the fund.
A superannuation fund with only one member where the trustee is a group of individuals, will be an SMSF if the member is:
(a) One of only two trustees (of whom one is the member and one is a relative of the member)
(b) One of the only two trustees and not an employee of the other trustee
(c) No trustee of the fund can receive remuneration from the fund, or from any person for duties or services performed in relation to their position as trustee of the fund.
A superannuation fund, other than a single member SMSF, is an SMSF if:
(a) The fund has 2 to 4 members
(b) If the trustees are individuals, each individual trustee is a member
(c) If the trustee is a body corporate, each director is a member
(d) Each member is a trustee of the fund or a director of the corporate trustee
(e) No member is an employee of any other member unless they are related, and
(f) No trustee or director of a corporate trustee receives remuneration from the fund or anyone else for any duties or services as trustee or director
Generally, anyone 18 years of age and over, who is not under a legal disability (such as a mental disability) can be a trustee of an SMSF, unless they are a disqualified person.
An individual is a disqualified person if they:
(a) have ever been convicted of an offence in respect of dishonest conduct
(b) have ever been the subject of a civil penalty order under the superannuation legislation
(c) are any insolvent under administration (i.e. they are an undischarged bankrupt)
(d) have been disqualified by the Commissioner of Taxation
Aside from being unable to act as a trustee, a disqualified person cannot:
(a) have a legal personal representative act as a trustee on their behalf
(b) have a legal personal representative act as a director of a corporate trustee on their behalf, or
(c) be a member of an SMSF (unless they have successfully appealed to the ATO for an exemption)
A body corporate may be the trustee of an SMSF, unless it is considered to be a disqualified person.
A corporate trustee is deemed to be a disqualified person if:
(a) the body corporate knows, or has reasonable grounds to suspect, that a responsible officer (i.e. director, secretary, executive officer) of the body corporate is a disqualified person, or
(b) a receiver, administrator, official manager or provisional liquidator has been appointed in respect of the body corporate or
(c) action has commenced to wind-up the body corporate
Taxation concessions, such as tax deductions for contributions, 15% nominal tax rate on fund earnings and tax concessions on benefit payments, all depend on a superannuation fund of any type being a complying superannuation fund.
To be a complying superannuation fund, an SMSF must be:
(a) a resident regulated superannuation fund at all times during the income year
(b) must have either
i. not contravened any of the Regulations during the income year or
ii. the Compliance test may be applied
Contact us if you need further clarifications.
An SMSF will be an Australian superannuation fund at a particular time if:
- the fund was established in Australia or any assets of the fund are situated in Australia
- the central management and control of the fund is ordinarily in Australia
- either the fund had no active members or at least 50% of either:
- the total market value of the funds assets attributable to superannuation interests of active members or
- the sum of the amounts that would be payable to or in respect of active members if they voluntarily cased to be members
- is held by active members who are Australian residents.
Concessional contributions include:
- employer contributions (including contributions made under a salary sacrifice arrangement)
From 1 July 2012, all individuals have a concessional contributions cap of $25,000.
An increased concessional contributions cap applied until 30 June 2012 for people who were 50 years old or over:
- If you were 50 years old or over, your annual cap for the 2007-08 and 2008-09 financial years was $100,000.
- If you were 50 years old or over, your annual cap for the 2009-10, 2010-11 and 2011-12 financial years was $50,000.
If you had more than one fund, all concessional contributions made to all your funds were added together and counted towards the cap. This cap was not indexed.
Non-concessional contributions include personal contributions for which you do not claim an income tax deduction.
People under 65 years old may be able to make non-concessional contributions of up to three times their non-concessional contributions cap over a three-year period. This is known as the ‘bring-forward’ option.
Contact Superfund Works for further information.
Under the CGT cap, you can during your lifetime exclude non-concessional super contributions from the non-concessional contributions cap up to the CGT cap amount. The CGT cap applies to all excluded CGT contributions, whether they were made between 10 May 2006 and 30 June 2007 or after 30 June 2007.
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Acceptable contributions to an SMSF
|Contributions and conditions
|Contributions that are made in respect to the member.
|Not under 65, but is under 70
|Contributions that are made in respect of the member that are:(a) Mandated employer contributions(b) If the member has been gainfully employed on at least a part-time basis during the financial year in which the contributions are made:i. Employer contributions (except mandated employer contributions) orii.Member contributions or(c) Payments from an FHSA of a kind
|Not under 70, but is under 75
|Contributions that are made in respect of the member that are:(a) Mandated employer contributions or(b) If the member has been gainfully employed on at least a part-time basis during the financial year in which the contributions are made contributions received on or before the day that is 28 days after the end of the month in which the member turns 75 that arei. Employer contributions (except mandated employer contributions) orii. Member contributions made by the member
|Is not under 75
|Contributions that are made in respect of the member that are mandated employer contributions
Do you want to utilise your concessional contribution cap effectively to achieve tax savings Contact Superfund Works today.