SMSF Series 1 - SMSF Basics
- Braun Kim
- Jan 5
- 3 min read
Updated: Apr 15
A Self-Managed Super Fund (SMSF) is a private superannuation fund regulated by the Australian Taxation Office (ATO). It allows you to take full control of your retirement savings and future financial decisions. Unlike traditional super funds, the members of an SMSF are also its trustees, meaning they are directly responsible for compliance with superannuation laws.
Key Features of SMSFs
Membership: An SMSF can have up to six members. For funds with more than one member, all members must also be trustees or directors of a corporate trustee if there’s a corporate trustee. For more details, please read this (Link)
Control: Members cannot be employees of each other unless they are related.
Purpose: The money in the fund can only be used to provide for your retirement.
Laws around SMSF Compliance
SMSFs are required to comply with Australian superannuation legislation. Most importantly, the SMSF (as with all super funds), must be set up for the sole purpose of providing retirement benefits to its members. As a result, properties purchased through an SMSF cannot be the primary residence of a fund member or their related parties, ensuring compliance with the sole purpose test.
Trustees (members) are consequently responsible for ensuring that their SMSF satisfies the ‘sole purpose test’ and that it complies with obligations proposed by the legislation, such as:
developing an investment strategy and acting per that strategy;
in preparation of the investment strategy, members must consider taking out appropriate insurance cover for each member;
only accepting contributions to the SMSF from the members;
monitoring the total SMSF balance and contribution caps;
appointing a registered auditor to complete the annual audit;
maintaining the necessary administration and record-keeping;
ensuring the member has met a condition of release before they can withdraw from their SMSF; and
lodging the SMSFs yearly tax return with the ATO.
If members fail to fulfil their responsibilities, the ATO is empowered to impose various penalties.
Buying Property Through Your SMSF
Investing in property through an SMSF involves additional rules and tax considerations as a SMSF does not follow the same procedure as buying a property personally. There are additional restrictions associated with obtaining a property loan (i.e. a limited resource borrowing arrangement), and tax implications that need to be considered. You should also look at the implications of purchasing a commercial property through your SMSF.
Let's explore this in more details here (Link).
Other Issues
Most SMSFs do not need to register for GST because SMSFs mainly make input-taxed sales, and those do not count towards GST turnover. Annual GST turnover does not include contributions, interest and dividends, residential rent or income generated outside Australia. However, if your SMSF does include income from the lease of equipment or commercial property and that income exceeds $75,000 annually, then your SMFS will need to register for GST.
It is important that you review and update your SMSF Trust Deed regularly to ensure you comply with the laws and enjoy full benefits.
It is possible to invest in cryptocurrencies through your SMSF, but there are conditions. For more details, please read this (Link)
If you have further questions, please contact us (https://www.goodpca.com.au/contact-us).
Disclaimer
This content is intended as a general guide for GOOD PEOPLE ACCOUNTING SERVICES clients. The information is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice. Although every effort has been made to verify the accuracy of the information contained above, GOOD PEOPLE ACCOUNTING SERVICES disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained on this website or any loss or damage suffered by any person directly or indirectly through relying on this information.
