Introduction to SMSFs
Like other superannuation funds, a Self Managed Super Fund (SMSF) serves the primary purpose of securing retirement benefits for its members (or their dependents should a member pass before retirement). SMSFs are different from other superannuation funds because the members are also the trustees – this means that the members have control over their own superannuation investments.
A superannuation fund is a form of trust, so setting up an SMSF involves establishing a trust and appointing individual or corporate trustees. These trustees bear the responsibility of managing the SMSF’s assets and ensuring the fund adheres to superannuation and taxation laws. Compliance encompasses annual auditing, reporting, and fulfilling taxation obligations to the Australian Taxation Office (ATO).
Membership and Trusteeship
Every member of an SMSF must also serve as a trustee. In cases where a fund opts for a corporate trustee, each SMSF member must become a director of the respective company. This company needs to be registered with the Australian Securities and Investments Commission (ASIC), and each director must be a member of the corresponding SMSF. As of 1 July 2021, an SMSF can have up to six trustees or members, an increase from the previous limit of four. If a corporate trustee is used, each director must also have their own Director ID.
Benefits of SMSFs
SMSFs offer several advantages:
1. Tax Flexibility:
SMSFs complying with superannuation regulations typically benefit from concessional taxation rates, with member contributions and earnings taxed at 15% (within specified limits). Furthermore, benefits received after commencing the pension phase for a member are tax-free to both the fund and the member. SMSFs enjoy flexibility in utilising tax strategies involving capital gains, taxable income, and franking credits.
2. Investment Control:
As SMSF members are also trustees, they exercise greater control over fund investments. They can access a wide range of investment products, including options not available to public funds. For instance, SMSFs can directly invest in residential real estate instead of being limited to property trusts, as is often the case with public funds. Business owners may also use SMSFs to acquire their business premises or other commercial properties, subsequently leasing them to related parties. Investments in private business/equity may also be available to them.
3. Estate Planning:
SMSFs offer enhanced flexibility when it comes to distributing member death benefits. Members can arrange for benefits to be paid as pensions to dependents rather than lump sums, allowing the SMSF to continue operating. Funds can also be distributed to future generations in the most tax-efficient manner available. Non-cash assets, such as property or shares, can be directly transferred to beneficiaries.
4. Asset Protection:
SMSFs offer a robust mechanism for safeguarding members’ assets against potential bankruptcy or creditor claims. This feature makes SMSFs particularly attractive to business owners and professionals, as superannuation funds are not considered ‘property’ under the Bankruptcy Act.
5. Potential Fee Savings:
SMSFs are highly customised to suit their members’ preferences, which means there is no standard or average fee structure. Ongoing fees depend on factors such as the number of members, combined member balances, investment types, and the extent of outsourced administration. However, as the larger retail and industry funds usually charge fees according to a percentage of the balance, if the value of an SMSF is over a certain balance there are potential fee savings. You can also pool funds with other members to achieve a higher balance and access these savings, up to the six-member maximum limit.
6. Borrowing:
SMSFs give you the ability to borrow to purchase a specific asset, particularly if you have multiple members pooling their resources. This is most popular when purchasing property. Gearing is not generally available as an option in large retail funds.
Regulation of SMSFs
SMSFs are subject to regulation by two key authorities:
1. The Australian Taxation Office (ATO)
The ATO directly oversees SMSFs to ensure compliance with financial reporting and taxation obligations.
2. ASIC
ASIC indirectly manages SMSF audits by overseeing the registration process for independent SMSF auditors. These auditors play a vital role in ensuring overall regulatory compliance and are obligated to report any breaches to both fund trustees and the ATO.
How much money do I need to start an SMSF?
There is no absolute legal minimum requirement. None at all.
However, although SMSFs have been around for decades ASIC has issued more recent guidance surrounding the setup or switching to SMSFs.As part of that guidance they’ve recommended a minimum balance of $200,000. This recommendation is part of providing better advice to clients, rather than advocating for a legal minimum requirement.
ASIC feels that considering administration and compliance costs often range around the $2,000-$4,000 mark, having a fund with less than $200,000 is unlikely to be in the client’s best interest. They feel that the cost of establishing and operating an SMSF with a balance below $200,000 amount is unlikely to be competitive compared to an APRA-regulated super fund.
ASIC does acknowledge that there are situations where having less than $200,000 is appropriate.
Examples of these situations include:
1. Where the trustees perform much of their own administration and investment (SMSFs are known as ‘DIY’ funds, after all)
2. Where large amounts of money will be transferred or contributed to the fund in the near future
3. Where members feel that the benefits of having control and flexibility that an SMSF provides, outweighs the additional cost
Trustees should also consider the following as part of setting up an SMSF:
1. Establishment costs including the cost of using a corporate trustee
2. Insurance costs
3. Additional costs relating to financial and investment advice, in addition to general compliance costs
4. Comparison to investing in an APRA-regulated fund
5. The fact that you can have up to 6 members in an SMSF, and therefore spread the cost
Consolidate your Super Investments with Rivkin
If you have an existing self-managed super fund (SMSF) or are looking to establish a new SMSF, you can appoint Rivkin to be your Fund’s accountant to consolidate all of your investments in one place, thereby considerably reducing the administrative burden of running your SMSF.
Once you provide the required information (see page 3.), we take care of everything, simplifying your life just that one bit more.
We are SMSF experts.
Rivkin is one of the very few providers who offer both investment advice and administrative services. When you appoint Rivkin to be your SMSF’s accountant, we commit to –
- Taking over the administration of existing funds;
- Loading previous transaction data into our specialist software;
- Ensuring the on-going compliance of your fund;
- Engaging with independent auditors.
- Providing regular updates on your fund; and
- Answering all of your SMSF questions.
When necessary, we will also establish –
- a Macquarie Cash Management Account; and
- a Rivkin Securities equities and options account. This is next-generation value creation.
Competitive, Transparent Pricing.
Our annual packages are very competitively priced and adapted to your needs.
| Annual Packages | Silver | Gold | Platinum |
| Accumulation Fund | ✔ | ✔ | ✔ |
| Pension Fund (Including establishment and ongoing maintenance of pensions) | ✔ | ✔ | |
Macquarie Cash Management Account (CMA)
|
✔ | ✔ | ✔ |
| Macquarie Bank Term Deposits | ✔ | ✔ | ✔ |
| Trade through Rivkin, including:
|
✔ | ✔ | ✔ |
| Options Trading | ✔ | ✔ | |
| Investments in Managed Funds (subject to data availability) | ✔ | ✔ | ✔ |
| Direct investment in real property (both with and without gearing) | ✔ | ✔ | |
| Some other asset classes (to be agreed with Rivkin before purchase) | ✔ | ✔ | |
Subscription to the Rivkin Report, including the following portfolios:
Also:
|
✔ | ✔ | ✔ |
| Liaise with actuaries where required | ✔ | ✔ | |
Administration services, including:
|
✔ | ✔ | ✔ |
|
✔ | ||
| Annual Cost | $2,900 per year | $3,600 per year | Fixed price agreed individually |
| First Year / Per Month | Upfront | Upfront | Upfront |
| $241.67 per month | $300.00 per month | As Agreed |
