Answers to Common SMSF Questions

Last update - 25 January 2024 By Charity Bru

This article outlines the answers to some of the most common questions asked about Self-Managed Super Funds.

What is a Self-Managed Super Fund (SMSF)?

An SMSF is a type of superannuation fund in Australia that is managed by its members, who also act as trustees. It allows individuals to have greater control over their retirement savings and investment choices.


What are the key differences between an SMSF and other types of superannuation funds available in Australia?

The key difference between an SMSF and other superannuation funds is that SMSFs are self-managed, meaning members are also trustees responsible for managing the fund. This provides greater control and flexibility over investment choices but also places the onus on members to comply with superannuation laws. Other funds, such as industry or retail super funds, are typically managed by professional fund managers.


Who can set up and be a member of an SMSF?

Generally, anyone over 18 years old can set up and become a member of an SMSF. An SMSF can have up to six members, and all members must be trustees or directors of a corporate trustee.

At Rivkin, we assist with the process of setting up your fund using a standard SMSF trust deed. If you would like to have a custom deed you will need to consult with a lawyer.  


What are the key responsibilities of SMSF trustees?

Trustees of an SMSF are responsible for managing the fund’s investments, complying with superannuation laws, keeping records, and ensuring the fund’s sole purpose is to provide retirement benefits for members.


How much money do I need to set up an SMSF?

There is no specific minimum amount required to set up an SMSF, but it’s important to consider whether the costs associated with running the fund are justified based on the size of your retirement savings.

If you would like to see an example of the fees incurred during the setup and administration of your SMSF, you can click here to see Rivkin’s SMSF product offering. 


What investments can an SMSF hold?

SMSFs can invest in a wide range of assets, including cash, shares, property, and more. However, investments must comply with superannuation laws and the fund’s investment strategy.


Can I borrow to invest in an SMSF property?

Yes, SMSFs can borrow to invest in property, but strict rules and regulations are surrounding this practice, often referred to as a Limited Recourse Borrowing Arrangement (LRBA).


How are SMSFs taxed?

SMSFs are generally taxed at a concessional rate, with income from investments typically taxed at a rate of 15%. Capital gains from investments held for more than 12 months may be eligible for a 10% tax discount.


Can I use my SMSF to buy a residential property to live in?

No, SMSFs are prohibited from acquiring residential properties for members or their relatives to live in. Investments must be made for the sole purpose of providing retirement benefits.


Can I access my SMSF savings before retirement, and under what circumstances can early access be granted?

Generally, SMSF savings are preserved until retirement. However, there are limited circumstances where early access may be granted, such as severe financial hardship, compassionate grounds, or temporary incapacity. These cases must meet specific criteria and require approval from the Australian Taxation Office (ATO).


What are the penalties for non-compliance with SMSF rules?

Non-compliance with SMSF rules can result in penalties, including fines, a much higher rate of tax charged to the fund, disqualification as a trustee, or even imprisonment in serious cases. It’s important to ensure your fund remains compliant.


What are the annual compliance and reporting requirements for SMSFs, including audits, and how do I ensure my fund remains compliant?

SMSFs have various compliance and reporting obligations, including the annual lodgment of financial statements and income tax returns. They also require an annual audit conducted by an approved auditor. To ensure compliance, it is advisable to engage a professional accountant or auditor with expertise in SMSFs.


Please note that SMSF regulations and rules may change over time, so it’s essential to consult with a qualified financial adviser or accountant for the most up-to-date information and advice tailored to your specific situation.


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