According to the ATO’s June 2015 quarterly SMSF statistical report, there are now over 557,000 SMSF in Australia holding assets worth over $590 million.

Both the number of SMSF and their assets have increased by roughly 6% since June 2014.

So what exactly is a SMSF and why are they so popular?

According to the ATO’s June 2015 quarterly SMSF statistical report, there are now over 557,000 SMSF in Australia holding assets worth over $590 million.

Both the number of SMSF and their assets have increased by roughly 6% since June 2014.

So what exactly is a SMSF and why are they so popular?

What is a SMSF?

A SMSF is a type of superannuation fund governed by the Superannuation Industry (Supervision) Act 1993 that is an alternative to retail and industry superannuation funds.

The defining characteristics are that a SMSF can have a maximum of 5 members and that every member must be a trustee.

SMSF are “complying” funds meaning that they:

• Are able to receive both employer and personal superannuation contributions; and
• Enjoy the same tax treatment as retail and industry funds.

Why are SMSF popular?

SMSF are favored by persons who want a greater level of control of how their superannuation savings are invested and managed.

They are also favored by persons who wish to invest directly in property as this is not an option offered by retail and industry superannuation funds.

What can SMSF invest in?

SMSF can invest in a wide range of assets including shares, property, managed funds, fixed interest products, precious metals and collectables.

There are however some restrictions on what a SMSF can invest in. In particular there are restrictions around investments involving members and related parties.

At commencement, a SMSF is required to document an investment strategy. That strategy should then be reviewed at least once annually to ensure it remains appropriate and that all investments made are consistent with the strategy.

Can SMSF borrow?

Generally, SMSF are prohibited from borrowing. However, in limited circumstances known as limited recourse borrowing arrangements, a SMSF may borrow to acquire investments. Eg direct property.

What about insurance?

Unlike most retail and industry superannuation funds, SMSF do not come with any kind of standard/basic insurance cover.

As such, SMSF are required to consider insurance for members, and can arrange insurance such as Life and TPD cover. Other insurance products like income protection may also be available.

What obligations come with SMSF?

SMSF must be operated in compliance with the Superannuation Industry (Supervision) Act 1993 (& associated Regulations) and with the applicable tax legislation.

These obligations are many and varied and include preparing annual financial statements and an income tax return. There is also an obligation to have an independent audit conducted annually.

A SMSF will also be required to pay an annual supervisory levy to the Australian Taxation Office to remain compliant.

There is allot to know about establishing and operating a SMSF – doing your home-work is a prerequisite. If you are considering establishing a SMSF, we recommend seeking professional advice to help you understand how SMSF work and whether a SMSF is right for you.

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Sky Accountants

November 2015

Ballarat Accountants

Phone: 1300 328 855

Office Address: 902 Howitt Street, Wendouree, Victoria 3355, Australia

Postal Address: PO Box 2234, Bakery Hill, Victoria 3354

Gisborne Accountants

Phone: 03 97444522

Sunbury Office Address: Suite 13, 33-35 Macedon Street, Sunbury, Victoria 3429, Australia

Gisborne Office Address: 45 Hamilton Street, Gisborne, Victoria 3437, Australia

Postal Address: PO Box 270 Gisborne Victoria 3437