When setting up your SMSF you will need to decide between operating your fund with members as Individual Trustees or a Corporate Trustee (Company). In either instance, each member of the fund is to be either an individual trustee of the fund or a Director of the Corporate Trustee Company.
The above choices can have different implications on the way you manage and operate your fund.
Some of the key considerations for comparison are listed below:
|Differences||Individual Trustees||Corporate Trustee|
|Cost||No additional cost on establishment||Additional Costs are incurred on establishment and year on year annual fees are also payable to ASIC – Note these fees are paid by the SMSF. Contact a consultant or see our service guide for a breakdown of the actual fees payable.|
|Practical Considerations||Assets will be held in the name of the individuals as trustees for the fund. In the event that a member enters/leaves the fund, all documentation relating to the fund will need to be updated to include the new member.||If a member enters/leaves the fund it is a simple process to update the company details by lodging a 484 Form with ASIC.|
In the case of a surviving member fund, a corporate trustee would need to be appointed in any case, as no one member fund can operate with only one individual trustee.
Take the time to consider your options and discuss pros and cons with a SMSF consultant, Financial Adviser or your Accountant.
NextGen will act as Tax Agent on the behalf of your fund and lodge Tax Returns, BAS Returns, IAS statements as required. This also means that any ATO queries related to your fund will come through our office and be directed to one of our technical SMSF specialists before you are notified. This flow of information ensures that we are always on top of the status of your fund and understand any queries the ATO may raise.
ATO payments will still need to be made by the Fund Trustee, however we will be sure to explain any liabilities to be settled.
With a SMSF you have the control to make investment decisions based on your own research and preference to risk. You can also clearly see the administration fees and income earned within your Fund.
Fees for running a SMSF can also be much lower than a Retail/Industry Fund as they take a percentage of your earnings in fees for their services.
In simple terms, an SMSF will give you a greater amount of control and a greater level of transparency with your fund assets.
One of the major benefits of running a SMSF is the ability to invest in almost any type of investment.
There are regulatory guidelines and restrictions to consider, however the main premise is that you hold investments for the sole purpose of providing retirement benefits to your members.
Common investment classes in SMSF’s include:
We always recommend that Trustees seek consultation before purchasing investments, to ensure full compliance with Superannuation legislation.
An investment strategy provides your SMSF with a framework for making investment decisions to increase members’ benefits in retirement.
The investment strategy must be in writing so you can demonstrate that your current investment decisions are in accordance with the written document.
That being said, there are specific criteria for Trustees to follow in preparing an investment strategy and we would recommend you contact one of our SMSF Consultants to find out more or your Financial Advisor to assist you in preparing this document.
Yes. Permitted that the investment is made to provide retirement benefits to your fund members and your Investment Strategy permits you to make such investments.
Contact us to discuss how you can update or alter your investment strategy.
On face value, you are able to engage in these transactions, however the total value of these assets with respect to your fund (being known as ‘in-house assets’) must not be more than 5% of the fund’s total assets.
The investment restrictions are some of the most important rules trustees need to comply with under the super laws. We recommend you speak to one of our SMSF Consultants to make sure your investments comply with the law.
SMSF’s can borrow money using certain instalment warrants or limited recourse borrowing arrangements (LRBA). These arrangements allow the SMSF to purchase any type of asset that it would otherwise be able to invest in.
Some typical investments for which borrowing arrangements are established include: shares, managed funds, residential property and commercial property.
A typical super borrowing structure for residential property is shown below:
Note: Banks will often seek a personal guarantee from you as they are unable to take security over any other SMSF asset outside of the holding trust. Providing such a guarantee can put your non-superannuation assets at risk.
The rules and regulations for setting up and borrowing in an SMSF can be complex and it is important that you obtain the right advice.
Contact us today to see if this strategy is right for you.
There is no set minimum balance for you to start an SMSF, however the ATO considers that you may need around $200,000 in super savings based on compliance fees of approximately $2,000 a year.
That being said, NextGen Super offers a holistic end-to-end package for as little as $999 per year (excluding the annual super levy) meaning that if your current super balance is less than $200,000 it may still be very cost effective for you to gain control of your retirement benefits by establishing an SMSF.
Please click here to view a detailed breakdown of our fees.