After setting up your Self-Managed Super Fund, there is quite a list of on-going tasks involved in running your SMSF, covering administration, investment strategy and implementing it, compliance, insurance and pension stage responsibilities.
(a) Administration tasks
Some of the many tasks to keep up with including paying expenses and keeping documents for proof at year end, recording minutes and resolutions of meetings for significant decisions and preparing the annual tax and regulatory return NAT 712266. It is also required that an Operating Statement and Statement of Financial Position be prepared. An independent auditor (not the accountant/tax agent) must be appointed to review the fund is complying, and once a report is given, the income tax and regulatory return can be lodged. A supervisory levy is paid when lodging – over $250.
By law, keep all records including accounting records, statements, annual returns for a minimum of five years. Where-as you must keep records such as minutes of meetings, change of trustee, reports to members and trustee consents, for a minimum 10 years.
(b) Investment Strategy and Limitations
The law governing all super (SIS Act) at Section 52 requires a written investment strategy be formulated and given effect or put into action. This is to encourage a serious and professional approach. The overall guiding principle is the Sole Purpose Test –that funds are maintained for the sole purpose of providing retirement benefits. This is why some restrictions apply in order to avoid risk, and both the SIS Act and the trust deed need to be consulted. Restrictions include general prohibition from acquiring assets from members and related parties, keeping assets separate from personal and business affairs, limited borrowing rules, personal use of assets, careful use of derivatives and no lending to members.
(c) Compliance, Trustee Responsibilities, Disputes
To stay compliant, Trustees must regularly consult the trust deed to follow it, as well as consider changes in superannuation, taxation and other laws (an update Trust Deed if required), and keep aware of the circumstances of the members. A breach of the trust deed as considered a breach of the superannuation law. In all dealings, the Sole Purpose Test is the key requirement – to maintain the fund solely for the core purpose to provide retirement benefits.
Fund members must live in Australia, so be aware that relocation overseas for can affect compliance.
Outside Dispute resolution between members and trustees is not available via the Superannuation Complaints Tribunal, so Trustees must mediate themselves or resolve via the court system.
(d) Insurance in your SMSF
The SIS law and Regulations require Trustees to consider and seek advice about member insurance needs. What if…? Ensure that your fund applies for cover that is appropriate – life, total and permanent disability (TPD) and/or disability income insurance (income protection). There are advantages to hold these in an SMSF – for example the premiums are tax deductible for the SMSF. Other considerations may include some circumstances where access to super benefits may be restricted such as disability payments.
(e) Paying Benefits & Income Streams (Pension)
Contributions by employers (concessional) and members (non-concessional) as well as fund earnings are generally classified as “preserved benefits” and cannot be accessed by members until a condition of release is met. A condition includes meeting preservation age, which are dates determined by member date of birth, as well as officially retiring from work.
When a member generally meets the age of 60, and has elected to convert super to pension/income stream, the lump sum or income stream payments are tax free. If a member is under 60 and paid a benefit PAYG tax will need to be paid and reported to the member and ATO on a payment summary. The amount withheld is reported to the ATO annually or quarterly.
Other conditions of release include reaching 65 YO, restricted access at preservation age via transition to retirement, death, permanent incapacity, terminal illness.
See ATO publications (number is the ATO Nat number eg NAT11032)
11032 Running a self-managed super fund
71454 How your self-managed super fund is regulated
Interested to know what self-managed super (SMSF) is all about, and if it is for you? Book for a FREE webinar with bonuses, run every month – Self Managed Super Fund Roadmap (all you need to know) for the next monthly event, see SMSF – FREE Seminar or our other seminars above – Share Workshop and Property Boost (every few months) in the menu above or call us 0407 361 596