a guide to Self Managed Super Funds a guide to Self Managed Super Funds 1
disclaimer This ebook has been prepared by EJM Financial Services in conjunction with AMP Financial Planning Pty Limited, ABN 89 051 208 327 ( AMPFP ), AFS Licence No. 232706. Any advice contained in this ebook is of a general nature only and does not constitute personal product advice. In preparing the advice no account was taken of the objectives, financial situation or particular needs of any particular person. Therefore, before making any investment decision, readers should consider the appropriateness. Although the information provided in this ebook was obtained from sources considered to be reliable, AMPFP does not guarantee that it is accurate or complete. Therefore readers should not rely upon this information when making investment decisions. AMP does not accept any liability for any resulting loss or damage suffered by a reader or by any other person. a guide to Self Managed Super Funds 2
about this guide With the performance of some superannuation funds over the last few years, many Australians are looking for new ways to invest and take greater control of their retirement outcomes. Self Managed Super Funds are a viable and attractive option for some, however we must consider your personal circumstances to see if it s right for you. This ebook is designed to give you some preliminary information and tips about where to start, and we encourage you to consult with us so we can help you navigate the options when considering whether a Self Managed Super Fund is right for you. a guide to Self Managed Super Funds 3
what exactly is a Self Managed Super Fund? A Self Managed Super Fund (SMSF) is a superannuation fund established for the benefit of between 1-4 members who are also the trustees of the fund. These funds allow the members to control how the fund operates and what investments are undertaken for retirement. what are the benefits? control & investment choice A SMSF provides maximum control over your superannuation assets and allows you the flexibility to decide how your funds are invested and how the fund is to operate. A SMSF can be structured to meet the specific investment needs of members and greater control over investment strategies. The fund can invest in a wide range of investments including property, shares, cash or any other assets that suits the investment objectives of the fund (provided it meets the sole purpose test). Opportunities also exist for your SMSF to borrow to invest. tax concessions Investing in a SMSF has tax advantages that make super a powerful wealth creation strategy. The concessional 15% tax rate applies to income of the fund, including contributions for which the tax payer has claimed a tax deduction Realised capital gains on investments held for more than 12 months are taxed at an effective rate of 10% Tax can be lowered through the use of franking credits and the offsetting of capital losses Concessionally taxed end benefit, including pension benefits estate planning A SMSF can be structured for efficient estate planning. It is always recommended to consider your immediate family, dependants, and future generations when considering suitability. a guide to Self Managed Super Funds 4
using your SMSF to buy real estate One great advantage of operating a Self Managed Super Fund (SMSF) is that it can enable you to invest in property using funds inside your super. A SMSF can in invest in all types of property such as indirect property investments, direct property (residential, commercial, industrial and rural) and property located overseas. Buying real estate within your SMSF has several benefits when compared to doing so outside of super. tax advantages Transactions made inside super are taxed at a rate of 15% instead of up to 45% for investments outside of super If you hold a property within super for more than 1 year, Capital Gains Tax in assets held for more than 12 months is calculated at only 10% If you sell your property whilst in your pension phase, you may not pay any Capital Gains Tax (CGT) You may be eligible to claim tax deductions for making loan repayments other advantages Buying property inside super is an effective way of diversifying your portfolio. Investing in different asset classes can help reduce the overall exposure to risk and volatility. In some cases assets held within a SMSF can provide asset protection in debt and bankruptcy situations. Borrowing funds to purchase property that increases in value (known as gearing ) allows you to boost your super balance (and your retirement savings). Provides an opportunity for some people to purchase property using their super which may have previously been out of reach due to lack of savings outside of super. conditions As there are comlpex conditions and strategies to navigate when purchasing property within your super, you should always seek the help of an accredited SMSF financial advisor. Some of these restrictions even relate to the types of renovations and improvements you can make to the property. For more information contact one of our SMSF specialist advisors on 1300 266 905. a guide to Self Managed Super Funds 5
what s involved in setting up a SMSF? The process of setting up a SMSF involves several steps and requires the expertise of professionals such as solicitors etc. Some people choose to navigate this process on their own however for a relatively small cost our team at EJM Financial Services can manage the process for you. (For more information please contact our office on 1300 266 905 and we will be happy to assist you). 1. obtaining a trust deed All SMSFs require a legal document called a Trust Deed to be drawn up by a qualified solicitor. The Trust Deed maps out the rules for setting up and operating the fund. These details in addition with the superannuation laws, form the governing rules of the SMSF. Generally the Trust Deed will specify how the fund will include details such as: Members of the fund (known as the trustees) The responsibilities of the trustees The fund s goals How benefits will be managed an paid out to the trustees How professional advisors should be selected and employed by the fund When having a Trust Deed drawn up, it is important that you ensure it is correctly tailored to the needs and objectives of your fund and its members, and drafted to meet the legal requirements. Ensure that your Trust Deed is regularly reviewed to keep it up to date. 2. appointment of trustees The next step is the formal appointment of the fund s trustees, New funds usually appoint trustees under the fund s trust deed. Typically trustees can either be yourself as a sole trustee, up to four individual members, or a corporate trustee where a company is set up to act as trustee of the fund. In the case of a corporate trustee all members of the fund must also be directors of the company. All trustees (or directors for corporate trustees) need to consent in writing to being appointed and these records need to be kept for a minimum of 10 years. 3. holding fund assets To be established, your SMSF needs to hold assets. The trustees of the fund hold the fund s assets in trust for the benefit of the fund s members. Usually a SMSF is established by making a contribution to the fund when the trust deed is executed. A contribution can be the transfer of certain assets (e.g. listed shares) or cash. Assets should be recorded in a way that they are distinguished as separate to personal or business assets and are clearly identified as being owned by the fund. Assets owned by the fund (other than money) need to be held in the name of the individual trustees (or the corporate trustee) as trustees for the fund. a guide to Self Managed Super Funds 6
example The Jones Family Super Fund has two individual trustees, Phillip & Margaret Jones. Where possible, the assets of the fund need to be held in the name of: Phillip and Margaret Jones as trustees for the Jones Family Super Fund 4. signing a trustee declaration If you re a new trustee (or director of a corporate trustee) you ll need to sign a declaration within 21 days of being appointed a trustee (or director). By signing the Trustee Declaration, you re declaring that you understand your responsibilities as a trustee (or director) of the SMSF. 5. registration with the ATO Once the fund is established and all the trustees have signed the trustee declaration, the fund needs to be registered with the Australian Taxation Office (ATO). Obtaining a TFN and ABN A Tax File Number (TFN) and Australian Business Number (ABN) are allocated by the ATO to all funds that are registered. Electing for your fund to be regulated For the fund to be complying and receive tax concessions, you need to elect for it to be regulated and to comply with the super laws. This election needs to be completed within 60 days of the establishment of the fund. (Generally the fund is taken to be established when the trust deed has been signed and the first contribution to the fund is made). Registration for GST Your SMSF will need to be registered for GST where its annual turnover exceeds $75,000. 6. opening a bank account A bank account will need to be opened in the name of your fund to allow you to accept cash contributions and rollovers of super benefits as well as daily operational management. All contributions and rollovers should be deposited into the fund s bank account. The money can then be invested in accordance with the fund s investment strategy and used to pay the expenses and liabilities of the fund. a guide to Self Managed Super Funds 7
is a SMSF right for me? A SMSF is best suited to those looking for maximum control over their superannuation assets, but are also willing to accept certain regulatory responsibilities placed on trustees and to work at managing their investments. SMSFs offer many advantages to small business owners and high net worth individuals. They are usually most cost effective when assets exceed certain thresholds. It is recommended in all circumstances to seek professional advice from your financial planner and accountant when considering the suitability of self managed superannuation. what s the fine print? The benefits of using a SMSF can be very appealing however they are not a set and forget type of fund. Whilst none of the considerations below are insurmountable, you do need to be aware that having a SMSF does create added work and responsiblity, and will require the payment of fees both to setup and for ongoing management. However the potential benefits of a SMSF, if suitable for you, can outweigh these added considerations. setup & maintenance SMSFs do require administration and management, both in the setup as well as on an ongoing basis, to adhere to specific regulations and laws. It is also a requirement, and good financial common sense, to maintain a regular analysis of your fund s investment performance and goals. legal, regulatory, audits & tax returns As a trustee of your SMSF you must adhere to the ATO s specific requirements such as: Appoint an approved auditor to audit your SMSF Lodge an annual SMSF tax return each year Lodge a Rollover benefits statement when rolling benefits into other funds Keep comprehensive records such as: minutes of investment decisions, how decisions are made, transaction details, reasons for decisions on the storage of collectables and personal use assets, annual operating statements and annual statements of your SMSF s financial position, who the trustees of your SMSF are and their consent to act as trustees (trustee declarations), copies of returns and information provided to members, required income tax and deduction documentation (including any actuary certificates), notify us of any change of details for the SMSF (for example, a change in trustee or members). a guide to Self Managed Super Funds 8
the benefit of advice As you have read in this ebook, a Self Managed Super Fund can offer a number of benefits, but there are some core questions that need to be worked through to assess the suitability of a SMSF for your needs. Once setup there is also the importantance of ongoing compliance with the strict ATO regulations. It pays to get professional advice about your personal situation to ensure that a SMSF is the right move for you a free consultation EJM Financial Services team of financial planners and tax advisors specialise in wealth management and wealth creation (including SMSF) through professional financial advice. A free consultation with our advisors will help determine your options and elaborate on the pros/cons in more detail. In addition to offering you personalised advice about the appropriateness of SMSF for your circumstances, we can set up a SMSF on your behalf and handle the ongoing maintenance if you wish. a guide to Self Managed Super Funds 9
who are we? EJM Financial Services has a team of Self Managed Super Fund accredited experts ready to help you figure out if they are right for you. EJM is one of AMP s Top Six practices in Australia & New Zealand*. We operate all over Victoria with main offices in West Melbourne and regionally in Wangaratta. Our advisors can visit you at home or work, during business or after hours. 443 King St West Melbourne VIC 3003 Office 2, 54 Ovens St Wangaratta VIC 3677 for more information contact our office on 1300 266 905 or visit our website: www.ejm.com.au *Ranking of practices is determined by net business flow (NBF) which is a weighted measure of new and retained business over the previous year based on the classes of products/services on the approved products/services list. a guide to Self Managed Super Funds 10
we can come to you Our advisors are able to visit you at your home or workplace, during business or even after hours if convenient for you. our supporting services In addition to Self Managed Super Funds EJM Financial Services can assist you with all your financial and lifestyle goals. Some of our services include: Financial Planning Estate Planning Investments (Property, Shares) Insurance (Income Protection, Life Insurance, Disablement etc) Structured Investments Taxation Planning Business Succession Planning Superannuation & Retirement Planning a guide to Self Managed Super Funds 11
contact us call now 1300 266 905 PO BOX 13189 Law Courts VIC 8010 info@ejm.com.au fax: (03) 9320 7633 www.ejm.com.au Melbourne 443 King St West Melbourne VIC 3003 ph: (03) 9320 7600 Regional Office 2, 54 Ovens St Wangaratta VIC 3677 ph: (03) 5721 2020 EJM Financial Services Pty Ltd ABN 63 006 492 182 is an Authorised Representative of AMP Financial Planning Pty Limited AFLS 232706