Frequently Asked Questions

What are the advantages of an SMSF?

Members of SMSFs have exclusive control over their investments within the law. The maximum amount of tax on earnings is 15%. With the control that SMSFs provide over asset disposal timing, gains can be delayed until assets are supporting an Account Based Pension, at which point the income is taxed at 0%. Up to 100% of the total assets of the fund may be invested in "Business Real Property" by SMSFs.

Is establishment of a SMSF a tax-deductible expense?

No, it is capital in nature.

What can my SMSF invest in?

All investments by your SMSF must be made on a commercial ‘arm’s length’ basis. The purchase and sale price of fund assets should always reflect true market value, and the income from fund assets should always reflect a true market rate of return. Generally: you can't buy assets from, or lend money to, fund members or other related parties (there are some exceptions to this rule) your fund can't borrow money.

What happens if we dont comply with the investment restrictions?

If you don't comply with the investment restrictions we may impose significant penalties, including disqualifying you as a trustee and even prosecution. It's a good idea to speak to an SMSF professional to make sure your investments comply with the law.

What is in-house asset?

An in-house asset is any of the following: - a loan to, or an investment in, a related party of your fund - an investment in a related trust of your fund - an asset of your fund that is leased to a related party. There are some exceptions, including: - business real property that is leased between your fund and a related party of your fund - some investments in related non-geared trusts or companies. In-house assets can't be more than 5% of your fund’s total assets.

What is exit plan?

It's important for all funds to have an exit plan in place even if you're not ready to wind up now, as this will make it easier when the time does come. Your plan should consider all the circumstances of your members and be signed off by all trustees. You should also keep this plan with the fund's records. Make sure you review your exit plan regularly, assess your fund and each member's circumstances to decide if an SMSF is still right for you. You may want to speak with an SMSF professional to help you decide.