Self Managed Superannuation Funds offer many advantages to small business owners and high net worth individuals. They are usually most cost effective when members’ combined assets exceed $150,000. It is best suited to those people looking for maximum control over their superannuation assets and who are prepared to accept the responsibility of being a trustee and to work at managing their investments.
The fund may invest in a wide range of investment options, e.g. property, shares, cash, term deposits, share based funds and property based funds. The fund can use 100% of assets to acquire business real property from a member or related party and in return the superannuation fund can lease back the property at market rates.
In September 2007, legislation was passed to allow borrowing by superannuation funds through Installment Warrants. It authorises any borrowings made by a superannuation fund provided that the borrowed money is applied for the purposes of acquiring an asset other than one which the fund is prohibited from acquiring. There are however strict guidelines in place in regard to borrowing by SMSF’s.
How does the legislation affect you?
If properly structured through an Installment Warrant, a superannuation fund can borrow to acquire an asset. Examples of where a superannuation fund might seek to borrow are:
The existing assets of the fund cannot be used as security regardless of the performance of the new investment.
You need to follow a number of administrative procedures to ensure your fund is complying and entitled to the tax concessions that apply. Every year the superannuation fund must lodge a combined compliance return and income tax return with the Australian Taxation Office. The SIS Act also stipulates other record keeping and reporting requirements with which you must comply to avoid any loss of the fund’s eligible tax concessions. DIY Superannuation Services Pty Ltd will keep all records of transactions, provide annual reports, prepare and lodge all statutory returns, arrange fund audit and actuary if required as well as retain all records for the required statutory period.
Firstly there are restrictions as to what assets an SMSF is allowed to acquire from members or their associates. These assets are limited to listed securities, bonds and business real property. Consideration for the sale of these investments must be performed at arms length or at a proper commercial valuation. Note that with any transfer of assets to the fund a capital gains event will occur and if a capital gain is realised the individual will be liable for capital gains tax. Transfers can be made as non-concessional contributions or if the member is substantially self-employed, whereby less that 10% of total assessable income of the individual is generated from an employer, a tax deduction may be claimable to the individual which may off set capital gains realised.
Your Super Your Way was established to better assist people with the daunting task of providing for their retirement. Our philosophy is simple, “No one cares more about your retirement, Than You”.
Your Super Your Way has specialist advisors taking care of all legal, statutory, and taxation matters associated with Self Managed Superannuation Funds. With this in mind, the fund’s trustees can focus on the task at hand, developing fund income and assets for the retiree’s future.
© 2023 Your Super Your Way | All Rights Reserved | Made by Websmith