Frequently Asked Questions
A SMSF is a type of superannuation fund which is managed by the members of the fund who are also its trustees or directors of a trustee company. SMSF’s differ from larger commercial or industry superannuation funds which are typically managed by professional trustees in return for a management fee.
SMSF’s offer a number of benefits over other types of superannuation funds including greater control over investments; wider range of investment opportunities; ability to borrow to buy direct property; greater tax planning control; greater estate planning opportunities; more flexible pension planning.
An SMSF will take more of your time to look after compared with a retail, employer or industry fund. As trustee you will be fully responsible for ensuring your fund is operated within the law and that all regulatory matters are attended to on a timely basis. You must ensure at all times that your fund is maintained for the sole purpose of providing death or retirement benefits to your members or the members’ dependants. This is called the sole purpose test.
However with a best-in-class SMSF administrator such as ITP SMSF we will make running your fund as easy as possible and to help ensure your fund remains compliant at all times.
This will largely depend on your super fund balance. Market consensus shows that a SMSF with less than $200,000 may end up costing your more than a retail or industry fund. You would then need to decide whether the additional cost compared to other superannuation options is worth the additional benefits such as great investment choice and control. Generally, the larger the balance of your SMSF the less your fund will cost to run as a % of the fund balance.
Another factor weigh up is the cost of life insurance which will generally cheaper in an employer sponsored or industry fund due to the combined bargaining power of a large number of members. However it is worth checking this out as life insurance rates for SMSF members are trending lower.
The general consensus is that members should have at least $200,000 in super before establishing a SMSF to be cost effective, however this also depends on investment choice. If your strategy is to use $100,000 of your super as a deposit to buy an investment property within your SMSF, you could end up with an asset value within your fund of much greater than $200,000 and this could make establishing a SMSF well worthwhile.
We advise all clients intending on establishing an SMSF to seek financial planning and legal advice before going ahead to ensure you are making the right decision in terms of your overall circumstances. ITP SMSF can put you in touch with a financial planner if you choose who will be able to provide you with an overall strategy taking into account of your current circumstances and your future goals and objectives. This strategy may or may not include a recommendation to establish a SMSF.
However if you are comfortable with how the idea of a SMSF would sit within your own financial strategy, have conducted your own research and have already made the decision to establish a SMSF, we will be happy to assist you with the setup and ongoing administration of your SMSF.
The cost to setup your SMSF with ITP will depend on the following:
- Whether you manage your own investments or hire a financial planner to setup an investment strategy;
- Whether you choose individual trustees or a company trustee;
- Whether or not your fund has borrowings.
Setup of the fund structure itself will range from $760 for a new SMSF with individual trustees to $3,170 for a new SMSF which will allow borrowing via a bank loan.
It’s possible to commence your fund with a more simple cost and cost effective structure and then modify the structure later to suit your needs, for example, if you decide to borrow to buy a property within your SMSF. However if you have made the decision to, for example, borrow to buy a property at a later stage, it is best practice and more cost effective to set your fund up with the right structure now, rather than make changes later on.
Members are not able to claim a tax deduction for the initial setup as it is considered a capital cost.
Ongoing fees and costs are broadly divided into:
- Administration and compliance: ITP SMSF provides administration packages starting from $99 per month depending on the number of members and type of investments held;
- Statutory: comprising the SMSF supervisory levy paid annually to the ATO currently $259 and where applicable annual statement fees between $46 and $246 paid to ASIC for any company trustees you have;
- Audit: generally ranging from $330-$770 paid direct to auditor annually depending on complexity of fund;
Other services, fees and costs: where required, your fund may incur additional costs for services such a trust deed update; pension setup; actuarial certificates for allocated, account based and market linked pensions; Limited Recourse Borrowing Arrangement for buying a property with borrowed funds; Business Activity Statements; financial advisor fees; investment strategy updates; change of trustees; amendment to death benefit agreements or nominations; pension reviews; lump sum withdrawals; commercial property and other asset valuation fees; and rectification of compliance breaches.
As trustee of your SMSF you have control over where you invest your super as long as funds are invested in line with what the law allows. There are certain restrictions on where you can invest super within a SMSF and every super must have a regularly review investment strategy. The investment strategy can be formulated by the trustees or with the help of a licenced financial planner.
If you formulate your own strategy we provide a standard document for you to complete which is then adopted as your fund’s investment strategy.
ITP SMSF is also able to arrange a financial planner to assist you with formulating and implementing an investment strategy for your SMSF in line with an overall financial plan.
Your SMSF is able to invest in a wide range of investments including direct residential and commercial property; local and international shares; bonds; managed funds; exchange traded funds; term deposits; derivatives and cash.
There are some exceptions, however generally you are not able to buy assets from or lend money to fund members or other related parties and relatives. All investments must be done at arms’ length. In house investments which are owned by fund members and relatives are very restricted.
SMSF’s cannot invest in a residential property which is occupied or used in any way by fund members or related parties as members are not permitted to gain present day benefits from fund investments.
If your SMSF buys a commercial property, in some cases you are able to lease the property to a related party such as a business owned by a member however again there are restrictions such as the lease being at arms-length and on market terms.
As part of our ongoing administration services, ITP SMSF is able to advise you on whether a particular investment is allowed under the law or subject to any restrictions, however we also recommend you should obtain independent advice from a licensed financial planner before making any investment decisions.
You can use what is called a limited recourse borrowing arrangement to borrow to buy an investment property through your SMSF. If you decide this fits within your investment strategy ITP SMSF can establish the structure you need to borrow through your SMSF.
There are a number of rules that must be followed when using this strategy including:
- Each borrowing must relate to only one asset or in the case of shares, a single parcel of the same company in the same class of shares
- A fund is able to borrow to cover the costs incurred in connection with the borrowing (for example stamp duty, legal fees), as well as maintenance or repair expenses
- A fund is unable to borrow to acquire land and subsequently subdivide it
- A fund is unable to borrow to renovate or improve the asset being acquired
- Borrowings are able to be refinanced
- A lender can obtain a guarantee from another related entity, however thr rights of the guarantor are also limited to that asset.
A SMSF can have between one and four members.
Where a fund has only member, there must be two individual trustees being the member and one other individual who is not an employee of the other person unless the other person is a relative. Alternatively, a fund can have one member who is also the sole director of the trustee company, or one of two directors of the trustee company.
No, the law states that a SMSF trustee or director of SMSF trustee company cannot receive any remuneration for their services.
Not for an extended period. For an SMSF to be a ‘complying fund’ and receive concessional tax treatment, the SMSF must be an Australian resident fund. SMSFs are at risk of losing their complying status, if their members spend time working overseas. This is because the residency rules require trustees and the majority of contributing members to reside in Australia.
Yes, a SMSF member can be under 18, however if the under-age member does not have a nominated legal personal representative, a parent or guardian must act as trustee of the fund on their behalf. Where the SMSF has a corporate trustee, a parent or guardian is allowed to be a director of the trustee company in place of the underage member.
Choosing individual trustees to run your SMSF means the following:
- Up to 4 members who are also trustees
- Can have a fund with 1 member trustee. However there must be an additional person to also act as trustee
- A member can’t be employed by another member unless they are related
- Can’t be paid for the time and effort involved in running the fund
- Members have an equal say in the administration of the fund
- Lower setup cost – company trustee setup and ASIC fees not required
- Higher ongoing costs and complexities if a change in trustee is required in future
- Many banks will not lend to a SMSF with individual trustees
Alternatively, choosing a company trustee means the following:
- Up to 4 members who are also directors of the company trustee
- Can have a fund with 1 member who is also a director of the company trustee – no need to involve anyone else
- A member can’t be employed by another member unless they are related
- Can’t be paid for the time and effort involved in running the fund
- Trustee directors have an equal say in the administration of the fund
- Higher setup cost – company trustee setup and ASIC fees are required
- Lower ongoing costs and complexities if a change in trustee is required in future
- More suited to SMSF’s that plan to borrow to invest in an investment property
Please have the following ready before commencing your application:
- Intended SMSF name
- Planned SMSF start date
- Individual Trustees or Company Trustee?
- Administration option: Silver, Gold or Platinum?
- Member names
- Member(s) contact details
- Member(s) date and place of birth
- Member(s) occupation(s)
- Member(s) Tax File Number(s)
- Member(s) nominated beneficiaries
- Authority from other members to submit the application
- The ITP difference: Best possible service at the best possible price. We strive to provide you with a high level of service and value. You’ll have access to expert advice from a team of qualified accountants, financial planners and lending consultants at your disposal.
- Easy-to-understand process to establish your SMSF, plus complete ongoing service which will save you time and worry.
- The ITP SMSF service supports a wide range of investments, banks, brokers and platforms -perfect to give you the choice you want from your SMSF.
- Central SMSF office to assist with all your SMSF needs, plus more than 240 ITP branch locations across Australia.
- ITP provides a one-stop-shop for all your tax needs, including individuals, companies, partnerships, trusts and SMSFs.
- Australian owned and operated.
ITP SMSF will carry out the following for you when setting up your new SMSF:
- Create a trust deed (and company trustee if chosen)
- Register your SMSF for an ABN, TFN and GST (if required)
- Prepare an investment strategy document
- Provide you a tailored guide to assist you in opening a bank account for your SMSF.
- Show you what you need to do to start making contributions to your SMSF.
- Provide you with an online dashboard to easily track your fund performance and super contributions.
Chances are that your local ITP office will be able to assist you in establishing a SMSF. Your local ITP office will work with our dedicated SMSF service centre in Sydney to establish your new SMSF or provide ongoing SMSF administration services to you. Please ask your local ITP office for more details.
Alternatively the deducted ITP SMSF service centre also provides services directly to the public. If you would prefer to establish your SMSF directly with us rather than visit a local ITP branch, please submit an enquiry today at www.itpsmsf.com.au.
All subscribers to the ITP SMSF administration service will receive online access to a member portal in order to view up to date investment data and pension, contribution and fund information.
In addition, subscribers will also receive a full suite of annual reports including financial statements, audit report and member statements.
Yes, the ITP SMSF administration service includes preparation and lodgement of the Annual Return which is a combined income tax and regulatory return which is lodged to the ATO.
Yes, ITP SMSF provides a comprehensive ongoing fund administration service for your SMSF including the following:
ITP’s ongoing SMSF administration services are designed to provide you with the support you need in the day to day running of your fund and consist of the following:
- ATO Annual Return;
- Fund accounting and preparation of annual financial statements;
- Online dashboard for you to track the activity and performance of your fund;
- Co-ordination of annual audit;
- Minutes and resolutions;
- Company secretarial services for your SMSF trustee company and custody trust trustee company (where applicable).
All superannuation fund trustees must consider insurance coverage requirements for their members as part of their investment strategy.
A superannuation fund is only able to provide an insured benefit to a member that satisfies a condition of release being:
- Terminal illness;
- Permanent incapacity;
- Temporary incapacity.
ITP SMSF would be happy to put you in touch with a financial planner who can assist you in reviewing or arranging your life insurance requirements.
A self-managed superfund can accept contributions from the following sources:
- Superannuation guarantee contributions (employer compulsory contributions);
- Your employer where you have salary sacrificed;
- Your after tax personal contributions;
- Government (co-contributions); and
- Transfer or rollover from other superannuation funds.