Frequently asked questions about Superfunds.

Self-managed superfunds (SMSF) or DIY superfunds is the fastest growing sector in the superannuation industry. There are more than 534,176 SMSFs in Australia with 1,011,686 members as at June 2014. SMSFs hold about $530 billion of $2.05 trillion super pie.  It is a complex area because of the rules and regulations which trustees have to follow. Breaking or more technically "contravening" those rules could lead to legal action by the ATO. Trustees found guilty of deliberate and gross carelessness could face jail, fines and members losing 46.5% of their super balance.

Is a DIY superfund suitable for you? Perhaps you should read the FAQs and form a better understanding of the requirements and responsibilities of being a trustee and member of your SMSF. In an SMSF, the maximum number of members we can have is 4 individuals. The common setup is a two member SMSF made up of husband and wife. All members are also trustees of the superfund.

As trustees, you have to follow the rules of the Superannuation Industry Supervisory Act (SISA) and Superannuation Industry Supervisory Regulations (SISR). It is not easy to read the SISA or SISR, even for me as an accountant. If trustees are unsure if they can invest in this or that eg vintage wine, car, painting, then they should call their accountants for advice. Because fixing a problem investment can be time consuming and costly. For example a trustee accidentally purchases a residential property from a related party before telling their accountant first. SMSFs can not buy residential property from related parties. What is a related party?

related party, of a superannuation fund, means any of the following:

                     (a)  a member of the fund;
                     (b)  a standard employer‑sponsor of the fund;
                     (c)  a relative of the member of the fund, ie spouse, parent, grandparent, brother, sister,
                           uncle, aunt, nephew, niece, lineal  descendant or adopted child of the individual or
                           of his or her spouse;

To get it out of the SMSF means paying stamp duty and conveyancing fees again. Once to bring it in and another to get it out. A very expensive lesson! If the trustee had called the accountant for advice, this costly exercise would have been avoided.

As trustees you are responsible for keeping bank statements, dividends, investment statements, contracts of offer and sale, insurance, etc. safely so that the accountant can prepare the tax return and also as audit evidence for the SMSF auditor. Trustees have to obey the golden rule in SMSF which is the SOLE PURPOSE TEST. The sole purpose test is that the benefits/investments is acquired solely to provide retirement benefits for the members. There are several other rules such as the IN-HOUSE ASSET rule which basically means that you can not invest more than 5% of the fund balance in an asset owned by a related party. This is usually not common for a majority of SMSFs.

There are also CONTRIBUTION RULES, such as the $27,500 concessional cap and the $300,000 non-concessional contribution bring-forward rule. If you are 65+ years old you have to satisfy the "work test" to make a $100,000 member non-concessional contribution. The "work test" is working at least 40 hours for 30 consecutive days. All this is discussed in another FAQ.

If you have any queries, please don't hesitate to contact us via email

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Chartered Accountants

Jimmy CK Chong is a Chartered Accountant & registered tax agent. Contact him via:
Tel : 08 9440 0871
Mob : 0433 117 110
Email :

Liability limited by a scheme approved under Professional Standards Legislation.

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