Self Managed Super
Are you better off managing your own super?
RetireInvest Pty Limited Australian Financial Services Licence 238429
RetireInvest Pty Limited (ABN 23 001 774 125) holds Australian Financial
Services Licence Number 238429 and is licensed to provide financial product
advice and deal in financial products such as: deposit and payment products,
derivatives, life products, managed investment schemes including investor
directed portfolio services, securities, superannuation, Retirement Savings
The information presented in this seminar is of a general nature only and
neither represents nor is intended to be specific advice on any particular
matter. RetireInvest strongly suggests that no person should act specifically
on the basis of the information contained herein but should obtain appropriate
professional advice based on their own circumstances.
• What is a ‘self managed superannuation fund’ (SMSF)?
• What investments can I use?
• Is a self managed super fund right for me?
• What information do I need to decide?
• Value of advice
• A growing number of Australians are choosing to self-manage
their super – with the potential of increased control, flexibility and
• According to the Australian Tax Office (ATO), more than 3,900
new self managed super funds launched every month on average
• But running your own fund means is a lot to consider – with
greater freedom comes greater responsibility.
What is a Self Managed Superannuation Fund?
• Up to 4 members
• All members are trustees
• If using a corporate trustee, all members must be directors of the
• No member can be an employee of another member unless they are related
• Can have ‘single member’ funds
• Administered by the ATO
Self Managed Super tends to suit…
• Operate small or family businesses
• Like to have hands-on control over investment decisions
• Like to have their superannuation customised to play a key role in family
wealth and estate planning
• Wish to invest in alternative assets
Why Self Managed?
• Tax-Effective Wealth Accumulation
• Access to Wider Range of Investments
• Effective Estate Planning
What are the expected costs?
Set Up Ongoing
Fund $450 to $3,000 $1,200 to $3,000
Investment Advice 1% to 4% 0.5% to 1.0%
Transaction Fees 1% to 4% 0.5% to 1.0%
The cost effectiveness of an SMSF
will depend on the level of investments!
What are the expected costs on $300,000?
Set up Ongoing
Fund $1,200 $2,500
Investment Advice $5,000 $2,000
Transaction Fees $1,000 $1,000
Total $7,200 $5,500
Setting up a Self Managed Super Fund
• Obtain a trust deed
• Corporate or individual trustees?
• Elect to become a regulated fund
• Obtain a Tax File Number and Australian Business Number
• Open a bank account in the name of the fund
• Establish an Investment Strategy
• Prepare minutes and documentation to admit members to the fund
We can help!
• A Trustee must be appointed, either a
• corporate trustee, or
• individual trustees where the primary purpose of the fund is to provide a
• all members must be trustees and vice versa
• Restrictions on who can be a trustee:
• Minors (person under 18)
• Individuals under a legal disability (eg. has lost mental capacity)
• Anyone disqualified from being a company director
• Anyone convicted of fraud or dishonesty.
Obligations? What obligations?
• Responsibilities of Trustees
• Investment Strategy
• Investment Selection
• SIS Act
• Trustees must formulate and implement an Investment Strategy. An
Investment Strategy is a plan for making, holding and realising fund
• It must have regard to:
• The investment objectives
• Risk & Return
• Liquidity (Cash Reserve)
• Ability to meet liabilities
• Asset Allocation
Complete Investment Control?
Investment limits and restrictions
• Sole Purpose Test
• Restricted Acquisitions From Related Parties
• In-house Asset Limits
• Business Real Property Exemption
• Derivatives Only For Risk Management
• Arm’s Length Dealings
• Limited ability to borrow via a limited recourse loan
• Trustee covenants
Sole Purpose Test
Care needs to be taken when investing in:
• Works of Art
• Motor Vehicles
• Business Equipment
Must not be seen to be obtaining a ‘personal benefit’
SMSFs are prohibited from acquiring most assets from a related party
• Standard employer of the fund
• ‘Associate of the member’
In-House assets are:
• Investments in, and loans to, related parties
Restricted to 5% of the value of the fund
But there are some exceptions……
• Listed shares
• ‘Widely held’ unit trusts (managed funds)
• Investments in pooled superannuation trusts
• Business real property
• Property owned by the super fund and a related party as tenants-in-
• Deposits with authorised deposit-taking institutions (ADI) and approved
• Life insurance policy issued by a life company (not acquired from a
member or relative)
Smith Family Super Fund Assets:
Macquarie CMT $ 15,000 NO
BHP shares $ 30,000 NO
Home at 23 First Ave Adelaide $250,000 POSSIBLE
Perpetual Aust Share Fund $ 50,000 NO
Shops 1-4, 52 Main St Adelaide $500,000 NO
Loan to Smith Pty Ltd $ 5,000 YES
ING Life Policy on John Smith $500,000 POSSIBLE
Borrowing to Invest
• Until late last year there were very few opportunities for funds to
• Indirect borrowing via trusts or companies was possible but there
were a number of risks and limitations.
Borrowing to Invest – Instalment Warrants
• A geared investment in a superannuation fund can be achieved
via a structure known as an ‘Instalment Warrant’
• An Instalment Warrant can enable a fund to utilise borrowing to
purchase a range of investments including direct property.
The Legislation now provides…
• The superannuation fund is permitted to borrow
• The loan must be applied to acquire an investment
• The investment is held on trust for the superannuation fund
The Legislation provides…
• The superannuation fund has a beneficial interest in the
• The superannuation fund must make one or more payments to
acquire the investment
• If the superannuation fund defaults on the loan the lenders right to
recoup is limited to the value of the property
• You can gear with your Superannuation Fund
• Borrowing can be for any investments as allowed by SIS
• Borrowing is limited to newly acquired assets (ie. not for currently
• You can swap geared assets
• You can only do an instalment warrant via a Debt Instalment Trust
• Lenders security is limited to the asset held in the debt trust
• There is no limit on the amount of the loan for the instalment warrant
• There is no restriction on who the fund can borrow from
• The loan must be on a limited-recourse basis
• Sandra wishes to purchase a property which is currently valued
• Her SMSF has significant investments but she wishes to use
$100,000 in the SMSF to purchase the property
• The property could then be purchased by using an instalment
Lets look at an instalment warrant structure
$100,000 Trust Property
Shares $300,000 Lender • Bank
Property $500,000 • Institution
Who can benefit most?
• Gearing investments via super including property, shares and exotics
• Those who have met the concessional and non-concessional
• Negative gearing by lending to the fund at a premium rate
• Those who wish to put money in super but can’t contribute – over 65
who don’t meet work tests
• Younger members who wish to bring forward the purchase of
investments via super
• Superannuation is for the long term – the rest of your life.
• Investments need to provide liquidity, growth and income.
• Cash and Fixed Interest provide liquidity and income.
• Direct Property provides income and growth
• Shares provide liquidity, income and growth
Growth investments such as property and shares can be volatile over the
short term, but generally outperform cash and fixed interest over the long
Investment Options - Growth
• Property provides:
• Income (rent)
• Growth (price movement)
• Tax Relief (depreciation)
• International and Australian shares provide:
• Income (dividends)
• Growth (share price movement)
• Australian shares also provide:
• Tax Relief (franking credits)
• Are all the members (trustees) skilled in investing?
• Will business or other real property be purchased?
• When will members reach preservation age?
• How would the withdrawal of a member affect the fund’s assets?
• Does the investment strategy take into account the liquidity requirements
for the payment of pensions?
• Do members require insurance cover?
• What are the Member assets outside the SMSF?
• Being acquainted with and carrying out the terms of the trust
• Ensuring that title of all fund assets is in the names of the trustees
• Accurate bookkeeping
• Annual Lodging of tax return
• Annual Audit
• Timely and Efficient
• Act impartially in the interests of all beneficiaries
• Ensure that all vesting and preservation rules are adhered to
• Keep informed & up to date
• Adhere to lodgement timelines & bureaucratic requirements
• Legislative requirements e.g. investment activities & maintenance of fund
• Severe penalties for becoming non-compliant
• SIS Act over-rides trust deed
Self managed super funds
• Do it yourself
• Tailor to suit you
• More control
• Only for retirement income
• Formulate and implement a investment strategy
• Must have a trust deed and trustees
• Regulated under super industry rules
• Severe penalties for non-compliance rest solely with the
Is Self Managed Super for you?
• What is your fund going to be used for?
• What is the level of involvement you are willing to commit?
• Do you want to out-source?
• investment strategy?
• investment selection?
• compliance requirements?
• Investment Advice
Investment Strategy • Direct Share advice
• Managed Funds
Investment Selection • Ongoing Investment and Strategic
Lawyer / Accountant / Super
• Trust deed & other document
• Annual accounts
• Tax return preparation
Do it yourself?
Financial Adviser? Accountant? Self?
Overall = Strategic
Day to Day = Tactical
Where to from here ?
• Do it yourself
• Seek further advice from an expert
Thank you for attending