The governing legislation for SMSFs is the Superannuation Industry (Supervision) Act 1993 (Cth), commonly referred to as the SIS Act. Here are some key rules you should be aware of.
The sole purpose test requires that SMSFs are maintained for the purpose of providing benefits to members upon their retirement, or to their dependants if a member dies. As a trustee of a regulated superannuation fund, you must comply with the sole purpose test for the SMSF to be eligible for superannuation tax concessions. The sole purpose test is divided into core and ancillary purposes.
A regulated SMSF must be maintained solely for either:
one or more core purposes, or
one or more core purposes and one or more ancillary purposes.
An SMSF must be maintained to provide benefits for each member of the SMSF on or after at least one of the following:
the member’s retirement
the member reaching an age not less than prescribed in the superannuation regulations
the member’s death, if the death occurred before they retired, and the benefits are provided to their dependants or legal personal representative or both
the member’s death, if the death occurred before they attained an age not less than prescribed in regulations, and the benefits are provided to their dependants or legal personal representative or both.
Ancillary purposes for maintaining an SMSF are to provide benefits for members in the following circumstances:
termination of a member’s employment with an employer who made contributions to the SMSF for that member
on the cessation of work due to ill health
death of a member after retirement where the benefits are paid to their dependants or legal personal representative or both
death of a member after reaching an age not less than prescribed in the superannuation regulations where the benefits are paid to their dependants or legal personal representative or both
another ancillary purpose approved in writing by the regulator.
This allows an SMSF to provide benefits in situations of financial hardship and/or on compassionate grounds, subject to the SIS Act, the governing rules of the SMSF and the approval of the appropriate regulator.
As a trustee you must be aware of the minimum standards for accepting contributions under the SIS regulations. The rules become more complex from age 65 and generally require satisfaction of a work test. There are also limitations on how much can be accepted as a single contribution at any point in time.
Concessional contributions are generally contributions made for you or by you for which a tax deduction is claimed and are included in the assessable income of the SMSF. They include:
superannuation guarantee (SG) contributions
contributions made by employers over and above the SG or award obligations, including salary sacrifice contributions
payments by the ATO of SG shortfall amounts
contributions paid pursuant to an award/agreement certified by an industrial authority
personal contributions for which a tax deduction is claimed.
Non-concessional Contributions (NCCs) are contributions that are not assessable to the SMSF and include:
personal post-tax contributions
certain amounts of an overseas transfer
excess concessional contributions above the concessional contribution cap which are not refunded.
There are various restrictions and requirements placed on how an SMSF may invest its assets. These are designed to protect members’ benefits. The main ones are:
sole purpose test
trustee covenants concerning investment of member’s money
regulations applying to investments in collectibles and personal use assets
general prohibition on giving a security over fund assets
prohibition on loans to members
non-arm’s length investments
acquisition of assets from related parties
in-house asset provisions
written investment strategy.
Things you should know.
The information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs having regard to these factors before acting on it. Any taxation consideration outlined in this presentation are general statements, based on an interpretation of the current tax law, and do not constitute tax advice. Any super law considerations or comments outlined above are general statements only, based on an interpretation of the current super laws, and do not constitute legal advice. The tax implications of the relevant products mentioned in this presentation can impact individual situations differently and you should seek specific tax advice from a registered tax agent or registered tax (financial) adviser.
BT Portfolio Services Ltd ABN 73 095 055 208 AFSL 233715 (BTPS) operates Panorama Investments and administers Panorama Super. BT Funds Management Limited ABN 63 002 916 458 AFSL 233724 (BTFM) is the trustee and issuer of Panorama Super, which is part of Retirement Wrap ABN 39 827 542 991. Westpac Financial Services Ltd ABN 20 000 241 127 AFSL 233716 (WFSL) is the responsible entity and issuer of interests in BT Managed Portfolios. Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714 (Westpac) is the issuer of the BT Cash Management Account (BT CMA). Together, these products are referred to as the Panorama products. A Product Disclosure Statement or other disclosure document (PDS) for the Panorama products can be obtained by contacting BT on 1300 881 716, or by visiting bt.com.au. You should obtain and consider the relevant PDS before deciding whether to acquire, continue to hold or dispose of interests in the Panorama products.
In addition, BTPS is the provider of the SMSF Establishment Service and the SMSF Administration Service. A Guide and Terms and Conditions is available for each of these services by contacting BTPS on 1300 881 716.
BTPS, BTFM and WSFL are subsidiaries of Westpac Banking Corporation ABN 33 007 457 141 (Westpac). Apart from any interest investors may have in Westpac term deposits, Westpac securities or the BT CMA acquired through the Panorama products, an investment in, or acquired using the Panorama products, is not an investment in, deposit with or any other liability of Westpac or any other company in the Westpac Group. These investments are subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. Westpac and its related entities do not stand behind or otherwise guarantee the capital value or investment performance of any investments in, or acquired through, the Panorama products.
The information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material.
© BT Financial Group – A Division of Westpac Banking Corporation. Information current as at 15/08/2016.