Self Managed Super Funds presenter Barbara Smith CPA CFP Technical Director, Taxpayers Australia Executive Director, Superannuation Australia www.taxpayer.com.au June 2001 www.taxpayer.com.au

Small funds data Dec 2000 A force to be reckoned with: About 215,000 small funds Members: about 427,000 Assets held: $73 billion Average assets per member: $147,500 www.taxpayer.com.au

Self managed super funds have 1 - 4 members, for example: a single person husband & wife 3 friends 4 family members 4 individuals in business together www.taxpayer.com.au

If you want to start a SMSF What you need to do: decide on the trustee (company or members) organise and execute the trust deed admit members and arrange for contributions Complete and lodge the Application to Register for a New Tax System Superannuation Entities to apply for a TFN & elect to be regulated + an ABN, and if required register for GST www.taxpayer.com.au

Types of small fund Employer sponsored A personal fund but still make sure the deed allows the fund to accept of employer contributions Self Managed Superannuation Fund Small APRA Fund www.taxpayer.com.au

Who can be the trustee? The trustee(s) must be: for a SMSF a company with all members being directors, or individuals with all members as trustees, or for a small APRA fund an approved trustee www.taxpayer.com.au

What are the SMSF trustee rules? www.taxpayer.com.au

Advantages of SMSFs greater control of investments & tax management ‘I can do it better’ costs may be lower: costs of a managed fund include entry, account-keeping and fund manager fees cost of an self managed fund include set up fees, brokerage and stamp duty Fund managers charge entry fees of up to 5% and up to 2% annual management fees. www.taxpayer.com.au

SMSFs - Why not? If the fund becomes non-complying: tax concessions are lost can’t accept super guarantee contributions assets - UCs are taxed at 47% applies if trustee/members are non-residents Should the gov’t be in the business of ripping off our retirement savings because of technicalities? if not enough capital costs are higher time & cost involved in compliance www.taxpayer.com.au

Who cannot be a member of a SMSF? A person who is an arms length employee of another member UNLESS the employee is related to another fund member; or is a director of the employer’s company a disqualified person www.taxpayer.com.au

Disqualified person rules www.taxpayer.com.au

Deductible contributions Age based for 2000/01 under 35 $11,388 35 - 49 $31,631 50 or more $78,445 Self employed ded’n $3000 + 75% of excess up to age based limit employees can claim this ded’n only if they receive 10% or less assessable + exempt income + reportable fringe benefits from employer providing support www.taxpayer.com.au

Sole purpose of superannuation to provide benefits on: each member’s retirement each member reaching 65 or more or for each member’s dependants if the member dies before retirement or age 65 www.taxpayer.com.au

Investments You have a wide choice, but they must: be commercial & arms length comply with the fund’s investment strategy not be to lend to or provide financial assistance to members or their relatives generally not be from related parties not be encumbered or acquired with borrowed money www.taxpayer.com.au

Investments No related party can get an incidental benefit No borrowings or charges Can buy as tenants in common with a related party www.taxpayer.com.au

Assets than can be acquired from related parties Limited to stock exchange listed securities, eg listed shares 5% of the fund’s assets invested in inhouse assets, ie a loan, investment or lease with a related party (but not a member or member’s relative) widely held unit trust investments + for self managed funds business real property used 100% for business Can be used 100% for member’s or member’s company business www.taxpayer.com.au

Your investment strategy An allocation of assets among the major asset classes that must consider: risk expected return composition/diversification attitude of members to various investments liquidity requirements payment of liabilities www.taxpayer.com.au

Tax on a SMSF www.taxpayer.com.au

CGT payable by the Super Fund Indexation frozen at 30/9/99 For assets acquired before 21/9/99 and held for at least one year, the choice of including in assessable income either: two-thirds the realised nominal gain, or ALL of the difference between the disposal price and the frozen indexed cost base. For assets acquired after 21/9/99 & held for at one year+, tax on 2/3rds of nominal gain www.taxpayer.com.au

Tax credits in the SMSF A super fund has $600 taxable conts + $600 capital gain + franked dividends + imputation cr $1000 Tax is calculated: 00/01 taxable contributions $600 Capital gain $600 x 2/3 $400 Franked dividends $660 Imputation credit $340 Taxable income $2000 Tax payable @ 15% $300 Less imputation credit $340 Imputation credit refund $40 www.taxpayer.com.au

Getting your hands on the money When a condition of release occurs your super fund can pay you: a cash lump sum an allocated pension - pay yourself variable amounts a complying pension - pay yourself a lifetime or fixed term pension Death benefits: tax free to your tax dependants with your RBL www.taxpayer.com.au

www.taxpayer.com.au Questions? www.taxpayer.com.au

Superannuation Australia’s services DIY Superannuation Manual + quarterly updates to the Manual + practical seminars to walk you through + quarterly DIY Super Journal + telephone helpline speak to our experts when you need extra help + software BGL simple fund & BGL simple invest + books on superannuation & tax + trust deeds and updates www.taxpayer.com.au

Members of Taxpayers Australia enjoy benefits that include: 2000 & 2001 Tax Manual, over 800 pages our fortnightly Taxpayer journal discounted services & seminars our telephone help line to clarify your tax or superannuation problems ATO/government representation on taxation and superannuation issues www.taxpayer.com.au