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Superannuation SMSF FAQ .

Frequently Asked Questions

Self Managed Superannuation Funds

What is a Self Managed Superannuation Fund?

It is a superannuation fund which you manage yourself. As a trustee of your SMSF, you decide where to invest your superannuation monies. You take total control of your retirement.

You no longer depend on the conservative investing of fund managers and their high fees for little return.

Why would I set up a Self Managed Superannuation Fund?

By setting up your own self managed superannuation fund, you take control of your retirement planning. You become responsible for your own investment decisions and you become entitled to tax savings that you otherwise wouldn’t be entitled to.

SMSFs can also be used for asset protection from gold digging parasites. Assets held in your SMSF cannot be touched by creditors in many situations, eg. in a bankruptcy petition or company liquidation, your assets cannot be touched.

Does this mean I can access my retirement monies early?

Definitely not. The restrictions remain the same.

That is, apart from exceptional circumstances, you cannot access your superannuation monies until you turn 60 years of age (or 55 years of age, depending on the year that you were born). Even then, you cannot access your monies until you retire from work.

What can I do with my Self Managed Superannuation Fund?

You can do a lot of things, including:

  • Buy property
  • Buy property options (including the 10-12 year Shepparton land deals)
  • Borrow to buy property (see our separate brochure on this)
  • Buy shares and trade shares
  • Trade derivatives, ie. options, forex (in certain situations), CFDs, warrants (but not futures or Eminis, except if you are using an autotrader in limited situations)
  • Buy artwork, wine, jewellery, antiques, rare stamp collections, other investments (subject to certain limitations)

You can invest in most things that any other structure invests in, depending on your investment strategy (a document that you have to have that outlines the investment strategy of your Superannuation Fund).

Are there any restrictions in what my Superannuation Fund can do?

Yes. There are a few restrictions.

As a rule, your SMSF can invest in most things, depending on Your investment strategy. Your SMSF can invest in investments such as shares, managed funds, property trusts, art, antiques and rare collections. And many other things too.

There are, however, a few restrictions.

  • Your SMSF must be set up for the sole purpose of providing for your retirement. So for example, you cannot buy a house to live in.
  • Your SMSF cannot borrow apart from exceptional circumstances
  • Although you can trade most markets, including options, CFDs, shares, and forex, you have some limitations with futures and forex due to the borrowing rules … you must always seek professional advice before trading through your SMSF
  • You cannot transfer your own assets into your SMSF (unless they are shares listed on the stock market, or property used for business premises).
  • Your SMSF cannot provide you with any financial assistance, eg. you cannot borrow money from your SMSF to finance your business, even at market interest rates. This breaches what is known as the “in-house” rules

Therefore, it’s important you seek professional advice before doing any investing or trading from your Superannuation Fund. You can get into a lot of trouble for breaking these rules.

What other restrictions do I have?

There are a couple of important restrictions:

  1. Your Trust Deed must allow you to do your strategy. For example, if you want to trade derivatives, your Trust Deed must specifically allow you to do it
  2. You must have an Investment Strategy that allows you to do your strategy, eg. trade options, and it must be a prudent investment strategy that a reasonable person would do, eg. you couldn’t speculate all your money on penny mining stocks or cheap out of the money options
  3. There are other duties and requirements as to prudent investing which the law places on you.

It is important that you seek professional advice before doing anything from your Superannuation Fund.

Can I use my Self Managed Superannuation Fund to buy a house to live in?

As stated above, definitely not.

Can I use my Self Managed Superannuation Fund to trade options or do buy writes, CFDs or forex?

Yes you can trade options, subject to certain precautions you have to take if you are trading naked (and no I don’t mean without clothes … you have a naughty mind to even think that J … I mean without proper call or put protection!)

There are difficulties with futures or CFDs or forex and you cannot trade these except in very limited circumstances, and you will need specific advice.

There are other restrictions. You need to have a proper investment strategy and Your fund rules need to allow you to do it. Not only that, but there are other duties and requirements as to prudent investing which the law places on You.

Therefore it’s important You seek professional advice before trading from Your SMSF.

How much money should I have before setting up a Self Managed Superannuation Fund?

This depends on the returns you expect to get each year from your investing. This is something you would work out with your financial planner.

It costs $1,750 to $3,000 to set up a Self Managed Superannuation Fund, depending on the way it is structured.

It costs between $3,000 to $5,000 (depending on the level of investments and activities of the Self Managed Superannuation Fund) to prepare tax returns and audit your Superannuation Fund.

As a minimum you should have at least $100,000 to set up a Self Managed Superannuation Fund (in fact, ASIC recommend that you should have $200,000). That said, there is no set figure, it comes down to the expected returns (you need to work this out carefully yourself or in conjunction with your financial planner).

Ultimately you calculate your expected returns against the estimated costs to run the Fund and determine if it is worth your while to set up a Self Managed Superannuation Fund.

How many people can you have in a Self Managed Superannuation Fund?

You can have a maximum of 4 members (related or unrelated). Each member must be a trustee of the SMSF (or a director of the trustee company).

How much should I have in Superannuation before setting up a SMSF?

It depends entirely on the level of returns You can reasonably expect to generate per annum.

To give You an indication, it costs between $400 – $1,500 (depending on the level of investments and activities of the SMSF) to prepare tax returns and audit a SMSF.

As a general rule, you should have at least $20,000 before setting up Your SMSF. Ultimately You need to calculate Your expected returns against Your estimated running costs and determine if it is worth Your while to set up a SMSF.

What are the tax rates?

Superannuation is useful to save tax for employees and business people.

Up until age 60, you only pay 15% tax in your Superannuation Fund.

Once you turn 60, you don’t pay any tax if you take the money as a pension. If you leave the money in your Fund to grow, you will keep paying 15% tax.

Can I use the pre-tax dollars to pay the running costs from the SMSF?

You can also use your pre-tax dollars to pay for all the usual running costs of your Fund. Expenses such as audit fees, life insurance, limited sickness and accident insurance, some home office costs, education and training costs, and your computer equipments and trading software costs, can all be paid out of the pre-tax income of the Fund.

However, make sure you get professional advice before you do any of this as it can get you into trouble in the audit if you pay non-superannuation expenses from your Fund.

Where to from Here?

At Wealth Safe, we can set you up with a Self Managed Superannuation Fund. This gives you control of your own retirement monies so you can increase your returns and ensure that you are financially independent by the time that you retire and need a pension.

You won’t be dependent upon the government for a pension (which would be very risky).

We ensure your fund is set up to comply with what the Tax Office wants, so you don’t run into problems down the track. We help your superannuation, planning and retirement advice.

We can also link you with experts who can show you “out of the box” investment strategies to help you grow your wealth quickly, but with low risk, safely and securely.

Click here to speak to one of our specialists and find out how to take control of your retirement and set up your SMSF.

Contact us today to ensure your assets are properly protected. You can either contact us on 1300 669 336 or click here to organize a free consult no obligation.

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