things to be aware of before deciding

Know your responsibilities

All trustees/directors of SMSFs are equally responsible for the running of the fund. You should understand your responsibilities and penalties for non-compliance, as well as understand if you are eligible to run an SMSF and satisfy the residency rules before setting up your fund. You can learn more about SMSFs from the ATO website here

You Must Not Use The Funds For Personal Use

You can not access your superannuation until you reach retirement age. Make sure you do not use the funds for personal use. Not even for 1 day. Using your SMSF funds for personal use can get you a jail sentence, a fine and your assets frozen. Check out the ATO website to see when you can access your super. 

Keeping things separate

All SMSF accounts and transactions must be kept totally separate from your personal accounts. So you need to set up dedicated SMSF accounts for banking, crypto, share trading accounts etc. Mixing funds with personal accounts could end you up with a hefty fine from the government.  So make sure you check with us if you are unsure.

Check your insurances

You can hold life insurance, income protection and TPD (total and permanent disability) insurance in your super.  If you are considering cancelling your insurance in your existing fund, you should seek financial advice from a licensed financial adviser as you can lose insurance benefits which you may not be able to replace with a new insurance policy.

No borrowing, leveraging or shorting allowed

You cannot borrow, leverage or short any assets within the SMSF. You are not allowed to use the collateral in the SMSF to secure other loans either.  Doing so could leave you with a government fine. You can borrow to purchase property in an SMSF if you set up a bare trust and comply with the limited recourse borrowing requirements in the SIS Act.  We can offer assistance with setting up the bare trust for additional costs.

Supported providers and data feeds.

We use data feeds to simplify the process and reduce costs for you.  We use supported providers to ensure the data feeds work smoothly and reporting satisfies auditor requirements.  Please ensure you are familiar with the supported providers you can use in conjunction with our services. You are also required to provide “read only” access to SMSF accounts via API or data feed where available. This means less work for you at tax time.

400 Transactions per financial year within the fund

Our $165 per month accounting fees cover the tax returns, audits and compliance on up to 400 non-bank transactions within the fund per financial year. This is more than enough for the vast majority of clients. Additional transactions will be charged at $4.40 per transaction.

Contributions are taxed

It is important to understand that the  contributions you and your employer make to your super are taxed. This is exactly the same as your normal retail superannuation fund but you do not notice this with a retail super fund because it gets taken out automatically. However for SMSF’s, you get to control all the money throughout the year and the contributions tax (15%) is added to your tax bill at tax time.

Multiple members in the SMSF

You can have up to 4 members in your SMSF. While the setup costs are the same regardless of how many people are in the fund, funds with additional members are charged an extra $20 per month per additional member . Each member is equally responsible for the running of the fund. The SMSF runs as one entity so you cannot for example say “this is my gold and this is your bitcoin.” Each member owns a proportion of the fund. 

You are taking on 2 roles.

It is important to understand that each person in the fund is acting as a member and a fund manager. You as the fund manager are responsible for investing the member’s money for their retirement. It is against the law to borrow from the fund for personal use.

Consider if an SMSF is right for you

The standard time it takes from completing the application until you own assets in your new SMSF is 2-3 weeks. This is true for most applications. However, hold ups can occur. 

The most common hold up is waiting for the ATO to approve the fund. The ATO approval is needed before you can fund your SMSF. If it takes longer than a week for the ATO to approve the fund you are likely getting an initial audit. This is where an ATO representative will double check the paperwork and want to ask you questions to make sure you understand your responsibilities in running an SMSF.  This will add a few weeks to your set up process as the members will need to book in a time to speak with the ATO rep. 

If your application for an SMSF is denied by the ATO we do not offer refunds as most costs go to ASIC, legal and administrative costs before ATO approval comes in. You should consider taking advice from the holder of an Australian Financial Services Licence before making a decision on a financial product and if you fall into any of the categories below, you should seriously consider waiting to set up an SMSF until your circumstances change.

  •  not up to date with other tax obligations (as in 1 year or more overdue)
  •  unemployed
  •  on government benefits.
  •  a low income earner
  • it does not make financial sense for you to have an SMSF.
We are here to help.

While New Brighton Capital does not offer financial advice, we are here to help. If you are unsure of some of the ins and outs regarding an SMSF, why not book a free consultation with one of our team who can answer your questions in plain English?

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