Slide 1

Self managed super funds
Take control of your super
Speaker’s name
April 2013
This information was prepared by Securitor Financial Group Ltd, ABN 48 009 189 495 AFSL &
Australian Credit Licence (ACL) 240687 (Securitor) and is current as at January 2013.
Material contained in this presentation is an overview or summary only and it should not be
considered a comprehensive statement on any matter or relied upon as such.
This presentation contains general information only and does not take into account your personal
objectives, financial situation or needs and so you should consider its appropriateness having
regard to these factors before acting on it.
All case studies and examples used in this presentation are for illustrative purposes only and
nothing in this presentation should be construed as an indication or prediction of future
performance or results.
Any taxation position described in this publication should be used as a guide only and is not tax
advice. You should consult a registered tax agent for specific tax advice on your circumstances.
As the rules associated with the super and pension regimes are complex and subject to change
and as the opportunities and effects differ based on your personal circumstances, you should seek
personalised advice from a financial adviser before making any financial decision in relation to any
matters discussed in this presentation.
April 2013
What is a self-managed superannuation fund (SMSF)?
Setting up an SMSF
Things to consider as a trustee
Things to consider when managing the fund
How should trustees be investing?
Strategies for SMSFs
Next steps
April 2013
What is an SMSF?
What is a self-managed super fund (SMSF)?
An SMSF is a superannuation fund that you manage yourself.
It provides retirement benefits for its members in the same way as a regular
super fund.
There are however some complex rules and regulations to be mindful of.
SMSF market1:
– 478,263 funds registered with the Government
SMSF Share of
– 35,276 new funds established last 12 months
– 31.3% of total super assets are held in SMSFs
($439 billion)
– 913,550 members
1 ATO Quarterly Statistics June 2012
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Type Super
- Can choose risk
- Insurance benefits
- Task: Keep
Wrap Type
Super Fund
Direct property
- Cash
- Shares
- Bonds
April 2013
Where do SMSFs fit into the super landscape?
Customer drivers of SMSF
Control of investment decisions
Full trustee responsibilities
Direct Investments options
Lack of knowledge
Investment returns
Time consuming to run
Lower costs
Tough penalties for breaching rules
Ability to gear
May be uneconomic for low balances
Tax management
Extra legal responsibilities
Flexible retirement pension options
Potentially higher costs
Flexible estate planning / protection
Maximum of four members
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Setting up an SMSF
Steps to setting up an SMSF
1. Obtain a trust deed
2. Appoint trustees
3. Sign a declaration
4. Collect members’ TFNs
5. Contribute or transfer assets to the SMSF
6. Lodge an election with the ATO
7. Open a bank account
8. Establish an investment strategy
9. Obtain death benefit nominations from each member
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Obtain a trust deed
A trust deed establishes the rules and conditions governing the fund.
These may include:
– Details of the trustees and who can be a trustee
– How trustees may be appointed and removed
– Trustee powers
– Who can contribute to the fund
– What types of benefits can be paid
– What types of investments can be used
– Procedures for winding up the fund
– Intention to create a Trust
It is important that the trust deed is signed and properly executed
April 2013
Appoint trustees
The trustees of a SMSF can be either:
– each member must be a Trustee and each Trustee must be a member,
– except for single member funds, which must have 2 Trustees
– each member must be a director of the corporate trustee company, and
– each director must be a member of the SMSF
April 2013
Sign a declaration
All trustee(s) or director(s) of the corporate trustee of the SMSF must declare
they understand their obligations, duties and responsibilities.
Some obligations and responsibilities include:
– Acting honestly in all matters affecting the SMSF
– Acting in the best interests of the members
– Formulate and implement the investment strategy
– Keep SMSF assets separate from personal and business assets
– Allow members access to certain information
April 2013
Lodge an election with the Regulator
To become a complying super fund and receive the associated tax
concessions, a fund must elect to become regulated.
Must register with the ATO within 60 days of starting fund
ATO will allocate a TFN and ABN to all registered funds
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Open a bank account
Set up a bank account to accept contributions, rollovers and earnings, pay
fund expenses and liabilities and purchase investments.
Bank account must be in the fund’s name.
The bank account is used to manage daily fund operations and often referred
to as the “Hub account”
Should be kept separate from individual trustee bank accounts
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Establish an investment strategy
Trustee obligation to have an investment strategy which sets out the guidelines
for all future investments by the fund.
Must have regard to whole circumstances of fund:
– Risk & return
– Diversification
– Liquidity
– Ability of the fund to discharge liabilities
– Strategy should consider objectives of each member
– Separate strategy to manage fund reserves
– Include insurance coverage
– Review investment strategy
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Obtain death benefit nominations
Members can provide the trustee with a written death benefit nomination.
Nominations should state who is to receive their super benefit upon their
death and in what proportion.
Nominations can be:
– Binding
– Non-binding
– Reversionary (for pensions)
April 2013
Things to consider
as a trustee
Things to consider as a trustee
An SMSF can have no more than four members.
The trustees of an SMSF can be either individuals or a company.
No member of the SMSF can be an employee of another member, unless the
members concerned are relatives.
Trustees must carry out their duties without payment.
Trustees are bound by law to responsibly manage the fund and are personally
liable for any actions of the fund.
Trustees will be required to set aside time for the ongoing management of the
April 2013
Things to consider as a trustee
A trustee cannot be a ‘disqualified person’, meaning the trustee:
– has never been convicted of an offence involving dishonest conduct
– has never been subject to a civil penalty under the SIS Act
– is not insolvent under administration (an undischarged bankrupt)
– has never been disqualified from acting as a trustee of a
superannuation fund by the regulator.
A company cannot act as trustee if:
– a responsible officer of the body corporate is a disqualified person
– a receiver, official manager or provisional liquidator has been appointed
– the company has been wound up.
April 2013
Things to consider when
managing the fund
Things to consider when managing the fund
Investment strategy
– Trustees are required to prepare and implement the investment
strategy and regularly review it.
– Strategy must reflect purpose and circumstances of the SMSF.
– Must consider whether insurance should be purchased by the SMSF.
– The SMSF’s assets must be held separate to the trustee’s personal
assets, and valued to market each year.
Insurance via superannuation
– Death, TPD and Income Protection policies can be purchased by the
Beneficiary nominations
– binding and non-binding
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Things to consider when managing the fund...
SMSF must provide an independent audited annual return to ATO
– Must include member contribution information including rollovers from
other super funds.
Record keeping
– Accounting records, such as annual operating statement, annual
statement and annual returns, must be kept to record and explain
transactions and the fund’s financial position.
– Trustees must ensure the SMSF complies with Superannuation Industry
(Supervision) legislation (SIS)
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How should trustees
be investing?
The Fund’s investment strategy
As a trustee you must consider:
Risk involved, likely returns and fund objectives
Composition of a fund’s investments, diversification
Liquidity requirements of the fund
Ability of the fund to discharge present and future liabilities
Insurance needs for members
Members risk profile:
– Risk profiling will impact on asset allocation
– One risk profile for the fund?
– Multiple risk profiles for individual members?
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How much are
members prepared to
lose and still be
The different types of assets
Core type
Satellite type
Cash / Term Deposits
Directly held shares
High interest savings a/c
Self-finding instalment warrants
Diversified fixed interest
Specialised managed funds
Tailored term deposits
Global property
Australian property
Hybrid securities
Managed funds
Global fixed interest
Exchange Traded Funds (ETFs)
Capital protected products
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Strategies for SMSFS
Strategies for SMSFs
1. Purchasing a residential investment property with borrowed funds
2. Purchasing a business real property with borrowed funds
3. Avoid the liquidity trap – helping trustees plan for the future
4. Insurance in SMSFs – helping trustees meet their members’ insurance
5. Borrowing to invest within an SMSF
6. SMSF and Estate Planning
April 2013
Strategies for SMSFs...
1. Purchasing a residential investment property with borrowed funds
– If an SMSF don’t have sufficient funds for a full purchase, but has
enough for a partial funding.
– Your SMSF can purchase a residential investment property under a
Limited Recourse Borrowing Arrangement (LRBA).
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Strategies for SMSFs...
2. Purchasing a business real property with borrowed funds
– Your family company wants to unlock cash that’s currently tied up in
your business premises, which is owned outright.
– Your SMSF, which holds a significant amount of cash, can purchase the
business premises from your company under a Limited Recourse
Borrowing Arrangement (LRBA).
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Strategies for SMSFs...
3. Avoid the liquidity trap
An advantage of having your own SMSF is the variety of investments you can
invest in (i.e. rental and business properties)
However, there is a potential problem when large assets like property are held.
If an SMSF must meet an obligation to pay benefits property may be may be
slow or difficult to sell in an emergency.
April 2013
Strategies for SMSFs...
3. Avoiding the other liquidity trap – at pension time
The liquidity trap for SMSFs isn’t just about emergencies
Pension payments in retirement mean you need ongoing cash flow
Take care before committing to the purchase of a single asset that will
represent the majority, if not all of the fund’s assets
A diversified investment portfolio including cash, managed funds, and listed
shares can be effective in managing:
– volatility; and
– the need for liquidity and divisibility
To enable timely payment of super benefits to members.
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Strategies for SMSFs...
4. Insurance in SMSFs
Providing insurance cover within a SMSF
Insurance cover for members is owned by the fund on the life of the members
The fund can insure members for:
– Life Insurance as a result of death
– Total and Permanent Disablement
– Income Protection
The fund can claim a tax deduction for certain insurance premiums.
Provides cash liquidity to enable payment of death benefits to beneficiaries.
Provides protection for any borrowings within the fund.
April 2013
Strategies for SMSFs...
5. Maximising franking credits in your SMSF
Purchasing high-yielding, fully franked stocks, means you can earn higher
franked dividend income and potentially generate excess franking credits in
your SMSF.
Excess franking credits may be used to:
– offset taxable contributions; or
– offset tax payable on earnings from other investments within the SMSF;
– obtain a refund of any excess credits after offsetting tax on other
income within the fund
Using instalment warrants to borrow to invest can help to maximise the
franking credits available to you
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Strategies for SMSFs...
5. Borrowing to invest within an SMSF
It is a concessionally taxed environment
Can use super contributions and investment income to service loan
Have met the concessional and non-concessional contribution caps but still
wish to increase their SMSF portfolio
Want to bring forward the purchase of investments via superannuation
How does it work?
April 2013
Strategies for SMSFs...
5. Borrowing to invest within an SMSF....
Issues to consider:
Steps to borrow through SMSF:
SMSF trustees must formally agree to
the use of a borrowing arrangement.
Cash flow
Decide which asset to purchase in line
with the fund’s investment strategy.
Investment restrictions
Establish the Custodian Trust to
purchase the asset
Arrange finance – either related party
or commercial loan
Arrange the relevant loan
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Strategies for SMSFs...
6. SMSF and Estate Planning
In the event of death of a member the SMSF can pay death benefits in the
form of:
– a lump sum to beneficiaries
– a pension to a SIS spouse dependant or child dependant beneficiaries
– a reversionary pension to spouse for existing pensions
Super death benefits do not form part of your estate unless the estate is
nominated as beneficiary under binding or non-binding death benefit
nomination form.
If structured correctly the SMSF can be an efficient way to pass assets to
April 2013
Next steps
Next steps
Consider whether an SMSF is right for you.
Speak to a Westpac Financial Planner to discuss your goals and financial
April 2013

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