Self Managed Super Fund Restrictions

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Self Managed Superannuation Fund's Restrictions

Before embarking on a self managed superannuation fund (SMSF) journey, potential trustees need to make sure that they not only understand all pros and contras of managing a DIY super fund, but also, they need to read on the subject continuously, and be well informed with the ongoing legislative and compliance issues.

The recommended and prudent approach is always to seek the professional advice from an AFSL holder before making any financial decision! (AFSL -Australian Financial Services Licence - is a license issued by ASIC under the FSRA that permits the issuing of a financial product or giving of financial product advice.)

If considering a Self Managed Superannuation Fund (SMSF), please note the following restrictions relevant to SMSFs:

Lending to members and their relatives,
Acquiring assets from 'related parties' of the fund,
Borrowing,
Investing in in-house assets,
All investments need to follow the two main rules: "sole purpose test" and "arms' length".

It is the duty of the SMSF trustees to separate the SMSF assets from their own personal assets, or assets belonging to their business.

SMSF assets cannot be used for personal or business purpose, this representing the "sole purpose test" i.e. the funds in the SMSF are for retirement purposes only, and cannot be accessed generally until retirement.

Money from the fund must not, under any circumstance, be used for personal or business purposes, as mentioned above. The fund's assets must not be viewed as a form of credit or emergency reserve, should the need arise! The main purpose of the superannuation investment is to generate and grow retirement benefits for the members.

The ATO, being the regulator of the self managed superannuation funds, offers trustees booklets emphasising the importance of fulfilling SMSFs obligations when it comes to compliance issues.

One of these booklets "Role and responsibilities of trustees" is a must reading for everyone running or thinking about starting their own self managed superannuation fund, and it covers SMSF issues from "A to Z" including:

What is superannuation?
What is a self managed superannuation fund?
Superannuation Industry (Supervision) Act (SIS Act) requirements
Compliance with the sole purpose test
Accepting the contributions in accordance with the rules
Managing the fund's investments
Paying benefits in accordance with the rules
Meeting administrative obligations
Appointing an approved auditor
Winding up the self managed superannuation fund
Penalties and compliance
Compliance checklist for trustees.

Copies of the booklet are available by contacting the ATO Super Helpline: 13 10 20, or you can download a copy from www.ato.gov.au/super

SuperEasy Pty Ltd is not licensed to provide advice on investments, or legalities of the types of investments that you can have. SuperEasy® strongly recommends that you seek professional advice before making any investment choice or decision!

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