There are two different trustee structures for a self-managed super fund (SMSF).
The following table outlines some of the issues relevant to each structure:
|Consideration||Individual Trustee||Corporate Trustee|
|Cost||Ongoing administrative requirements and establishment costs can be less for individual trustees than those associated with a corporate trustee because there are no Australian Securities & Investments Commission (ASIC) annual or upfront establishment fees.
There can be higher costs for individual trustees later, as noted below in discussingAdministration of fund assets, Penalties, andSuccession.
|Appointing a company to act as trustee raises initial costs for trustees, including upfront and ongoing administration costs.
ASIC charge $457 (excluding GST) to register a company for the first time. There is also an annual fee, depending on the purpose of the fund:
|Administration of fund assets||If a new trustee is appointed (such as they become a member of the fund) or an individual trustee is removed (such as they cease to be a member), changes to the title of the SMSFs assets are required to show the current trustees, and this can be a costly and time-consuming process.
Title changes as a result of changes in membership may incur a fee from the relevant state (government) authority. Most financial services also charge fees, in addition to any duties that may be payable to the state authority for the amendments to the title of the assets within the SMSF.
|The recording and registering of assets can be simpler, particularly if there are changes in membership. When members commence or cease membership of the SMSF, the process involved requires that the person becomes, or ceases to be, a director of the corporate trustee and notify ASIC and ATO of this change. The corporate trustee does not change just because someone becomes a member or stops being a member.
As a result, title to the SMSF’s assets remains in the name of the corporate trustee and there are no costs associated with title changes.
|Separation of assets||One of the important superannuation legislation requirements is that the assets of the fund must be kept separate from any assets held personally by the trustee. With individual trustees, there might be inconsistencies with the separation of assets between SMSF assets and personal assets; there is also a risk that fund assets may be intermingled with personal assets. Contraventions in this regard can incur penalties and other financial consequences.||The use of a corporate trustee, with a separate identity, reduces the risk of personal assets becoming intermingled with fund assets.
Also, as companies are subject to limited liability, a corporate trustee will provide greater protection if someone sues the trustee for damages.
|Penalties||Where a breach of the super law is detected, the new administrative penalties apply to each trustee of the SMSF. Each individual trustee is personally liable for the penalties, which can be up to $10,200 each, depending on the contravention.||
The penalties apply per trustee. With a corporate trustee, there is only one trustee and, therefore, one penalty.
|Succession||A fund with individual trustees is not likely to continue to operate as usual when changes in trustees occur, unless an appropriate succession plan has been prepared.
For many Australians, super is their largest asset and having an appropriate plan in place for control of an SMSF after death is beneficial.
|A company will continue in the event of a member’s death. With a corporate trustee, control of an SMSF and its assets is more certain in the event of the death or incapacity of a member.|
for more information please follow ATO link here
Up to 1 July 2013, the SMSF supervisory levy is payable for the financial year to which the self-managed super fund annual return (SAR) relates.
From 1 July 2013, the levy will be payable for the financial year in which the annual return is due – for example when you lodge your 2014-15 annual return, you will pay the levy for 2015-16 financial year. This is consistent with the rules for Australian Prudential Regulation Authority (APRA) regulated funds.
In order to bring collections forward, transitional provisions apply to the levy for the 2013-14 financial year so that it is payable in two instalments and collected upon lodgment of the 2013 SAR and the 2014 SAR.
The annual SMSF levy will also increase from $191 in 2012–13 to $259 from 2013–14. The levy will still be collected when the SAR is lodged.
The following table provides a summary of payments per financial year for existing and ongoing funds.
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Maintaining a healthy SMSF sector – Improving the quality of advice
ASIC today released Report 337 SMSFs: Improving the quality of advice given to investors (REP 337). The report summarises the findings from the first major project undertaken by ASIC’s Self-managed superannuation fund (SMSF) taskforce.
Self-managed super funds represent the fastest growing superannuation sector in Australia, with $439 billion assets held by funds.
ASIC Commissioner Peter Kell said ‘ASIC has ramped up its attention on a sector that is of growing importance to more Australian investors. We want to help ensure that we have a healthy SMSF sector.’
‘The decision to establish an SMSF is one of the most significant steps an investor can take in relation to their retirement savings. It involves taking greater personal responsibility for retirement investments. ASIC therefore wants to make sure those investors can be confident they can obtain good quality advice through gatekeepers such as accountants and financial planners,’ Commissioner Kell said.
‘At the very least, investors need to understand the time, resources, compliance obligations and risks associated with do-it-yourself superannuation, before moving their superannuation savings out of an APRA-regulated environment,’ he said.
To read more click here for ASIC web link
Applying for an ABN for Self-Managed Super Fund
The ATO has issued a fact sheet setting out how superannuation entities should apply for an ABN (NAT 2944). The fact sheet also contains the instructions for completing the application, with funds able to apply for an ABN either via the Australian Business Register at abr.gov.au, or by ordering a paper copy online or ringing 1300 720 092.
This guide is designed to help you as a self -managed superannuation fund (SMSF) trustee when valuing assets for super purposes. It is not a comprehensive handbook about valuations.
This guide does not take away your responsibility to manage investments prudently. You must ensure the fund’s investment strategy is reviewed regularly and takes into account the retirement goals of its members.
Table 1: Summary of valuation requirements
|Preparing the SMSF financial accounts and statements||Assets should be reported at market value.The valuation should be based on objective and supportable data.|
|Collectables and personal use assets – acquired after 1 July 2011Transfer or sale to a related party||Must be made at a market price determined by a qualified independent valuer.|
|Collectables and personal use assets – acquired before 1 July 2011Transfer or sale to a related party||For the period 1 July 2011 to 30 June 2016 transfers to related parties do not require valuation by a qualified independent valuer. However, these transfers should be made at an arm’s length price that is based on objective and supportable data.From 1 July 2016 transfers to related party must be made at a market price determined by a qualified independent valuer.|
|Transfers between SMSFs and related parties||Acquisitions of permitted assets must be made at market value.Disposals of assets must be made on an arm’s length basis.|
|Transfers between SMSFs and unrelated parties||A valuation is not required however the transfer must occur atarm’s length.|
|Determining the value of assets that support a super pension||The account balance needs to be determined on the commencement day of the pension or, for ongoing pensions, on 1 July of the financial year in which the pension is paid.An annual valuation is generally not required unless there has been event that significantly affects the value of the asset.The valuation should be based on objective and supportable data.|
|Testing whether the market value of the SMSF’s in-house assets exceed 5% of the value of total assets held by the fund||The value of a fund’s total assets needs to be determined on 30 June of the financial year the in-house assets are held.An annual valuation is generally not required unless there has been event that significantly affects the value of the asset.The valuation should be based on objective and supportable data.|
Some assets must be valued in a particular way – these are summarised in table 2. For more detail, see Specific requirements for asset classes.
Table 2: Events and valuations requirements
|Preparation of SMSF financial accounts and statements.||Based on objective and supportable data|
|Collectables and personal use assets – acquired after 1 July 2011 and transferred or sold to a related party after that date||Qualified independent valuer|
|Collectables and personal use assets – acquired before 1 July 2011 and transferred or sold to a related party before 1 July 2016||Transfer made at arm’s length pricethat is based on objective and supportable data|
|Collectables and personal use assets – acquired before 1 July 2011 and transferred or sold to a related party from 1 July 2016||Qualified independent valuer|
|Acquisition of an asset from a related party of the fund||Acquired at market value that is based on objective and supportable data|
|Disposal of an asset to a related party of the fund||Sale price should reflect a true market rate of return|
|Testing whether the market value of the SMSF’s in-house assetsexceeds 5% of the value of its total assets.||Based on objective and supportable data|
|Determining the value of assets that support a super pension or income stream.||Based on objective and supportable data|
We recommend the use of a qualified independent valuer where the value of the asset represents a significant proportion of the fund’s value or the nature of the asset indicates that the valuation is likely to be complex.
On 1 July 2011 rules were introduced into the Superannuation Industry (Supervision) Act 1993 (SIS Act) for self-managed superannuation fund (SMSF) investments in collectables and personal use assets.
These rules took effect on 1 July 2011. They apply to all collectable and personal use asset investments made by SMSFs on or after that date. If your SMSF held an investment in a collectable or personal use asset prior to 1 July 2011, it has until 1 July 2016 to comply with the rules. This transitional period provides SMSF trustees with existing investments in collectables and personal use assets time to comply with the rules.
Section 62A of the Superannuation Industry (Supervision) Act 1993 (SIS Act) provides that the regulations may make rules in relation to trustees of self-managed superannuation funds (SMSF) making, holding and realising investments involving collectables and personal use assets.
Regulation 13.18AA (1) specifies the assets that are taken to be collectables and personal use assets as:
Artwork is defined as a painting, sculpture, drawing, engraving or photograph, a reproduction of such a thing, or property of a similar description or use. Coins and bank notes are collectables if their value exceeds their face value. Spirits includes, but is not limited to, whiskey, gin, vodka, tequila, brandy and rum. Motor vehicles include, but are not limited to, motor cars and motor cycles.
As previously noted, it is important to remember the rules do not replace or supersede any existing requirements imposed by superannuation law in respect of your fund’s investments. That is, your fund is still required to comply with all existing legislative requirements, including the sole purpose provisions.
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|Revised reporting obligations will require superannuation providers to provide statements to us for all members who held an interest in the superannuation plan at any time during a reporting period, not just those for whom contributions were receive|
Self Managed Super Fund set-up
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Schedule 1—Trustee obligations
Superannuation Industry (Supervision) Act 1993
1 Subsection 10(1)
enhanced director obligations, for MySuper products, means the obligations imposed by:
(a) section 29VO; and
(b) covenants prescribed under section 54A that are specified in the regulations as forming part of the enhanced director obligations.
2 Subsection 10(1)
enhanced trustee obligations, for MySuper products, means the obligations imposed by:
(a) covenants referred to in section 52, as enhanced by the obligations imposed under section 29VN; and
(b) covenants prescribed under section 54A that are specified in the regulations as forming part of the enhanced trustee obligations.
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