Accounting For Super is a team of accountants and advisers within Brandi & Co, dedicated to helping Australians set up and run their own Self-Managed Superannuation Funds.

AFS offers the full suite of superannuation services, from establishing a fund through to investment strategies, from regulatory compliance through to the benefits phase. 

We know how to tailor a fund to make the most of your income and how to align its returns to your retirement needs.

An SMSF puts you in command of your retirement savings like never before.

“Part of the appeal of an SMSF is controlling and having access to a broader range of investments,” says ASIC website Moneysmart.

But it’s not a decision that should be taken lightly. It takes time and some understanding of investment, tax and super laws. The rules and responsibilities can be daunting.

“It’s a major financial decision and you need to have the time and skills to do it,” says the Australian Taxation Office. “It’s best to see a qualified, licensed professional to help you decide.” 

With AFS, you will have qualified professionals with more than 40 years’ superannuation experience right by your side, every step of the way.

An SMSF is a retirement savings trust fund run by the members, as opposed to super funds run by companies, industry bodies or the government.

SMSFs offer similar tax advantages to those large funds, but are smaller (limited to six members).

To qualify for the tax benefits – and avoid heavy penalties for non-compliance – a fund “needs to be maintained for the sole purpose of providing retirement benefits to your members”, says the ATO. 

There are almost 600,000 SMSFs  in Australia with more than 1.1 million members.

They control assets worth around $820 billion, with the average member holding $696,000.

The fund is established by a trust deed, with the trustees either individual members or a company with members as directors. Having a company as trustee is cost effective and easier to administer when members join or leave.

An SMSF needs to register with the Australian Taxation Office, acquire an Australian Business Number and Tax File Number, and set up a bank account. If it is going to receive employer contributions or rollover funds from existing super accounts, it will need to join the electronic payments service SuperStream.

* On average, around 500 new SMSFs are set up every week, and typically have two members. Most SMSF members are 45 years or older, and 53% are male.

More than 70% of members have an annual income of less than $100,000.

An SMSF is required to write an investment strategy that takes into account risk, diversity of assets, liquidity and ability to pay benefits and costs. It also needs to decide whether to hold insurance cover for members.

Most asset classes are allowable including shares, term deposits, debt securities, trusts, managed investments and property, and they can be domestic or overseas.

Collectables, such as jewellery, artwork and classic cars, are allowable but special rules apply. They must be insured by the fund itself, and not used by members or related parties. Storage and display is also restricted.

The most popular asset classes held by SMSFs (by value) are listed shares (28% of total) and term deposits (18%).

The least popular investments – including overseas property, collectables and crypto-currency – together account for less than 0.2% of total SMSF assets.

SMSFs are subject to tight rules around gearing to buy assets and any loan must be a “limited recourse borrowing arrangement”. It must be used to purchase a single asset or collection of assets with equal value, which is held in a trust.

“If the loan defaults, the lender’s rights are limited to the asset held in the separate trust. This means there is no recourse to the other assets held in the SMSF,” says the ATO.

The loan repayments must be made by the SMSF and no alterations to the property can be made until the loan has been repaid.

ASIC website Moneysmart cautions that SMSF property loans tend to costlier than other loans and hard to cancel.

An SMSF can also lend money, but again strict conditions apply.

SMSFs hold almost $57 billion in assets are under limited recourse borrowing arrangements, or 7% of total assets.

SMSFs need to keep minutes of meetings, track member contributions and balances, prepare annual accounts and financial statements, lodge a tax return and arrange for an independent audit every year.

Moneysmart quotes a report that says the average trustee spends eight hours a month managing their SMSF.

It says the average fund in 2019 cost $6,450 a year to run, including administration expenses and audit costs, but not including investment expenses or insurance premiums. In this regard, it’s worth remembering that the average fund has two members and $1.3 million in assets.

SMSFs spent a total of $3.6 billion on operating and administration in 2019-20, or 0.4% of total assets.

Leaving aside special arrangements such as the First Home Super Saver scheme or COVID-19 early release payments, a member has to meet a condition of release before benefits are payable.

A key concept here is preservation age, which ranges from 55 to 60 depending on your birth date. Once that age is reached, a member can either retire or keep working and activate a Transition to Retirement stream.

Anyone 60 or over can access funds when they leave a job. Someone over 65 can access benefits at any time, and funds are also released when a member dies.

Leaving aside special arrangements such as the First Home Super Saver scheme or COVID-19 early release payments, a member has to meet a condition of release before benefits are payable.

A key concept here is preservation age, which ranges from 55 to 60 depending on your birth date. Once that age is reached, a member can either retire or keep working and activate a Transition to Retirement stream.

Anyone 60 or over can access funds when they leave a job. Someone over 65 can access benefits at any time, and funds are also released when a member dies.

An SMSF can pay a member using an income stream – a pension – or a lump sum, or a combination of both.

An income stream can be paid weekly, fortnightly, monthly, quarterly or annually but must meet a minimum payment condition expressed as a percentage of the fund value that is in pension mode.

These minimums increase with age but once payments start, they must continue. Under special arrangements for COVID, the minimums were reduced to help retirees maintain their fund balances.

If you are 60 or over and meet a condition of release, lump sum payments are tax free.

 In 2019-20, SMSFs received $12.6 billion in member contributions, $5.4 billion in employer contributions, and paid $32.4 billion in benefits.