In the realm of Self-Managed Super Funds, many things are possible, but there are also many rules that need to be carefully navigated. Our SMSF experts answer the most commonly asked questions regarding this popular retirement savings strategy.
What is a Self-Managed Super Fund?
A Self-Managed Super Fund, commonly known as SMSF, is a private superannuation fund that you manage yourself. The difference between an SMSF and retail or industry super funds is that the members of an SMSF are usually also the trustees or directors. You get to choose the investments, the insurance, and generally have more control over your retirement savings. This means the members of the SMSF run it and are responsible for complying with the super and tax laws.
How to Set Up an SMSF
Our SMSF Accountants have provided a detailed explanation of the 5 key steps to setting up an SMSF . Here’s a summary:
- Determine your trustee structure
- Receive your SMSF documents
- Setup your SMSF’s bank account
- Rollover your existing superannuation and start contributions
- Define and implement your SMSF investment strategy
Can I Have an SMSF and an Industry Fund?
Yes. You can have an active SMSF and an Industry Super Fund both working together to benefit your retirement savings. But it could have its disadvantages as you’ll be paying multiple fees and potentially paying for unwanted insurance. Speaking with a skilled financial planner about your superannuation will help you determine whether or not you need to maintain your existing super fund if you decide to set up an SMSF .
Can I Buy Residential Property in a SMSF?
Yes, residential property acquisitions are permitted. However, your SMSF can’t purchase the property from a related party of the fund. The ATO describes related parties as members of the fund, their relatives and their associates. Even if your SMSF purchases residential property from an unrelated party, neither you nor anyone related to you can live in that property. If you’re buying a property from someone you know, check if they’re a related party as per the ATO’s guidelines before you sign the dotted line.
Can I Live in My SMSF Property When I Retire?
If you’re wondering how to ultimately to live in your SMSF property, you’re not alone. Many of our clients seek advice on this as they approach retirement. The only way to do it is by transferring the property from your SMSF to yourself as an individual via an in-specie transfer .
Can I Buy Commercial Property in an SMSF?
Yes! An SMSF is the only way you can use your superannuation benefits to directly purchase commercial property. If you’re a business owner, you might’ve heard of the benefits of using an SMSF to own commercial property , which you can then lease to your business. There are a number of ways you can do this, and the rules can be complicated, but we’ve outlined all of that in our Guide to Investing in Property with your SMSF .
Can a SMSF Borrow Money?
SMSFs have the choice to borrow money to buy property via a Limited Recourse Borrowing Arrangement (LRBA). These loans require an additional structure to be set up as the property must be held in trust while there is a debt attached to it. BlueRock’s Finance experts can help with every aspect of securing SMSF Loans .
Can I Rent a Property Owned By My SMSF?
It depends. Business real property (i.e commercial property) can be leased to the members and related parties, however residential property cannot be leased to a related party of the SMSF.
Can I Airbnb My SMSF Property?
Yes, you can rent out a property owned within your SMSF on Airbnb and other short term rental sites. But residential leasing cannot involve a related party of the SMSF. For e.g, if your SMSF purchased a beach house that is rented out on Airbnb, no related party can stay there (even if they pay market rates for the stay).
If they do, the property would fail the sole purpose test, which states that the fund is to be maintained for the sole purpose of providing retirement benefits to its members, as opposed to present-day benefits. You can, however, lease a residential property to an unrelated party.
Can I Sell Property From My SMSF to Myself?
Yes, you can sell property held by your SMSF to yourself. But watch out for taxes and fees. When you transfer property between your SMSF and yourself personally, think about the possible capital gains tax. Also it is important to note that the sale must be at market value.
Can an SMSF Invest in a Private Company?
Generally yes. Your SMSF can invest in a private or public company. Just remember, if you have a controlling vote or interest, that investment might count as an "in-house asset”. The total value of these in-house assets cannot exceed 5% of the total value of the SMSF's assets. Advice should always be sought when thinking of investing to ensure compliance with the super rules.
When Can I Access My Self-Managed Super Fund?
Access to your Self-Managed Super Fund typically begins when a member reaches preservation age which varies depending on when you were born. This could be from age 55 to 60 while still working or retired (depending on satisfying the rules). Members over the age of 65 can access super regardless of working status. There are also special rules that apply where members can access super early, under the preservation age for example; financial hardship or on compassionate grounds. Speaking with your SMSF Accountant can help navigate these rules.
Where Do I Find a Great SMSF Accountant?
Look no further. You’re already here! BlueRock’s SMSF Accountants take care of all the things necessary to set up an SMSF, and meet your ongoing compliance and accounting needs. We also work alongside finance, investment, insurance and financial planning experts to provide a suite of complete SMSF solutions, from setups to investment strategies and ongoing accounting and administration. Get in touch today to speak with an advisor.
Disclaimer: It’s important to mention that most SMSF members will engage SMSF Specialist Advisors and Accountants to help guide them through the administration and compliance requirements of their fund. BlueRock can assist members by providing a holistic service and guiding them with their SMSF.
The information in this article is intended as general information only and should not be considered as advice on any matter and should not be relied upon as such. This information has been prepared without taking into account any individual objectives, financial situation or needs. You should therefore consider the appropriateness of the information before acting or seek advice before making any financial decisions.
