Self Managed Super Funds are great – but what are the Loan, Related party and Tax issues?

Setting up a self-managed super fund can be a great experience for those of us who love to manage our own money. Maybe in the current climate its not too pretty to see your money drop, or the market go sideways, but at least your destiny is in your own hands. You can:

  • Choose a share portfolio and investment mix to fit your exact aims and to complement your personal investments.
  • Borrow to invest (via an installment warrant) which is best suited to property purchases to grow your retirement savings over the long time.
  • Do not necessarily need to have a lot of money in super to make it cost effective especially if you negotiate good accounting and audit fees upfront and can minimize and sensibly justify the management expenses involved.

The world is your oyster! But what many people do forget though is that the money in self managed super funds (SMSFs) is not theirs and has many rules like:

  • it usually cannot be leant as a loan to related parties of the fund
  • most people cannot withdraw money from super yet
  • some investments are not generally allowed in a fund
  • as members and trustees there are specific duties required of you and
  • you could potentially lose almost half of the money in your super fund if you commit a serious breach and make the fund non-complying

The ATO releases many warnings about SMSFs and the amount of funds it has audited, found mistakes in, disqualified trustees for and the number of auditors it has castigated. We don’t want to scare you off self-managed super, but just remember you need to:

  • dedicate enough time
  • put in the investment effort
  • plan your future goals and
  • get professional advice

We have a strong background with SMSF administration, compliance and tax planning. Contact us today to discuss your situation.

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