3 things you might not know about SMSFs
Maintaining a self-managed super fund (or SMSF) can feel like owning a beast with many arms and legs. You may feel comfortable with a few elements of managing your monster, only for an unexpected limb to appear out of nowhere and slap you around the face.
Shares, units and bonds that are listed on an approved stock exchange can often be transferred into the super fund
However, if you can tame your SMSF, it's an extremely useful way to create a sizeable nest egg come your retirement. As the old saying goes, knowledge is power, so to strengthen yours, we ask: do you know these three things about your SMSF?
1) More Aussies than ever before have one
According to the Australian Tax Office (ATO), the number of SMSFs active across the country has grown substantially over the past half decade. ATO figures show that there were 758,589 members maintaining 399,386 SMSFs as of June 2009.
By June 2014, there were more than a million members to 534,176 SMSFs – a growth rate in terms of members of around 33 per cent in only five years.
2) You can put your business property into your fund
If you place your Whitsunday Shire business property into your SMSF, you can find the security of a constant flow of cash through rent. There are a few conditions for doing so, however.
- The property must be used solely for business purposes, so can't also be an apartment or recreational space, for example
- The purchase must be permitted by the fund's investment strategy
- Your SMSF must buy your business property at market rate, and the rent must meet the same criteria
- You must maintain the fund in accordance with 'arm's-length' rules
Depending on your situation, there may be further considerations – around capital gains tax and estate planning, for instance – so it's smart to get SMSF advice before making any sudden movements.
3) Your shares can also be transferred into your fund
Shares, units and bonds that are listed on an approved stock exchange can often be transferred into the super fund as a contribution by the member, rather than the fund buying them (as in the business property example above).
- All shares must be transferred at market value
- It must be part of the SMSF's investment strategy
- Should the fund pay dividends, it must go to the super fund, not the member's bank account
This strategy may open the door to further capital gains tax. Again, it's important to get your strategy right from the start, so contact your financial planner for on-the-phone advice. Seeking help will ensure you stay compliant with the various SMSF rules and laws, taming your super fund beast's flailing limbs so they can work in your favour.