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Self Managed Superannuation Fund

FED

This publication guides practitioners through setting up, running, and amending self managed superannuation funds.

2 Matter Plans

Overview

The commentary covers setting up, running, and amending self managed superannuation funds, including limited recourse borrowing, investment strategies, pensions, death benefits and transfers to and from a SMSF.

The Reference materials folder includes guidance on electronic signing and witnessing, and the comprehensive Getting the matter underway folder includes compliance and client care documents. Using the extensive Retainer Instructions when gathering information ensures nothing is missed.

The Business Structures and the Comparative Table guide provides a comparison of the pros and cons of different business structures.

Precedents in this publication include:

  • SMSF trust deed and rules;
  • Binding death benefit nomination;
  • Example investment strategies;
  • Library of resolutions for fund investments;
  • Deed of amendment and rules;
  • Deed of change of trustee;
  • Limited recourse borrowing deed.
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2 Matter Plans Included

  • Item icon ALERTS - Nil
  • Item icon Full Commentary - Self Managed Superannuation Fund
  • Folder icon Reference materials
    • Item icon AI Prompts
      An AI prompt defines a specific task for AI to perform, like drafting a particular document, and provides clear instructions on how to execute that task. The goal is for the AI to quickly create a useful first draft of a document, which the user verifies and refines into a final version, ultimately ...

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    • Item icon Looking to the Future
    • Item icon Electronic Signing and Witnessing
    • Item icon 101 Costs Answers
    • Item icon Business Structures and the Comparative Table
    • Item icon Further information
  • Item icon Overview
    Superannuation is a form of savings plan for retirement encouraged by the Federal Government. By providing obligations on employers through the superannuation guarantee arrangements to contribute to superannuation and providing incentives to others by the provision of taxation benefits, the Federal ...

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  • Item icon Summary of the process
    Setting up a self managed superannuation fund The usual steps in setting up a self managed superannuation fund include:

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  • Folder icon A. Getting the matter underway
    • Item icon File cover sheet - Self managed superannuation fund
    • Item icon To do list - Self managed superannuation fund
    • Item icon First steps
    • Item icon Client details and verifying identity
    • Item icon Retainer instructions - Self managed superannuation fund - New
    • Item icon Retainer instructions - Self managed superannuation fund - Existing
    • Item icon Conflict of interest check
    • Item icon Initial letter to client enclosing costs agreement
    • Folder icon Library of costs agreements
      • Folder icon Australian Capital Territory
        • Item icon Costs agreement - ACT
      • Folder icon New South Wales
        • Item icon Costs agreement - NSW
      • Folder icon Northern Territory
        • Item icon Costs agreement - NT
      • Folder icon Queensland
        • Item icon Initial letter to client enclosing costs agreement
        • Item icon Costs agreement - QLD
        • Item icon Abbreviated costs disclosure - Costs under $3000
      • Folder icon South Australia
        • Item icon Costs agreement - SA
      • Folder icon Tasmania
        • Item icon Costs agreement - TAS
      • Folder icon Victoria
        • Item icon Costs agreement - VIC
      • Folder icon Western Australia
        • Item icon Costs agreement - WA
        • Item icon Standard costs disclosure form for clients - Fees under $3000
    • Item icon Time and costs estimates
    • Folder icon If required - Updating costs disclosure
      • Item icon Letter to client updating costs disclosure
      • Item icon Charge securing costs
      • Item icon Guarantee securing costs
      • Folder icon Costs disclosure before settlement in litigation matters
        • Item icon Letter to client - Costs disclosure before settlement - NSW, VIC, and WA
        • Item icon Letter to client - Costs disclosure before settlement - QLD, SA, TAS, ACT, and NT
    • Folder icon General deeds, agreements, execution clauses, and statutory declarations
      • Item icon Deeds and Agreements
      • Folder icon Deeds
        • Item icon Deed for general use
        • Item icon Deed of guarantee
        • Item icon Deed of release
        • Item icon General deed of indemnity
        • Item icon Deed of assignment of agreement
        • Item icon Deed of gift
        • Folder icon Library of standard clauses for deeds
          • Item icon Amendment
          • Item icon Confidentiality for defined information - All parties
          • Item icon Confidentiality for defined information - One party
          • Item icon Confidentiality for terms of deed - All parties
          • Item icon Confidentiality for terms of deed - One party
          • Item icon Costs
          • Item icon Counterparts
          • Item icon Dispute resolution
          • Item icon Events beyond control
          • Item icon Governing law and jurisdiction
          • Item icon Interpretation
          • Item icon No assignment
          • Item icon Notices
          • Item icon Severance
          • Item icon Waiver
          • Item icon Whole agreement
      • Folder icon Agreements
        • Item icon Agreement for general use
        • Item icon Heads of agreement
        • Item icon Non-disclosure agreement - Formal
        • Item icon Non-disclosure agreement - Informal
        • Folder icon Library of standard clauses for agreements
          • Item icon Amendment
          • Item icon Confidentiality for defined information - All parties
          • Item icon Confidentiality for defined information - One party
          • Item icon Confidentiality for terms of agreement - All parties
          • Item icon Confidentiality for terms of agreement - One party
          • Item icon Costs
          • Item icon Counterparts
          • Item icon Dispute resolution
          • Item icon Events beyond control
          • Item icon Governing law and jurisdiction
          • Item icon Interpretation
          • Item icon No assignment
          • Item icon Notices
          • Item icon Severance
          • Item icon Waiver
          • Item icon Whole agreement
      • Folder icon Execution clauses
        • Folder icon Library of execution clauses for agreements
          • Item icon Attorney
          • Item icon Authorised officer
          • Item icon Company
          • Item icon Company - Sole director
          • Item icon Individual
          • Item icon Individual - No witness
        • Folder icon Library of execution clauses for deeds
          • Item icon Attorney
          • Item icon Authorised officer
          • Item icon Company
          • Item icon Company - Sole director
          • Item icon Individual
      • Folder icon Statutory declarations
        • Item icon Commonwealth statutory declaration
        • Item icon Statutory declaration - blank - ACT
        • Item icon Statutory declaration - blank - NSW
        • Item icon Statutory declaration - blank - VIC
        • Item icon Statutory declaration - blank - QLD
        • Item icon Statutory declaration - blank - TAS
        • Item icon Statutory declaration - blank - SA
        • Item icon Statutory declaration - blank - WA
        • Item icon Statutory declaration - blank - NT
        • Item icon Standard annexure note for documents
      • Item icon Standard annexure note for documents
  • Folder icon B. Establishing a self managed superannuation fund
    • Item icon What is a self managed superannuation fund?
      A self managed superannuation fund is a regulated superannuation fund with no more than 6 members and which:

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    • Item icon Benefits of a self managed superannuation fund
      The main benefits provided by the Federal Government to promote the use of superannuation are the taxation benefits for investment earnings accumulated in a superannuation fund to retirement and the taxation benefits to members on withdrawal of those benefits in retirement. Principally:

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    • Item icon Conditions for a fund
      Conditions for single member fund If a fund is a single member fund, the basic requirements to be a self managed superannuation fund are set out in s 17A(2):

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    • Item icon Steps to form a fund
      The steps required to form a self managed superannuation fund are relatively simple.

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    • Item icon Resolution to establish superannuation fund - Individual trustee
    • Item icon Resolution to establish superannuation fund - Corporate trustee
    • Item icon Letter to client with documents to establish superannuation fund
    • Item icon Product disclosure statement
    • Item icon Trust deed and rules - Self managed superannuation fund
    • Item icon Application to become a member
    • Item icon Letter to member confirming successful application to become a member
    • Item icon Letter to client confirming self managed superannuation fund compliance
    • Item icon Australian Business Register – ABN registration for superannuation entities
    • Item icon Trustee obligations
      The following table provides trustee obligations as listed with the relevant provision from the Superannuation Industry (Supervision) Act 1993 (Cth) and the Superannuation Industry (Supervision) Regulations 1994 (Cth).

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    • Item icon Who may not be a trustee
      A disqualified person cannot be a trustee of a fund. A disqualified person is anyone who:

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    • Item icon Consent to act as trustee - Reproducing Section 120 of SIS Act
    • Item icon Consent to act as trustee
    • Item icon Australian Taxation Office – Trustee declaration for self managed superannuation funds
    • Item icon Contributions to a self managed superannuation fund
    • Item icon Blank resolution - Corporate trustee
    • Item icon Blank resolution - Individual trustee
    • Item icon Notice to member - Claiming contributions
    • Item icon Acceptance of contributions
      The rules for a self managed superannuation fund accepting contributions are found in r 7.04 of the Superannuation Industry (Supervision) Regulations 1994. When these rules are not satisfied, the fund is required to refund the contribution. The regulations permit a fund to accept contributions ...

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    • Item icon Taxation of contributions
      Deductions for employers An employer can claim a tax deduction for contributions it makes to a fund on behalf of its employees when the contribution is made and:

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    • Item icon Stamp duty on the trust deed
      Duty is generally payable on the establishment of a trust. However, exemptions apply for the establishment of a self managed superannuation fund in all jurisdictions other than the Northern Territory where nominal duty is payable. Nominal duty is also generally charged on the transfer of property ...

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    • Folder icon If required - Member qualifies as self-employed person seeking tax deduction
      • Item icon Notice of intent to claim or vary a deduction for personal super contributions
  • Folder icon C. Investment strategies
    • Item icon Investment restrictions
      Because of the generous taxation concessions, the Superannuation Industry (Supervision) Act 1993 limits the investments that can be made by a self managed superannuation fund. The overriding requirement under s 62 is that a fund must be maintained for the sole purpose of providing retirement ...

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    • Item icon Enclosure - Self managed superannuation fund investment strategies
    • Item icon Example investment strategy - Long form
    • Item icon Example investment strategy - Short form
    • Item icon Resolution of trustee adopting an investment strategy - Individual trustee
    • Item icon Resolution of trustee adopting an investment strategy - Corporate trustee
    • Folder icon Resolutions for fund investments
      • Item icon Resolution - Participation in employee share scheme
      • Item icon Resolution - Prior purchase of property - Individual trustee
      • Item icon Resolution - Prior purchase of property - Corporate trustee
      • Item icon Resolution - Purchase of property without borrowing - Individual trustee
      • Item icon Resolution - Purchase of property without borrowing - Corporate trustee
      • Item icon Resolution - Purchase of shares without borrowing - Individual trustee
      • Item icon Resolution - Purchase of shares without borrowing - Corporate trustee
      • Item icon Resolution - Sale of property - Individual trustee
      • Item icon Resolution - Sale of property - Corporate trustee
      • Item icon Resolution - Sale of shares - Individual trustee
      • Item icon Resolution - Sale of shares - Corporate trustee
  • Folder icon D. Amending self managed superannuation funds
    • Item icon Letter to client adopting new rules for the fund
    • Item icon Deed of amendment and rules
    • Item icon Resolution to adopt deed of amendment and rules - Individual trustee
    • Item icon Resolution to adopt deed of amendment and rules - Corporate trustee
    • Item icon Resolution to confirm resignation of old trustee - Individual trustee
    • Item icon Resolution to confirm resignation of old trustee - Corporate trustee
    • Item icon Resolution to confirm acceptance of new trustee - Individual trustee
    • Item icon Resolution to confirm acceptance of new trustee - Corporate trustee
    • Item icon Substituting a trustee
      Section 17A(3) sets out the circumstances in which a trustee of a self managed superannuation fund can be substituted without the fund being non-compliant, and suffering adverse tax consequences. Those are:

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    • Item icon Deed of change of trustee
    • Item icon Letter to client for change of trustee
    • Item icon Notify us of changes to your SMSF – Australian Taxation Office
    • Item icon Update your ABN details – Australian Business Register
  • Folder icon E. Pensions
    • Item icon Pensions
      Account based income streams

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    • Item icon To do list - Establishing an account-based pension
    • Item icon Pension payment agreement
    • Item icon Letter to fund trustee requesting an account-based pension be established
    • Item icon Letter from client to fund trustee requesting an account-based pension be established
    • Item icon Resolution to establish an account-based pension fund for member - Individual trustee
    • Item icon Resolution to establish an account-based pension fund for member - Corporate trustee
    • Item icon Letter to client confirming establishment of pension
    • Item icon Initial schedule of account-based pension payments
    • Item icon Product disclosure statement - Account-based pension
    • Item icon Letter from client confirming understanding of pension entitlements
    • Folder icon If required - Reversionary pensions
      • Item icon Letter to client enclosing reversionary pension nomination notice
      • Item icon Reversionary beneficiary nomination notice
      • Item icon Enclosure - Fact sheet on reversionary pension nominations
  • Folder icon F. Death benefits
    • Item icon Death benefits
      Regulation 6.21 of the Superannuation Industry (Supervision) Regulations 1994 requires the fund trustee, following the death of a member, to pay the deceased member’s remaining superannuation interests to their beneficiaries, or legal personal representative, as soon as practicable. The ...

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    • Item icon Enclosure - Fact sheet on binding death benefit nominations
    • Item icon Letter to client enclosing binding death benefit nomination notice
    • Item icon Binding death benefit nomination notice
    • Item icon Member information statement - binding death benefit nomination
    • Item icon Statement of information concerning binding death benefit nominations
    • Item icon Letter to client - Seeking written clarification of binding death benefit nomination
    • Item icon Revocation of binding death benefit nomination
  • Folder icon G. Member or related party transfers to and from a SMSF
    • Item icon Business real property
      A complying superannuation fund may only acquire ownership of real property from a member or related party if it constitutes business real property. Business real property is real estate that:

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    • Item icon Contribution limits
      If the transfer of business real property to a fund by a member is treated as a contribution, that contribution will be counted in the member’s contribution limits for the financial year in which it is made. Significant adverse tax liabilities may be triggered personally for a member whose ...

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    • Item icon Investment strategy
      The acquisition of any property by the fund needs to be in line with its investment strategy. If it is not, then the investment strategy will need to be reformulated to consider the property acquisition prior to the transfer. Section 52 of the Superannuation Industry (Supervision) Act 1993 ...

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    • Item icon Income tax
      The transfer of business real property may trigger income tax for the member, and it is recommended they seek their own specific tax advice on the matter. Generally, the income tax consequences are as follows:

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    • Item icon Stamp duty on transfers
      Stamp duty can be significantly reduced if business real property is transferred from a member to their fund under exceptions available in many states through their respective stamp duty legislation. For example, s 62A of the Duties Act (NSW) provides for a concessional rate of $750 if:

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    • Item icon Fund transfer of real property to a member
      Stamp duty An in specie transfer to a member will incur ad valorem stamp duty on the value of the transfer which is payable by the member.

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  • Folder icon H. SMSF borrowing
    • Item icon To do list - Limited recourse borrowing arrangement
    • Item icon Enclosure - Fact sheet on limited recourse borrowing for self managed superannuation funds
    • Item icon Fund borrowing
      A self managed superannuation fund is permitted to borrow funds to acquire an asset provided that the borrowing is structured as a limited recourse borrowing arrangement. This commentary briefly explains the superannuation and taxation law applicable to limited recourse borrowing arrangements ...

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    • Item icon How does a limited recourse borrowing arrangement work?
      Apart from very limited exceptions, a fund is only permitted to borrow under a limited recourse borrowing arrangement. For a borrowing to constitute a limited recourse borrowing arrangement, all the following conditions must be met:

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    • Item icon The assets a fund may borrow to acquire
      The type of asset a fund may acquire under a limited recourse borrowing arrangement is regulated by:

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    • Item icon Specific rules governing assets that can be acquired under a limited recourse borrowing arrangement
      Generally, a fund is only permitted to acquire a single acquirable asset under a limited recourse borrowing arrangement. An acquirable asset does not include money, whether Australian currency or foreign currency. The exclusion of money prevents a fund from entering a margin loan as part of a ...

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    • Item icon Application of general superannuation investment rules to borrowing
      Superannuation law contains many investment rules which all complying superannuation funds must adhere to. See Investment restrictions, Investment strategy and Business real property. These rules include the requirement that the investment be in line with the investment strategy of the fund and be ...

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    • Item icon What else can borrowing be used for?
      Besides using the borrowed money to acquire the asset, a fund is also permitted to use funds borrowed under a limited recourse borrowing arrangement to pay expenses incurred in connection with the acquisition and borrowing. This includes conveyancing fees, stamp duty, brokerage and loan ...

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    • Item icon Who can be the lender?
      A fund may borrow from any person under a limited recourse borrowing arrangement. This includes related and unrelated parties of the fund. If a fund borrows from a related party, the loan must be on an arm’s length basis, including having a commercial interest rate. A written agreement will assist ...

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    • Item icon Who can be the custodian?
      It is a key requirement of a limited recourse borrowing arrangement that the asset is held on trust for the fund until the loan is repaid. The custodian performs the duty of holding the asset on trust for the fund. The custodian is sometimes referred to as the holding or security trustee. The trust ...

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    • Folder icon Statutory declarations
      • Item icon Commonwealth statutory declaration
      • Item icon Statutory declaration - blank - ACT
      • Item icon Statutory declaration - blank - NSW
      • Item icon Statutory declaration - blank - VIC
      • Item icon Statutory declaration - blank - QLD
      • Item icon Statutory declaration - blank - TAS
      • Item icon Statutory declaration - blank - SA
      • Item icon Statutory declaration - blank - WA
      • Item icon Statutory declaration - blank - NT
      • Item icon Standard annexure note for documents
    • Item icon Clause - Statutory declaration - Apparent purchaser
    • Item icon Custodian deed
    • Item icon Resolution of sole director - Act as custodian
    • Item icon Resolution of sole director - Act as custodian - Bank limited recourse borrowing arrangement
    • Item icon Resolution of the directors - Act as custodian
    • Item icon Resolution of the directors - Act as custodian - Bank limited recourse borrowing arrangement
    • Item icon Can a limited recourse borrowing arrangement involve a guarantee?
      Often external lenders require that a related party of the fund, such as a member of the fund, guarantee the fund’s borrowing. The Australian Taxation Office accepts that a limited recourse borrowing arrangement may involve a guarantee. However, the usual rights of a guarantor need to be varied ...

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    • Item icon Can the fund refinance?
      A fund can refinance a limited recourse borrowing arrangement without jeopardising the complying nature of the arrangement provided that the arrangement and the fund remain compliant with all applicable laws.

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    • Item icon Taxation consequences on entry into the limited recourse borrowing arrangement
      Stamp duty on entry into the custodian deed If the asset purchased under a limited recourse borrowing arrangement constitutes dutiable property to which stamp duty may apply, such as land, then entry into the custodian deed raises stamp duty issues. This is because the custodian deed involves a ...

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    • Item icon Taxation during the term of the limited recourse borrowing arrangement
      Income tax The income tax consequences for a fund during the term of a limited recourse borrowing arrangement were previously unclear. The main issue was whether the custodian trust comprising the custodian as trustee of the asset for the fund would be recognised for tax purposes or whether one ...

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    • Item icon What happens at the end of the borrowing arrangement?
      A limited recourse borrowing arrangement may be ended either by:

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    • Item icon Steps to setting up a limited recourse borrowing arrangement
      Step 1 – Review rules and investment strategy of fund Before entering the limited recourse borrowing arrangement, the trustee of the fund reviews the trust deed or rules governing the fund to ensure that the fund is permitted to enter such a transaction.

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    • Item icon Limited recourse borrowing deed
    • Item icon Resolution of directors of lender - Limited recourse borrowing arrangement
    • Item icon Resolution of directors of trustee - Limited recourse borrowing arrangement
    • Item icon Resolution of individual trustees - Limited recourse borrowing arrangement
    • Item icon Resolution of the directors of trustee - Bank limited recourse borrowing arrangement
    • Item icon Resolution of individual trustees - Bank limited recourse borrowing arrangement
  • Folder icon I. Finalising the matter
    • Item icon Letter to client finalising the matter
    • Folder icon Example invoices incorporating notification of rights
      • Item icon Example invoice incorporating notification of client's rights - NSW
      • Item icon Example invoice incorporating notification of client's rights - VIC
      • Item icon Example invoice incorporating notification of client's rights - QLD
      • Item icon Example invoice incorporating notification of client's rights - SA
      • Item icon Example invoice incorporating notification of client's rights - TAS
      • Item icon Example invoice incorporating notification of client's rights - ACT
      • Item icon Example invoice incorporating notification of client's rights - NT
      • Item icon Example invoice incorporating notification of client's rights - WA
    • Item icon Closing the file
    • Item icon File closing checklist
  • Item icon Comments and suggestions for By Lawyers

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