Week 12 - SMSF

Question 1

What are the fundamental requirements of SMSF?

Answer 1

1. Solely for the purpose of retirement benefits
2. no more than 5% In house assets

Question 2

What is the Sole Purpose test?

Answer 2

Test to see if the fund is for the purpose of benefiting the members:

1. Fund must be for retirment benefit accumulation
2. Benefits go to the member’s dependants in they die

Question 3

What is the inhouse Asset Test?

Answer 3

Test to make sure the assets within the fund are not too closely related to assocuates

• Max 5% of inhouse assets
• No lending / investing with associates

Question 4

What is a corporate trustee and its benefits ?

Answer 4

business hire to act as the funds trustee

Pros
1. Limits liability of member acting as trustee

2. Reduced compliance costs
3. Easier to change members in fund
4. Choice between ATO or APRA as regulator

Question 5

What are the benefits of having a APRA regulated fund?

Answer 5

1. members do not need to be australian residents for tax purposes
2. reduced responsibility via corporate trustee
3. member can remain if they go bankrupt
4. More time
5. Access to complain tribunal to solve conflicts

Question 6

What Laws govern SMSF?

Answer 6

1. Common Law
2. Trust Law
3. Superannuation industry supervisions

Question 7

What are the advantages of a SMSF?

Answer 7

• Control

Flexibility of investment options

Tax advantages

Cheaper if fund is large

Question 8

What are the main disadvantages of SMSF?

Answer 8

Responsibility

liability

Trustee obligations of management

Investment options for small fund

Question 9

Can a SMSF allowed to borrow?

Answer 9

no, except;

1. If cash needed to pay member’s benefit
2. If it urgently need cash to settle share transaction
3. indirect borrowing through LRBA for a single asset