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A Self-Managed Superannuation Fund (SMSF) in Australia can invest in a wide range of assets, but strict regulations and guidelines must be followed. SMSFs are subject to the Superannuation Industry (Supervision) Act 1993.
Generally, SMSF is allowed to invest in the following classes of investments. However, some classes of investment might require additional information when it comes to reporting.
Super laws require you to prepare and follow an investment strategy for your SMSF, which must be reviewed regularly. Your investment strategy is your plan for making, holding and realising assets consistent with your investment objectives and retirement goals. It should set out why and how you’ve chosen to invest your retirement benefits to meet these goals.
An investment strategy sets out:
Generally, a qualified financial adviser can help you prepare an investment strategy. Alternatively, you can prepare an investment strategy on your own. The ATO provides instructions on this; see the link below.
Your SMSF needs to meet the sole purpose test to be eligible for the tax concessions normally available to super funds. This means your fund needs to be maintained for the sole purpose of providing retirement benefits to your members, or to their dependants if a member dies before retirement.
Contravening the sole purpose test is very serious. In addition to the fund losing its concessional tax treatment, trustees could face civil and criminal penalties.
It’s likely your fund will not meet the sole purpose test if you or anyone else, directly or indirectly, obtains a financial benefit when making investment decisions and arrangements (other than increasing the return to your fund).
When investing in collectables such as art or wine, you need to make sure that SMSF members don’t have use of, or access to, the assets of the SMSF.
Your fund fails the sole purpose test if it provides a pre-retirement benefit to someone – for example, personal use of a fund asset.
For investments held for more than 12 months, they are subject to a 33% capital gain discount. Therefore, the gain will be taxed at 10% of the income tax rate, which is generally 15%.
For investments held for less than 12 months, the capital gain will be taxed at 15%.
For example, let’s consider John’s Superannuation fund. It purchased ABC shares on 01/07/2020 for $10,000 and disposed of them on 15/05/2023 for $15,000. The capital gain from this transaction is $5,000. With a capital gain discount of 33%, the taxable capital gain is reduced to $3,333. Applying the income tax rate of 15%, the income tax payable on this capital gain is $500.
If capital losses exceed capital gains in a given year, the losses can be carried forward to the next financial year. In subsequent years, these losses can be used to offset any gains.
It is crucial to have the account name set up correctly for each investment account. For example, if the super fund is named ‘John Family Superannuation Fund’ and the corporate trustee is ‘John Family Pty Ltd,’ please see below for samples of considered correct account name in this instance:
When it comes to reporting, various investment classes necessitate distinct sets of documentation. For further details, kindly refer to the provided guide following the instructions below. This guidance only provides you with a general information.
Cash Account
Term Deposits
Residential
Commercial
SMSF SOLUTIONS AUS PTY LTD & THE BROOK HILLS TAX ACCOUNTANT PTY LTD AS PARTNERS FOR ARCH PARTNERS ABN 67 487 335 799; TAX AGENT REGISTRATION 26214880
No Advice Express or Implied: The information presented on this website is of a general nature and has not been crafted to accommodate the specific objectives, financial situation, or individual needs of any particular investor. SMSF Solutions refrains from providing financial product advice or endorsing any financial products, either explicitly or implicitly. It is explicitly stated that SMSF Solutions neither recommends nor represents any financial product or service available through its platform, including those established for your SMSF upon becoming a client.
Seek Professional Advice from a Financial Adviser: SMSF Solutions operates on a no-advice model and does not dispense financial, legal, or tax advice to clients. It is strongly advised that clients seek appropriate professional advice based on their personal circumstances. A licensed financial adviser can assess an individual’s situation and provide recommendations suitable to their financial needs. All information on the SMSF Solutions website is factual and general in nature, and therefore, reliance on it should be avoided. Trustees bear legal responsibility for all decisions made, even if advice is sought from a financial planner. While financial professionals can offer guidance and assistance, ultimate responsibility for the fund lies with the trustees.
ARCH PARTNERS and its employees wish to acknowledge the Traditional Custodians of Country throughout Australia where we operate our business. We recognise their connection to the land, water and culture and wish to pay our respects to their Elders past, present and emerging.