More control, more flexibility – and a lot more questions. It sounds empowering – until the rules, acronyms, and responsibilities start to add up.
While Self Managed Super Funds (SMSFs) can offer flexibility, they also come with strict rules and responsibilities. Here are the 5 of the most common questions I come across in our day-to-day conversations:
1. Do I get to choose the investments?
SMSFs allow flexibility in choosing investments, as long as they align with a documented investment strategy and comply with the sole purpose test. Trustees often explore shares, term deposits, managed funds, and property. While we don’t provide investment advice, we work with clients to ensure their strategy is properly documented and compliant from a tax and reporting standpoint.
2. Can I buy property through my SMSF?
You can, and for many, this is one of the key attractions of running an SMSF. Both residential and commercial property are allowed, but the rules around use and related-party transactions are strict. For example, you can’t live in or lease a residential property to a related party, but commercial property can be leased to your business on market terms. Navigating the rules correctly is critical.
3. Can a SMSF borrow to buy an asset?
Yes – but only under specific conditions. A SMSF can borrow under a structure known as a Limited Recourse Borrowing Arrangement (LRBA), typically used to acquire property. These arrangements need to be carefully structured to comply with superannuation legislation. It’s something we often assist with from a compliance and lending perspective, given the number of moving parts involved.
4. Can I make contributions to my SMSF?
Yes – members can make both concessional (before-tax) and non-concessional (after-tax) contributions, within annual limits. We help clients with the reporting and tax treatment of contributions, but decisions about contribution strategies are best made with a licensed financial adviser.
5. What are my responsibilities as a trustee?
Trustees are ultimately responsible for the ongoing compliance of the fund – including annual financials, tax returns, audits, and record-keeping. It can be manageable with the right support, but it’s not something to take lightly. We assist clients with these ongoing obligations so they can focus on strategic decisions with confidence.
A SMSF can give you more control over how your super is invested – but with that control comes added complexity and responsibility.
Whether it’s understanding the rules, structuring a property purchase, or staying compliant year to year, getting the right support matters. These are conversations I have with clients regularly, and every situation is different.
If you’re considering an SMSF, start by asking the right questions – and make sure you have the right team around you.