Super Basics Q&A
The Global Financial Crises has scared many people, especially those with investments in super retail funds managed by ‘experts’. The dominant question for small investors particularly those with small balances is ‘why did you not get me me out in time?’ The implication is that if you were the experts why could you not see this situation coming? The reqality is many are too small.
Reflecting on this many have decided to take have more control setting up their own Self Managed Super Funds (SMSF).
Below are basic questions I am asked.
Are our contributions in a separate Trust Fund?
- For efficiency, funds are pooled together
- The accounts reflect a record of each member’s
- Contribution
- Share of net income
- The rules require the trustees to maintain a separate account for each member
Tax tip – Consolidating Super with others may provide sufficient funds to start investing in a property – good for Y gen group.
Are all expenses split 3 ways, e.g from our pool of super funds?
Fund operating expenses are paid out of the pool of fund income
When we retire, are our investments divided by our individual contributions e.g. our initial % of contributions and additional contributions?
- Because the fund keeps a separate a/c for each member, that will be the member’s entitlement on either
- When eligible e.g. on retirement they can receive their entitlement either as a
- Lump sum or
- Pension
Do we all have a say in where the investment goes?
Where the trustee is a company – preferred by lenders to an SMSF
- All members must be directors of the company
- As directors they will have a say in the decisions taken regarding how and where to invest
the pooled funds - The trustee can decide to allocate each members contribution to a different
investment/managed fund/asset class
i. Larger portions allow for investment in larger assets like property
Expenses for individual insurances do the funds come out of the individual pool of super funds?
The expense is allocated to the individual member’s pool
Are properties in our individual names safe?
Properties owned individually outside of the fund should not be impacted by any activity in the fund
Does the arrangement affect income of one relative as the other receives Centrelink income?
- Income derived by the fund is not taken up in any income test for Social Security type benefits.
- Income of one member is unlikely to affect the other members situation.
Recently I answered the following queries in relation to a proposed SMSF, clients were consiering of forming. Members would be a couple and a relative of one. Though basic, the anwers may be of interest to you. In future we will be looking to include more items on Super. Your questions are welcome. For help with decisions on property investments in SMSF or just tax returns or to discuss further, contact Shukri.
Disclaimer:
Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to property buyers and investors. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal, tax or investment advice. You should, where necessary, seek your own advice for any legal, tax or investment issues raised in your affairs.
