The term ‘do-it-yourself super’ is possibly a misleading label. Managing your home is easy compared with managing your superannuation money, with its detailed taxation, trustee and other legal rules. DIY funds are often referred to as self managed superannuation funds or SMSFs or SMS for short.
Superannuation funds get various tax concessions to encourage you to save for your retirement. For example, the top tax rate for the fund's investment earnings is 15%, probably well below the top tax rate on your own income. You get that tax concession only if you operate a 'complying fund', that is, a fund that complies with all the rules. If you do not comply, your fund will have to pay extra tax, and possibly back taxes and penalties. Generally, there are three ways you can save your super:
- Australian Prudential Regulation Authority (APRA) regulated super funds (your super is pooled together with large numbers of other members and the fund professionally managed by trustees in compliance with super law. This is where most people have their employer paid super.).
- Retirement savings accounts (you have your own special deposit account with a bank or other deposit-taking institution. These are not commonly held).
- Self-managed super funds (SMSFs) (you are responsible and the trustee of your own fund and need to comply with super law and make your own investment decisions).
We can help you set up an SMSF and advise you on the establishment, operation, structuring and valuation of an SMSF. We can also put you in contact with a licensed financial adviser who can advise you about which super fund best suits you or which investments should be in your fund.
A licensed financial adviser will consider your personal situation and recommend a suitable product for you. By using a financial adviser, you get extra protection if anything goes wrong because you have recourse to an independent complaints scheme.
Operating an SMSF means you’re responsible for the fund. You need to make sure you have enough assets, time and appropriate skills to:
- make the best investment decisions
- meet all your obligations as a trustee of your fund.
Sole Purpose Test
In addition, your SMSF needs to meet the sole purpose test. 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. As a trustee, you need to maintain your SMSF so that it complies with the sole purpose test at all times while your SMSF exists, including when investing fund assets and paying benefits upon retirement of members.
Contributions
| Age |
Rule on Acceptance of Contributions |
Up to age 65
|
Anybody can contribute, regardless of employment. The fund can accept any type of contribution.
|
Age 65 up to 70
|
You must work 40 hours in any consecutive 30-day period in the financial year in which you wish to make a contribution. The fund can then accept any type of contribution for this member.
|
Age 70 up to 75
|
You must work 40 hours in any consecutive 30-day period in the financial year in which you wish to make a contribution. The fund can then accept employer contributions and can only accept member contributions made by the member on their own behalf (i.e. spouse contributions cannot be accepted).
|
Age 75 and over
|
The fund can only accept compulsory contributions (award).
|
Limits on Contributions for the period 1 July 2010 to 30 June 2011:
| Age |
Concessional |
Non-concessional |
Less than 50 for the
whole financial year |
$25,000 |
$150,000 |
Turning 50 during the
financial year
|
$50,000 |
$150,000 |
Over 50 but not
under 65** |
$50,000 |
$150,000 |
* Non-concessional contributions include member contributions for which no tax deduction is claimed. Please note that these limits may be lower if you have contributed more than $150,000 in any one year since 1 July 2007. A bring forward may apply, allowing a higher or lower limit.
** If you are over 65 (but under70) these limits apply, but you must satisfy the work test to make contributions into super.
If you require assistance, please contact us on (02) 8264-0755
All representations and information on this site is general in nature and should not be relied upon as advice. If you require specific advice please contact us.