Helpful Hints from the Australian Government ATO:
Before you begin investing, you must have a clear investment strategy setting out your funds investment objectives and specifies the types of investments your fund can make.
The strategy must be in writing and be reviewed regularly to ensure it continues to reflect the purpose and circumstances of the fun. You must also consider whether to hold insurance cover (eg life insurance) for each member of the SMSF.
Things to consider in your investment Strategy:
- Diversification: Make sure that your strategy includes investing in a range of assets and asset classes
- The liquidity of the funds assets and how easily they can be converted to cash to meet the fund expenses.
- The funds ability to pay benefits and other costs
- The members’ needs and circumstances.
You will need to manage your funds investment strategy separately from the personal or business investments of members, this must include ensuring that the fund has clear ownership of its investment assets.
Certain contributions received by a complying SMSF are included in its assessable income and are usually taxed as part of the SMSFs income at 15% (or 47% for non-complying SMSFs). These ‘assessable contributions’ include:
- employer contributions (including contributions made under a salary sacrifice arrangement)
- personal contributions that the member has notified you they intend to claim as a tax deduction
- generally any contribution made by anybody other than the member, with limited exceptions such as spouse contributions and government co-contributions.
Restrictions on investments in your SMSF:
- There are a number of restrictions relating to transactions involving related parties and relatives of members in your SMSF. The guidelines state that no-one associated with your fund can receive present day benefits from its investments.
- Your fund cannot acquire assets from related parties unless has been acquired at market value and is one of the following
- A listed security (ie bonds or shares listed on an approved stock exchange
- A business real property
- An in-house asset, provided the market value of your funds in-house assets does not exceed 5% of the total market value of your funds assets
- An asset specifically excluded from being an in-house asset
All the information above has been provided by the Australian Taxation Office. If you would like more information on Self Managed Super Funds, please call Solid Financial Advisors on (03) 9690 2666