Self Managed Superannuation Funds


“Self Managed” Superannuation Fund means just that – you do the work. Before thinking about setting one up, it is crucial that you have the time to manage your own superannuation.

A SMSF has less than five members; All of whom are usually business or family related. Each individual Trustee of the fund is a fund member and each member of the fund is a Trustee; up to a maximum of four with the exception of a single member fund. If you want a single member fund then you must have a second Trustee (all funds must have a minimum of two Trustees).

Each member of the fund remains legally responsible and must ensure the fund is correctly structured, keeps meticulous records and meets all reporting requirements.


Having a Self Managed Superannuation Fund allows you to take complete control of a previously unobtainable sum of money and use it to grow your wealth prior to retirement.

Managing a SMSF presents opportunities for more meaningful integration of superannuation into a fund member’s investment portfolio and retirement planning.

Your Superannuation Objectives:

  • To accumulate super savings and then maintain them at retirement time.
  • To control your investments.
  • To increase flexibility to utilize all available strategies at short notice.
  • To avoid unnecessary fees and taxes.
  • To have the ability to gear up the Funds investments through borrowing.


Self Managed Superannuation Funds are only cost effective if assets reach a minimum of $100,000 – SMSF’s typically cost $1,800 plus to run each year.

  • Investors aiming to reach this benchmark in a short time period may consider establishing a SMSF.
  • Investors who want complete control over their fund assets and who have the available time to spend managing their fund.
  • Professionals/ Executives with Super choice.
  • Retirees wishing to establish a pension.
  • Family groups wanting to take advantage of estate groups.

Under 40’s

  • Self managed Super allows you to manage your own super, rather than wait until retirement.
  • Subject to certain legislative restrictions you may use Self Managed Super to help build your non-retirement wealth. At Lockwood and Ward we will guide you through legislative issues and help you meet compliance regulations.
  • If you are investing in your first property, it is a useful vehicle to control your negative gearing.

Age 40-55

  • Self Managed Super can help by using existing equity to extend property portfolio in Super (therefore receiving many tax breaks) or by taking control of “lost” money in Super and build wealth.
  • Able to Salary Sacrifice to further increase contributions to super – this approach offers flexibility over just buying a property because it allows you to choose your level of deductions/ salary sacrifice, rather than have it ascertained at the end of the year.
  • The possibility of minimising Capital Gains Tax now by using tax planning combined with super, or, by investing in super, whether future investments within the super environment become capital gains tax free or limited to 10%, rather than the 20.25% – 46.5% capital gains tax usually associated with capital gains made by individuals.

Age 55 plus

  • This age bracket is that of people close to or considering retirement and you need to consider the most tax effective way to receive money in retirement, as well as minimise the amount of paperwork you have.
  • It is important now to maximise their wealth and retirement income prior to retirement, SMSF is useful for this age bracket because we have the option in every case to minimise or eliminate tax.
  • Anyone over 55 can continue to work, whilst still taking a “Transition to Retirement Income Stream” (TRIS). This allows for salary sacrifice income into super and then draw it out concessionally (under 60) or tax free (over 60).
  • TRIS means that for over 60’s, you can put more money into your super than you take out, and yet have the same take home pay, because what comes out will be tax free, meaning no PAYG needs to be withheld.
  • Any Income earned becomes tax free once a pension or TRIS is started because they are “assets backing a pension” – this means that if you are going to realise a capital gain on an asset in super (e.g sell an investment property), then there is no Capital Gains Tax because it is now a “pension asset”.
  • Once you are retired, there is no limit to the amount of income you can take from your super completely tax free


Before setting up a SMSF, you must ensure you have the sufficient funds to make it viable, the recommended minimum is $100,000. There are a number of trust laws and legislative requirements involved in setting up an SMSF. These include: obtaining a trust deed; appointing Trustees; electing to become a regulated fund; and obtaining a TFN and ABN.

Lockwood and Ward will attend to all the paperwork required to get the SMSF structure established and will assume management of the process for you. Our team will attend to ordering the structures, handling any queries from you and finally sending the documents to you for signature. They will also apply for Tax File Numbers, ABN (if applicable), GST (if applicable), paying all stamp duty on the documents and attend to all lodgement of forms to the various institutions to avoid penalties.

Lockwood and Ward will also attend to getting your SMSF approved as a Complying Fund by the Australian Taxation Office (ATO). Our experience shows this may take several weeks before approval is granted.

The Trustees of every fund are required to prepare and implement an investment strategy for their fund.


A Trustee of an SMSF must act in accordance with the clauses of the superannuation fund trust deed. A key area of responsibility for Trustees is investment management. There are duties and responsibilities Trustees must consider when making investment decisions for the SMSF. These rules aim to protect and increase member benefits for retirement purposes. It is important that Trustees seek appropriate financial advice when making investment decisions for the SMSF.

From July 1, 2007 all new trustees (and directors of corporate trustees) of a SMSF are required to sign a declaration, in the approved form, within 21 days of becoming a trustee or director. The declaration aims to ensure that they understand their obligations and responsibilities.


Once you receive the completed documents from Lockwood and Ward and whilst you are waiting for the approval from the ATO, take your Trust Deed to the Bank and open a cheque account in the name of (for example) Barry and Shirley Wood as Trustee of the Wood Superannuation Fund. This will allow the SMSF to accept contributions and rollovers. The bank account will be a temporary holding account until the Trustees decide where they would like to invest the money.


It is important that Trustees are aware of the minimum standards relating to the acceptance of contributions.

Mandated employer contributions

A mandated employer contributions are contributions made by an employer for the benefit of a fund member that are:

  • superannuation guarantee contributions
  • superannuation guarantee shortfall components
  • award-related contributions, or
  • Certain payments from the superannuation holding accounts special account.
  • Under the SIS regulations, you can accept mandated employer contributions for members at any time, regardless of the person’s age or the number of hours they are working at that time.

Member Contributions

You can accept non-mandated contributions only in the following circumstances:

For members under 65 years of age, you can

  • accept member contributions if the member has quoted (for superannuation purposes) their TFN to you
  • accept all other contributions
  • Certain special acceptance rules for fund capped contributions apply

For members aged 65 but less than 70, you may

  • accept contributions only if the member is gainfully employed on at least a part-time basis
  • accept member contributions if the member has quoted (for superannuation purposes) their TFN to you.
  • Certain special acceptance rules for fund capped contributions apply.

For members aged 70 but less than 75, you may

  • accept member contributions made by the member if the member is gainfully employed on at least a part-time basis
  • not accept other member contributions, such as spouse contributions or voluntary employer contributions
  • accept member contributions if:
  • the member has quoted (for superannuation purposes) their TFN to you, and
  • the contribution is received on or before the day that is 28 days after the end of the month in which the members turns 75.

Certain special acceptance rules for fund capped contributions apply.
For members aged 75 and over you can not accept any member contributions for a member aged 75.
There are a number of terms that need to be explained before discussing whether a fund can accept contributions.

Rollover money from Old Superannuation Fund

Once the bank account is opened and you have received approval from the ATO that your SMSF is a Complying Fund, you can receive rollovers from your other superannuation funds. Contact your existing superannuation fund and request a rollover application form, complete it and submit it ASAP. It can take anywhere from two to four weeks, depending on the fund, to process your rollover. The processing of rollovers from other superannuation funds is out of our control, so please be prepared for a four week turnaround. Your old super fund can electronically transfer the rollover money into your Superannuation fund’s bank account.


The Trustees of every fund are required to prepare and implement an investment strategy for their fund. This strategy must take into consideration the following:

  • Invest in such a way as to maximise member returns having regard to risk.
  • Appropriate diversification of investments.
  • Ability of the fund to pay benefits on retirement.

INVESTMENT RESTRICTIONS (Sole purpose is to provide for retirement benefits)

An SMSF is:
  • Prohibited from loaning or providing financial assistance to members or a relative.
  • Prohibited from borrowing [there are exceptions to the rule in limited circumstances].
  • Prohibited from purchasing assets from members unless:
    • The assets are Listed Securities.
    • The asset does not exceed 5% of the total fund assets.
    • The asset is Business real property.

There are very strict rules about where an SMSF can and cannot invest its money. A breach of those rules allows for jailing for misappropriation of funds. You cannot, for example, use the account like a normal personal bank account, drawing money from it when you need it and returning the funds later. This is unacceptable.

You cannot make use of investments of the fund for personal purposes or be seen to be receiving a benefit from the investments before you retire. For example: some people have used the funds to purchase artwork and make use of these paintings in their own home. This is strictly not allowed. Investments in an SMSF are to be maintained at an arm’s length basis. If you have a concern please contact accountant at Lockwood and Ward

Your SMSF accounts are audited and, should you breach the Superfund rules, the Superfund will be deemed non-complying and can be taxed at the highest tax rate of 45%. You also face penalties or jail if your actions are found to be in breach of the rules.


In September legislation was passed by the Howard government that effectively allows Superannuation Funds to borrow. This was endorsed by the replacement Rudd Government in 2008. Such borrowing is achieved through an arrangement called Instalment Warrant.

The Instalment Warrant arrangement is achieved by holding the investments in a Bare Trust, with the borrowing undertaken by this Trust. This enables borrowing to invest in a range of assets including property and shares. The borrowings can be obtained from many sources, including banks or members of the Super Fund.

The new borrowing requirements do not limit trustees to traditional tradable instalment warrant arrangements, such as those previously provided by institutions over publicly traded shares. The investment cannot be an investment the fund already owns. In addition, the superannuation law places restrictions on investments that can be acquired from related parties such as fund trustees, members, relatives of members or trustees and any entity they control either individually or as a group. The trustees of the fund choose the investment as part of the fund’s overall investment strategy.

Borrowing is limited to the following parameters:

  • The amount borrowed must be used towards the purchase of an investment which the fund would normally be permitted to acquire under superannuation law.
  • The investment is held on trust for the fund until either –
    a) the loan has been paid off and it is transferred to the fund, or
    b) the investment is sold to pay off the loan.
  • It is possible to exchange the investment for another.
  • The lender is limited to recover just the amount of the loan outstanding from the sale of the investment, and not from other assets of the superannuation fund, if there is a default on the loan.

Borrowing accentuates the capital growth achievable [Similarly, borrowing accentuates capital losses. Therefore, it should be undertaken when there is a high level of certainty that the medium term future is positive!]. Furthermore, borrowing should only be undertaken when the interest cost is reasonably proportionate to growth/inflation and income generated by the investment. Otherwise, the added risk is not justified. Therefore, it should be used strategically during the longer term market cycle – not indiscriminately irrespective of prevailing market conditions.

The cost of setting up this arrangement is significant. Firstly, as the Trustee of the Bare Trust must be different to the Trustee of the Super Fund, a company is most appropriate for this. This costs in the order of $1,150 to establish. The Bare Trust Deed costs between $2,200 and $2,500. Banks require an independent Solicitor which typically costs $1,800; and impose commercial rates of interest, loan application fees and property valuations.


There are a range of administrative obligations placed upon Trustees of SMSF’s. These include:

  • Lodgement of yearly Income tax returns.
  • Lodgement of Member Contribution Statements and payment of annual levy.
  • Arranging Annual Audit by an approved Auditor.
  • Maintain adequate records.
  • Maintain and update Investment Strategy.
  • Trustees must notify ATO of a winding up.



  1. Treat the fund as a separate entity. This means:
    • The funds money must be kept in its own bank account
    • The funds bank account must contain the name of the fund
    • The funds expenses must be paid out of the funds bank account
    • The funds money, such as contributions, interest and dividends, is all paid into the funds own bank account.
  2. Ensure that all records are kept of decisions of the trustees and of any member death benefit nominations
  3. Remember that the fund must be audited each year and that the audit will cover both financial and compliance issues.
  4. Ensure that all the funds transactions are on commercial terms
  5. Ensure that the fund has an investment strategy:
    • Record the investment strategy in a written format
    • Implement the investment strategy
    • Regularly review the investment strategy
  6. Ensure that the funds investments are recorded in the trustee’s name.
  7. Comply with the fund trust deed and governing rules
  8. Obtain and keep all documents relating to the funds financial transactions, expenses and payments
  9. Remember that, generally, the fund cannot acquire an asset from a member (or other related party) whether by purchase or as a contribution. However, certain exceptions apply:
    • Business real estate property can be acquired from a member (or related party) but you should obtain specific advice before acquiring the asset
    • Listed securities can be acquired
  10. Ensure that the funds earnings are allocated to members accounts and that members’ account balances are reconciled to funds account balance


  1. Don’t let the fund borrow money by:
    • Letting the funds bank account go into overdraft
    • Paying fund expenses using your personal bank account

    However, in limited circumstances, it is now possible for a fund to borrow directly for investment purposes

  2. Don’t breach the contribution rules – remember the annual contribution caps and, for members aged 65 or over, the age-based contributions restrictions; for members aged 75 or more, generally no contributions can be accepted.
  3. Don’t lend, invest or enter into a lease agreement in respect of more than five percent of the funds asset with a related party such as a fund member or a relative Getting good advice is necessary in most financial transactions but essential in all parts of starting and running your own super fund. The price of poor advice, no advice or ignorance about what is involved in the SMSF world could lead to depending on the old age pension if things go badly wrong.


Since the SMSF is audited, Trustees and their accountants must maintain the appropriate records. These include: computer accounts and / or excel spreadsheets; bank statements; cheque butts; share documents; details of all investments and expenses; receipts; rollover documentation; contracts of sale; and valuations. During the year we ask you to maintain a file with all of your funds records which would include:

  • Bank statements
  • Dividend and distribution advices
  • Buy/sell contract notes
  • Distribution tax statements
  • Property contracts including rental agreements and associated expenses
  • Invoices.

We send you a checklist in June requesting copies of such documents along with details of any contributions made to the fund and pension payments form the fund. With such documents we will:

  • Establish and maintain members records and accounting records
  • Lodge surcharge reports if required
  • Prepare annual financial statements
  • Prepare and lodge tax returns
  • Provide advice on compliance with the Trust Deed, and the SIS Act and Regulations
  • Organise audit of fund accounts and any additional certificates required
  • Prepare relevant pension and lump sum withdrawal paperwork
  • Maintain minutes of Trustee meetings.

As long as all the documents we require are returned by the deadlines in the checklist we will endeavour to submit all relevant lodgements on time.

Having your accountant take care your paperwork leaves you to get on with your life. You can invest your Super, and someone else does the hard work.