Help! The rules for super and my SMSF are always changing, it’s complex and can be hard to keep up to date. Where can I get someone to explain it all to me as simply as possible?
It’s a very good question. But, can I provide you with a definitive answer? I think the answer must be ‘no’ or ‘not really’ as it just depends on what you would like to find out and the level of detail you are after. For instance, are you after information, education or advice? SMSFs and superannuation have many facets, starting with setting up a fund, contributions, investments, lump sums or pensions as well as estate planning.
If it’s information you’re after, many organisations will provide facts sheets that merely describe what’s required and how the rules work in relatively simple terms. What you should be looking for is something that’s no longer than one or two pages and doesn’t include a lengthy discussion of products offered by the organisation. Just one topic at a time is enough as it will allow you to digest the information in a single bite, then you can move to another topic when you are ready.
There are a number of publications which cover superannuation and SMSFs in lots of detail if that’s what you are after. They can be in hard or soft copy and some cover the topics in depth and with lots of technical detail on how the law works. Depending on what you are after there are some publications which provide useful and understandable information at the ‘dummies’ end of the spectrum. Don’t be put off by the title as it may be just what you are after because the information may be provided as an ongoing case study or written in a style that is easy to read and understand.
The regulator of SMSFs, the Australian Tax Office (ATO), as well as the Australian Securities and Investments Commission (ASIC) provide worthwhile information on superannuation and SMSFs. The videos on the ATO website are explained simply in non-technical language and give you a broad understanding of what an SMSF is allowed and not allowed to do under the law. The ASIC website should be used if you wish to learn about personal financial and who is authorised to provide it.
Then there’s always the ‘BBQ conversation’ and ‘overheard at the gym’ type discussions. These can come in useful for another person’s experience with their SMSF and where they obtained information. However, any discussion on how the rules work during these conversations can be fraught with danger as there are many angles to the one issue and how the rules apply to your SMSF may be completely different to someone else.
Education is probably a step up from getting information about superannuation and SMSFs, although they are close relatives. However, education is about the application of the information you have obtained to your SMSF. It comes in all shapes and sizes ranging from updates that your accountant, lawyer, financial adviser or fund administrator may provide right through to courses run by local colleges and universities. Learning about SMSFs will help you apply the rules to your SMSF and to your advantage. In addition to the application of superannuation rules, understanding investments is essential as different investments have unique features and that knowledge is essential in developing the investment strategy for your SMSF.
Advice is about considering a range of options that someone has recommended to you. Look for someone who can provide strategic advice about your SMSF and how you are able to reach your goals for retirement. Strategic advice can include a program to save and invest via your SMSF including covering contingencies in case you are unable to work due to accident or injury. Remember that your personal financial situation can be included as a component of your plan as there are some investments which are better held personally and others you should hold through your SMSF.
Where to find good advice is always a difficult question to answer, however, the ASIC MoneySmart website has some useful information on what to look for in an adviser. Then there’s the tried and tested ‘word of mouth’ which can be helpful but should be balanced with your judgement about what you are really after. Don’t fall into a false sense of security with arrangements that are too good to be true because they probably are. Prior to seeking advice make sure you understand what your goals are and read information about superannuation and investing to give you a good base to start with.
Professional advice – who does what?
There are many professionals who specialise in providing services to SMSFs. These include accountants, tax agents, SMSF auditors, actuaries, financial planners, fund administrators and legal advisers. These professionals can help you understand the operating and technical requirements of SMSFs, as well as the running costs. You also need to understand the investment options and risks associated with building the retirement savings of all members.
Accountants and tax agents
Accountants can assist with the accounting, operation, structuring and valuation of the assets of an SMSF. If an accountant provides advice about making contributions, fund investments, paying lump sums or pensions, or transferring your benefit to an SMSF they must hold an Australian Financial Services (AFS) licence or be a representative of an AFS licensee. Tax agents can help you with tax advice for the superannuation fund as well as lodgement of the fund’s tax and regulatory returns.
An SMSF is required to be independently audited annually by an auditor who is a registered SMSF auditor. ASIC has a register of approved auditors so you can check if the auditor of your fund is on the list.
Some superannuation funds that are paying pensions require a valuation by an actuary to work out the taxable and tax-free income of the fund. The actuary will do this by calculating the proportion of the fund’s investments that were allocated to supporting pensions in retirement phase and those that were allocated in accumulation phase.
Financial planners can provide help in drafting the fund’s investment strategy, the suitability of different types of investments and how fund members are able to meet their financial goals.
When giving advice about contributing to superannuation, the role of the financial adviser is to ensure that you can make contributions to your SMSF and to determine whether the contributions qualify for tax concessions. This can include tax-deductibility for contributions, and payment of the co-contribution, the low-income superannuation contribution or a tax offset by the government for contributions made for a low-income-earning spouse. In addition, a financial planner should also assist you to ensure any contribution does not result in you going over the contribution caps. If you do go over your contribution caps, you may end up paying penalty tax on any excess contributions made to the fund.
When considering the transfer of your superannuation to an SMSF a financial planner is required to provide additional information to you. This includes any potential benefits that may be lost and any other significant consequences if you decide to transfer your benefit to an SMSF. The additional information is usually included as part of a Statement of Advice (SOA) and relates to:
• limits on the access you may have to compensation schemes
• the impact of changing funds on any insurance arrangements and
• limits on access to complaints schemes.
Some organisations can provide administration services which include accounting, tax and other services to assist with the day-to-day operation of your SMSF. The services may reduce the amount of effort required by you to run your SMSF and allow you to concentrate on the fund’s investments. You can pick and choose the type and level of service you require.
Lawyers can come in handy when it comes to the documents needed for your SMSF or settling any disputes that may arise with the payment of benefits and any actions taken by the regulators should your SMSF breach the rules. Often your accountant or fund administrator will have contacts with lawyers and can refer you for assistance if it’s required.
A range of people and organisations can help you with your SMSF,, depending what you are after and the level of information, education or advice you require. Make sure you talk to someone who has an SMSF about how they found information and learnt about SMSFs and the experience they have had with professionals when operating their fund.
While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.