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Home > I’m Interested in Self Managed Super > What are the restrictions around SMSFs?

The fund is strictly for your retirement. Any assets or cash in your fund must be strictly for retirement benefits only. You can’t finance your business, buy holiday homes you use, use purchased art assets to decorate your own home and golf club memberships definitely don’t comply.

There are restrictions that apply to SMSFs that don’t apply to public offer funds. It is important to understand these thoroughly, as not paying attention can mean the fund loses its ‘complying’ status.

Non-compliance means the low tax rates no longer apply and the advantage of having created your super fund disappears.

A formal investment strategy needs to be formulated and adhered to. Evidence needs to be shown that the trustees have given serious thought to their fund’s assets, including taking into account the risk of investing in different asset classes.
It is very easy to access FSF assets as they use the same type of bank accounts you use for your personal needs. This means it is easy to accidently withdraw from the fund. All super assets need to be left for retirement and withdrawals are not allowed under any circumstances.
Investments are not allowed in assets that belong to related parties of the trustees. This, for example, may mean that the trustees of the fund cannot use their super money to buy shares in their own business. They cannot lend money from the fund either.
Transactions have to be at arm’s-length or market rates. This means a discount cannot be given on an asset if it is bought from a friend or business associate. Full commercial rates have to be paid.
Gearing in Super (Limited Recourse Lending) is allowed under certain conditions. These conditions involve protecting other assets of the fund from default if the asset bought with borrowed money drops in value.
Assets have to be held separately to personal assets. This means they have to be registered in the super fund’s name and actually be transferred.
As the trustee you are required to have a proper administration system so paperwork is available if needed. Annual tax returns and audits are needed that members of public offer funds leave to others to deal with.

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