Return to full SMSF article list
HomeFree weekly newsletterFree newsletter archiveContact usLogin AllThingsConsidered.biz

Self Managed Super Fund (SMSF) Article
SMSFs and Small APRA Funds

By Tony Negline.

This article may be out of date.

17th August 2005

Click here to buy - A How To Book of SMSF's by Tony Negline

Under the super laws two types of DIY super funds are allowed – Self Managed Super Funds – often called SMSFs – and Small Australian Prudential Regulation Authority Funds which are generally referred to as Small APRA Funds or SAFs.

There is one important similarity with these fund types.  Both funds can have no more than four members.

Equally there are some important differences between SAFs and SMSFs:

Some investors who want to put their retirement asset into a small super fund may find that they are not allowed to use a SMSF and are therefore forced to use a SAF.  For example:

People who ignore these particular requirement risk up to six months jail or being fined its monetary equivalent.

Other investors, given their personal circumstances, may be permitted to be a trustee of a SMSF but might prefer to run a SAF.  For example:

If a small fund is changed from a SMSF to a SAF there is no need to wind the SMSF up and start a new fund.  Effectively the SMSF trustee resigns and is replaced by an Approved Trustee.  The ATO is told the fund is no longer a SMSF and APRA is told that it now has another fund to regulate.  Most Approved Trustees will insist that a fund's trust deed is altered to their standard small fund trust deed.

Additionally, before agreeing to take on a SMSF, an Approved Trustee will carefully examine a fund.  They will want to make sure the fund complies with all the relevant laws and has always complied.  If a fund hasn't always complied then it must be completely cleaned up before any Approved Trustee will be prepared to take it on.  Assets that are not acceptable to the Approved Trustee will have to be disposed of.  Typically this will be assets that either have negligible return or make up a disproportionately large percentage of total fund assets.

Instead of using a SAF investors who find themselves in any of the above situations might consider shutting down their SMSF and transferring their super fund monies to another type of fund such as a retail fund.  However anyone who has not retired and wants to transfer assets between super funds must factor in Capital Gains Tax.  Retired SMSF members who have to transfer their retirement assets into another superannuation vehicle might face Reasonable Benefit Limit issues which must be factored into any decision.

Return to full article list of SMSF articles

 

Share this article
Click to share this article on Facebook Click to share this article on Twitter

If you would like more SMSF articles like this by email, subscribe! It's free.

[Bold fields are required]

Your details

Your alternate email address is used only if messages to your primary email address are returned to us.

Industry

Do you work in the financial services industry?

This email is general in nature only and does not constitute or convey specific or professional advice. Legislation changes may occur quickly. Formal advice should be sought before acting in any of the areas discussed. Be aware that the information in these articles may become innaccurate with time. Responsibility is disclaimed for any inaccuracies, errors or omissions. Particular investments are neither invited nor recommended and hence this publication is not "financial product advice" as defined in Section 766B of the above legislation. All expressions of opinion by contributors are published on the basis that they are not to be regarded as expressing the official opinion of any other person or entity unless expressly stated. No responsibility for the accuracy of the opinions or information contained in the contributor's articles is accepted by any other person or entity. Copyright: This publication is copyright. If you wish to reproduce this article you require a license, which can be purchased here, to do so.

 
 
Site design by Raycon