Super Funds and Asset Classes

2.
1 Different types of funds in Superannuation
2.1.1 Retail funds
Retail super funds were created by financial and insurance institutes to serve the people who are
interested in saving for their retirement. These funds generally offer investment advice and
customized facility to their member and fix a pay to provide this service. These funds are controlled
by investment and banking institutes.
2.1.2 Industry Funds Industry superannuation funds are generally established by industry hodies like
trade union in Australia to offer their workers in retirement. The larger amount of industry of super
funds are open for anyone to join. The remaining smaller part is restricted to employees in a
particular industry. These superannuation funds are generally low to nid cost.
2.1.3 Self-Managed Super Funds
A Self-managed super fund (SMSF) is a reserved super fund which is regulated by the Australian
Taxation Office (ATO), that a member can manage himself. The maximin number of members in
SMSFs are 4 members. All members are should be trustees and are accountable for the choices
made about the fund and for complying with relevant Laws.
2.2 What is SMSF?
A Self-managed super fund (SMSF) is a reserved super fund which is regulated by the Australian
Taxation Office (ATO), that a member can manage himself. All members are should be trustees and
are accountable for the choices made about the fund and for complying with relevant laws.
A superannuation fund must meet few basic conditions to be considered as a Self-Managed Super
Fund (SMSF). The basic requirements of a SMSF (also known as a do-it-yourself DIY super fund)
includes the following:
The maximum number of members allowed is 4.
• Each member of SMSF should also be a trustee of the SMSF fund, and all the trustees should be
members.
A trustee of the SMSF can't receive any payment for performing the role of a trustee.
Any member of a SMSF cannot be an employee of another member, unless they are relatives.
2.3 Advantages of Self-Managed Super Funds
Control
In SMSF'S, you possess a lot of control in how you can invest your fund but your strategy for
investment should be formulated appropriately.
Flexibility
You have a large number of choices in what you can invest in. You can deploy the money into a
variety of assets like bank deposits, shares, direct properties, collectibles like artworks, managed
funds and pooled investment trusts. Also according to your requirements, you can changeover or
make modifications to your investments.
Control Over designing and operating the fund Since in SMSF's the members are also its trustees so
you have a greater control over how the fund is designed along with its rules and how it is operated.
For example, a super fund could operate the accumulation phase as well as the pension phase
(spending phase) some specific rules could also be introduced about the payment of the benefits like
putting constraints on the time at which the child could make use of pension,
Super Fund continues after your demise
In case of your demise, the super fund provides benefits to your wife or husband, also to your child
meaning that the funds would continue after your demise also.
Savings on cost.
usually, as your superannuation investment grows, the cost incurred in handling a self-managed
superannuation fund (SMSF) doesn't grow. How economical your SMSF is depends upon your
balance in the account. If the account balance is larger, your smsf would be more economicalSMSF's
don't usually have the similar regulations and they need not be licensed.
Concessions on tax
this fund provides concessions on on tax such as extension of lump sum tax in the pension phase of
super.
Benefits for Small Business owners Commonly, many owners of small businesses can use the rules
super which allow SMSF's to buy into business real property directly or by way of non-geared unit
trusts or through warrant trusts and also can lease back the property to an accompanying party
2.4 Disadvantages of Self-Managed Super Funds
Responsibility
If you are a trustee of sasf, all the responsibilities lie with you related to handling the fund. All the
super funds are required to be in compliance with the deadlines and the rules. There is also a
responsibility of ensuring that all the legislative requirements of the fund are net on time. You can
also be penalized in case of breaches of the legislation.
For diversification of investments, there is restricted capacity For the purpose of diversifying your
investments over a lot of options, you might not have sufficient amount like usually you are able to
deploy your money over a greater range of assets. Also how well the fund's investment are
performing also needs to be measured.
Expensive
Banking on the kinds of investment that you have nade from the super fund or its administration or
consulting assistance that you get, it might turn out to be expensive to landle the fund,
No way of approaching the Superannuation Complaints Tribunal
There is no way of approaching the Superannuntion Complaints Tribunal, of giving the complaints or
the disputes to SCT if you are a member of a SMSF.
You can pick one of the following structures for the super fund:
You can go for up to four individual trustees, or
A Corporate trustee (necessarily, a company acting as a trustee for the fund)
A SMSF trustee is responsible for:
Drafting the funds investment strategies and making the investments:
Accepting the contributions and paying out benefits:
Appointing an approved auditor:
Lodging annual returns with ATO and keeping the fund records
2.5 Is a Self-Managed Super Fund right for you?
Exceptionally, the main reasons for people setting SMSFs are not formed around investment returns,
In reality, most of the members set up SMSFs to gain greater control and greater flexibility around
their savings for retirement, This is all quite good, but since Super is all about saving for your
retirement, so if you are taking the DIY (do-it-yourself) path, you need to be sure that you would be
able to maximize your savings Other reason people want to establish an SMSF is that if they are a
small- business owner and want to utilize their SMSF to buy their business premise
which could be tax effective. If you have a greater superannuation balance, you may also be able to
save on fee by setting up an SMSF
But SMSFs are not for everyone. Every year roughly about 10,000 SMSFs are wound up for a number
of reasons
Apart from the funds member's death, a lot of trustees close down their fands because of the
burdensome compliance regime Also because the costs of running such a fund may total up to
$2000 to $3000 a year or maybe more, including the tax returns and an yearly audit Savers who have
smaller balances, this might be too much for then If the funds are not run meeting the compliances,
members also shoulder the risk of fines of up to $10800, or even jail There are some savers who
don't have the time or the required knowledge of financial concepts in order to marage their own
savings Another potential drawback is that there is not any compensation scheme for
2.5.1 Key considerations for the SMSF trustees
You are required to take an active interest in your Super People wanting to establish an SMSF are
looking for a greater level of control to robilize their retirement wealth They should also be very
confident in making relevant investment decisions in the best Interest of their fund If you are a
trustee, you need to invest a lot of time managing your SMSF Although this does not mean you doing
it all alone by yourself, you would be the person in control of the fund's operation
For your SUSE you will have administrative and legal responsibilities to fulfill
Trustees have a responsibility for administering, for meeting compliance and investment strategies
of their SMSF and they must adhere to strict rules and regulations If the trustee fails to meet the
obligations under super and tas laws, it could result in penalties or mybe disqualification trustee If
you do not feel quite comfortable managing all of these requirements yourself, it is important to
seek advice and support from a specialist. However, as a trustee you are entirely responsible for
operation. and compliance of your SMSF
You should have an suitable ninimum balance to run your SMSP
Generally, you require a starting balance of at least $300,000 and an anticipation that the fund will
continue to grow, for the SMSFs to be cost- effective In addition to the establishment costs,
containing a trusts deed and creation of the corporate trust, some of the ongoing costs related with
operating an SMSF include an annual tax return and audit, ATO and Investment fees If you need
professional SMSF support services to help you with the management and compliance of your fund,
you can also opt to pay for it
In the event of theft or fraud, you cannot receive compensation for your SMSF
Industry and retail super funds are subject to the regulations from the Australian Prudential
Regulation Authority (APRA) Whereas, SMSFs are not subject to the sane government protection
which means that in the event of fraud or theft resulting in financial loss, nenbers of SMSF can't
apply for compensation by way of the Australian Governments Superannuation Compensation
Scheme
If you are planning to reside overseas for an extended period of time, you must seek advice
You need to be an Australian resident in order to set up and manage an SMSF If you are planning to
reside overseas for extended period (one to tro years or more), it is apt to seek professional advice
The Australian Taxation Office (ATO) has laid out strict rules and regulations with regard to extended
leave from Australia. If you don't follow these guidelines, implicitly your SMSF could be regarded as
non-compliant and you may incur heavy penalties
To help you to set up and run your SMSF, specialist support providers are available for help
It is a great idea to appoint help to establish and manage an SMSF Even if you are planning on doing
the majority of the work yourself, you would still need an independent auditor and perhaps an
accountant and an actuary Many of the trustees also opt for professional SMSF support services to
get assistance with administration, compliance, investment and accounting advice
Consider possessing insurance cover along with your current super fund
It may be advantageous to possess permanent disability insurance and life insurance through
Superannuation If you are contemplating on switching over to an SMSF, it might also be
advantageous to maintain any current insurance cover by not completely closing down or rolling
over all of your superannuation If you want to replace your current insurance cover, you should
consider all the costs and benefits associated with it You are required to be acquainted with the
knowledge of complaints and dispute resolution mechanisms During the time you are managing your
SMSF, disputes and complaints may arise Even though SMSF's trustees don't have access to the
Superannuation Complaints Tribunal (SCT), they have the access to Financial Ombudsman Service
(FOS) and also to the Credit and Investment Ombudsman Service Limited (COSL) for services for
Independent dispute resolution It's your decision how you sant to structure your SMSF If you decide
to set up an SMSF, you will have to choose between setting up a corporate trustee or setting up an
individual trustee To know about the benefits and limitations of both these structures and what is
most suitable nuation
Classes
on covering-
funds
If you close down your SMSF, you are accountable for coming up with an exit strategy
You might want to or might need to wind up your SMSF at trustee, point in time need to have
contemplated an exit strategy to help in possible and also to be aware of all the noking this process
as simple costa involved with closing down your fund
2.6 Chonsing your investment strategy?
Identify your Investor profile
Are you ready to take up short-tera risk in order to earn long-tern gain? Or are you near to
retirement and want low risks? Considering these kinds of questions would help you in making your
investment choice
To work out which Investment option is suitable for you, it is important for you to take your personal
circumstances and your goals for retirement in consideration
There are three factors you should consider while working out which investment option would help
you in reaching your goals:
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1 When do you plan on accessing your super?
2 Your earnings from the investment

3 And, how do you feel about risk
Since everyone's situation is quite different and whether you are a growth investor or a conservative
investor, or you have a lot of time till your retirement or not, these factors have to be taken into
consideration
Learn the basics
Super is an investment for your future after retirement Getting familiar with a few key investment
principles would help you to make sense of your investment choices
There are four major investment profiles. They are as follows:
Growth -This option is designed for the members who want higher average returns over the long
term but with less risks than an option that is invested solely in shares
Balanced This option is designed for the members who want higher average returns over the long
term, at the same time being sensitive to the relative performance of other Australian
superannuation funds
Retirement- This option is designed for the members who are near to or who have reached their
retirement It is structured to generate wealth over the medium to long term, at the same time
providing with soze reduction to the fluctuations of the returns in the short-tere
Conservative This option is designed for the members who seek less volatile returns for their super
while maintaining some growth exposure Using their money in the short term is most likely to be
their main purpose It ains to reduce the risk of losses so it accepts a lower return over a long period
of time
Getting your Investment right
Picking the right investment option can actually make a huge difference to your retirement income
and it would depend on your personal circumstances and your retirement goals
To decide on the best alternative, you should:
• Understand the risks associated
Understand the asset classes
• Look at the expected returns for each of the investment profile
.Realize the importance of diversification
Life cycle Investment Strategy
People want an investment strategy that meets their requirements no matter what stage of life they
are at An option that targets on generating wealth over a long period of time as you grow your super
but which also gives you protection from the market ups and downs as you approach your
retirement
Let's understand the Life cycle Investment Strategy
What is Life cycle Investment Strategy?
It is an investment option shere your balance is automatically moved across three purpose built
investment pools on the basis of your age, efficiently reducing your investment risks as you near
your retirement
Tho is it meant for?
The Life cycle Investment Strategy is created for those members who have a Super-savings account
and members who wish to produce wealth over the long term, and then slowly transition to the
loser-risk Investaents as they approach 65 years of age
How does this process work?
It's quite simple, it is mainly focused upon creating wealth over the long term in the Balanced Pool
and then transferring your balance gradually to the lower risk retirement pools and cash pools as
you approach your retirement
Make an Investment choice for your super account
Since there are a lot of options to choose from when it comes to investing, it gets very confusing. To
decide on where to invest you should check out the risks, returns and asset mixes of the main
investment options
Whichever investment choice that you make for your super could make a significant difference to
your final super balance. Some of the investment choices are as follows:
Conservative
This investment choice is suited to the investors who:

Seek less volatile returns for their super at the same time maintaining some growth exposure
• Are most likely to utilize their money in the short-term
Retirement
Are near to or who have reached their retirement
Wish to generate wealth over medium to long tera, at the same time reducing fluctuations of the
returns in the short-term
Balanced
Vish to generate wealth over the long-term at the same tine also being sensitive to the comparative
performance of the other large Australian superannuation funds
Growth
Wish to generate wealth over the long-tera
Are willing to take up short-term ups and downs in the expected returns, but they want an option
that is less risky rather than an option that is invested solely in shares
Super performance should be monitored continuously with passing time to stay up to date and in
control of your super
2.7 The Major Asset Classes
In accordance with your investment strategy or option, your super fund makes use of professional
managers who decide on what all investments to invest your super money in
Some investments are more risky than the others. Investments with higher risk factor, like shares or
properties, have the potential for higher average returns over the long term, but they also carry a
greater risk of value falling, which could result in a loss known as negative return Investments with a
lover risk factor, like fixed interest and cash, are safer when it comes to less risk of losing your
money, but they offer lower returns than higher risk options.
There are two major asset classes that your super fund's professional managers night invest your
money: Current asset and fixed asset.
Current asset class includes Cash or Fixed Interest whereas fixed asset class includes Shares or
properties.
Fixed assets: These are designed to grow your investment. They include investments such as shares,
alternative investments and property. They tend
to carry higher levels of risk, yet have the potential to deliver higher returns over longer investment
tine frases. In general, fixed assets are expected to provide returns in the form of capital growth. For
example, as a shareholder, you may receive income in the form of a dividend on the shares you own.
However, the majority of the return usually comes from changes in the value of the company over
tize, as determined by its share price.
The increase or decrease in a company's value is known as capital growth or capital loss. These
returns can be strongly influenced by market fluctuations and can, therefore, vary considerably over
shorter time frames. The frequent changes in a company a value is known
2.8 Stages of Fund- Accumulation and Pension Funds

As you age, your super advances through different phases. They are as follows:
• Accumulation: This is the phase in which you are contributing to super, not doing any expenditure
and usually trying to save or accumulate and earning as much as possible. This is the longest phase
for most of the people, although it usually depends on how early you start and goes till the age to
which you live and runs from when you start working until you have reached in your 50 s.
Transition to retirement: This transitional phase is the shortest one. However, this phase is still
critically important and many of the people commit mistakes at this point. During the transition to
the retirement phase, it all depends on your personal circumstances. You might still be madly saving,
or shifting between saving and spending or simply spending out rightly.
Pension: This phase could also be called as the Spending phase. At this point in time your
accumulation is majorly done and you are focusing onto conserving your capital, generating income
and hopefully spending whatever amount you have got sustainably.
Regulation and Legislation Covering

1.1 Trust law
A trust is defined as a lawful positioning where a trustee has a role to manage assets for the profit of
one or more receivers. They are not like companies. Trusts are not distinct legal bodies, even though
they are considered as a distinct body for taxation commitments.
It's an agreement in which an individual or a company ie,, the trustee possesses the assets i.e., the
trust property in trust for the advantage of other people i.e., the beneficiaries. Super fund is a
unique kind of trust which is established and conserved for the only purpose of giving benefits of
retirement to fund's members, who are the beneficiaries
To establish a trust, you require the following:
The trustees
The assets
The recognizable beneficiaries
The intent to establish the trust.
Trusts are established by persons for variety of motives comprising succession planning, tax
maximization and protection of assets. A trust comprises of a trustee, trust property or the asset and
generally a beneficiary or beneficiaries.
If utilized prudently, a trust could offer great benefits in the ownership of investments, ownership of
business or in your will, bringing about in aids in safety of assets and tax effective dispersal of
income, It's essential that your attorney has great understanding of trusts.
A super fund is a trust fund which is managed to deliver benefits to members of the fund when they
near the retirement or on reaching a specific age.
The trust deed underneath which the fund is managed provides the trustees of the fund an optional
power to decide the benefits and could be suitable for concessional tax treatment and for tax
deductions to be given to persons who give contributions to it.
The procedure includes attaining a trust deed, assigning trustees, choosing to convert to a regulated
fund, and attaining a tax file number (TFN) and Australian business number (ABN).
The superannuation schemes are usually trusts. The deed or any additional instrument founding the
scheme is either a trust deed or levies trustee responsibilities on the people in charge of the scheme.
The trustee must not only conform to the rules of the related trust deed or any other instrument,
but also is liable to be subjected to common law principles of the trust law. The primary objective of
the trust law is the fiduciary duty to perform honestly, in good faith and in the best interests of the
members, Super schemes at times hire a professional trustee like a trust company. A professional
trustee should act with greater standard of care compared to a nonprofessional while performing his
responsibilities.
According to the super law, the legal entity keeping the assets of a SMSF is not permitted to be the
same legal entity who is eventually eligible to the benefit of those assets.
It means that SMSF is essentially a trust. In the language of a lawyer, in a basic trust the trustee will
possess the 'legal interest in the assets and the member of the fund will possess the 'beneficial
interest' in the assets.
1.2 Who can be a member and who can be a trustee?
Trustees are in charge of setting up and handling the managerial and compliance intricacies of their
self-managed super fund (SMSF).
A SMSF trustee is accountable for making sure that the SMSF is conserved for the purpose of giving
retirement benefits i.e., conforming to the sole purpose test.
The trustee is accountable for:
• Formulating the investment strategies of the fund and making the investments
o Take the contributions and giving out the benefits
o Assigning an approved auditor
o Filing the annual returns with ATO and maintaining the fund records
An SMSF cannot have more than 4 members at one time and are usually, members of the same
family.
An SMSF is just like a trust and similar to any trust is operated by the trustees. There are two kinds of
SMSF trustee structures: one in which the trustees work individually and the other in which a
company is selected as the trustee. In both the scenarios, members are the ones who operates the
fund, all the individual trustees or directors of the corporate trustee must usually be fund's
members.
Some people cannot become an individual trustee or director of a corporate trustee of a super fund
comprising of someone who:
has been found guilty of an offence concerning dishonest behavior
D has been liable to be subjected to a civil penalty under the super legislation
o is an undischarged bankrupt such as insolvent
has been banned from performing as a trustee of a super fund by the ATO has got a civil penalty
order under the Superannuation Industry (Supervision) Act 1993 (SIS Act).
Here super funds run as trusts with trustees which are accountable for the sensible process of their
funds and in framing and executing an investment approach.
When someone choose to operate the business through a trust (either a unit trust, discretionary
trust), a trustee will:
o Possess the properties of the business
Run the business
Allocate the revenue of the business
Conform the obstacles of the trust bond or will.
Few of the further responsibilities of the trustee are:
o Behave in good faith
o Implement sound attention in the management of a trust
Should maintain clear books and records of transactions
Try to avoid a conflict in any issues
o Continue the terms and conditions of the trust.
The trustee structure also needs to be chosen. There are two kinds of trustee structures, namely
Individual trustee and corporate trustee.
Individual trustee
The simplest and economical way to start a self-managed super fund is when you chose individual
trustees. Here there will be no further formation or foundation cost needed. But in the long run, the
maintenance cost will be very high
In an individual trustee structure, there are certain requirements to form this legal structure which
are:
There should be four members or less than that

o All these members should also be the trustees of the super fund
The member of this fund can't be member of another fund, except they are relatives.
There are various advantages of Individual Trustee which are:
1) There is no need of any ASIC forms to begin superannuation fund.
2) There will be very less procedural problems to go through with.
3) The member probable has an advantage of having private information, if he is a family member.
4) The ongoing ASIC obligations are not complied here.
5) It is comparatively cheaper than corporate trustee.
6) Have a control over varying situations or surroundings over time.
The disadvantages of the individual trustes are:
1) There is no experience in the field of investments.
2) Extra expenditure is happening for holding extemal experts such as accountants and advocates.
3) If you want the super fund to be single member type, then there need to be a minimam of two
trustees, I mean the member plus other peman to work as a trustee
4) In a two member superannuation fund, if one of the member dies, then the remaining member
cannot continue as individual trustee and individual member, Another person shall to be allotted as
the second trustee to continue the fund.
➤Corporate trustee
When you have a corporate trustee, the company is a trustee and the directors of this trust are its
members. The process of removing directors in a corporate trustee is very easy and simple.
Generally there is only one director in Corporate Trustee Company.
There are various roles to be played by corporate trustee which are:
• Management of flexible payouts with the presence of the client's reliable advisor.
The trustee needs to evaluate and fill all the fiduciary tax returns.
Day-to-day evaluation of publicly traded financial securities is to done.
Monthly, quarterly, and annual trust reports are needed to be prepared.
• They need to coordinate with the financial advisor, of wide-ranging communication with grantors
and receivers via reports, meetings and through other ways of communication.
Now we will discuss about the advantages of corporate funds which are:
1) The menibers of the company have limited liability because according to company act, the
company has a separate legal entity from its members..
2) If one of the member wants to leave the trust, it will become easy to segregate the trust's
possessions and private belongings as they are held in different names.
3) Unpretentious sequence and regulation of the trust when one of the trust's directors die
suddenly. A corporate trustee does not stop or terminate upon the death of one of its directors,
4) When a new member joins the trust, then normally they have to become a trustee of the fundIn a
corporate trustee, the new director must be appointed to the company.
5) In corporate trust, the trustee need never change. Alterations on the board will only apply to the
company's directors, but not to the trustee.
The disadvantages of corporate trustee are as follow:
1) To operate a trustee company, acceptance from the administrative department of company law is
required.
2) When a company has a single trustee, some difficulties may stand up about various issues.
3) While directors of a trustee company may get a secarity from personal liability than individual
trustees, still there are numerous areas where they might get unprotected.
4) The cost and complication involved in establishing a company and keeping the records for the
entity is high.
1.3 Establishing a superannuation trust
1.3.1 Establish the trust
To establish a trust, you require:
• Trustees
Assets
• Recognizable beneficiaries
The intent to establish a trust.
A trust deed is a lawful document that explains about the rules for setting up and running your fund.
It comprises of things such as objectives of the fund, who could become a member and if the
benefits should be paid out as an income stream or as a lump sum. The super laws and the trust
deed combined form governing rules of the fund.
The trust deed should be:

Created by a person who is qualified to do so It must be signed and dated by all the trustees
Appropriately implemented in accordance with the state or territory laws
• Reviewed on a regular basis and updated as needed.
1.3.2 Obtain the trust deed
The trust deed lays out the rules and regulations underneath which the SMSF would run, so it's
important to begin with a well-drafted trust deed. The deed must be formulated by a qualified legal
practitioner who has great understanding of the super law especially SMSFs and it must be designed
in such a way that gives the trustees maximum control and flexibility
The trust deed:
o Instructs the rules for the trustee to abide by, though it is not allowed to have clauses that will
need the trustee or trustees to breach the SIS Act.
• Must be formulated to permit the SMSF to aim to its objectives.
• Could be altered but only according to the guidelines mentioned in the original trust deed.
Decides how the member accounts would be calculated. In fund's accumulation phase, the deed
would specify how the incomes would be credited to each member's account.
o Instructs if the SMSF could pay out pensions, and if so, how.
1.3.2.1 Provisions that can be contained inside a trust deed
A trust deed for SMSF can contain the provisions which deal with the following:
Who would be a trustee of the SMSF?
Who could be a member of the SMSF?
Trustee rights to alter the trust deed.
o Who could make the contributions?
o Member investment choice availability.
o When and how the benefits could be paid?
o Kinds of income streams the SMSF could pay
o Receiving the binding death benefit nominations.
To whom the benefits could be paid out to upon the demise of a member.
Rulebooks to set up and manage fund reserve accounts.

When and how the SMSF should be wound up.
1.3.3 Sign of Declaration
When you become a trustee or a director of the corporate trustee of an SMSF, you need to sign a
declaration form declaring that you comprehend your obligations, duties and responsibilities as a
trustee or director of the corporate trustee of an SMSF.
The declaration should be in the permitted form which is obtainable from he ATO and it should be
finished in a period of 21 days of you becoming a trustee. This requisite is applicable to all the new
SMSF trustees regardless of if you are an individual trustee or a director of a corporate trustee.
The declaration is an inquisitive document since its purpose is basically to ratify that you
comprehend your responsibilities as a fund trustee. As a trustee, you're still answerable to these
tasks even if you do not sign on the document. Though if you do not sign the trustee declaration, you
might be subject to the penalties,
If your fund violates the super rules, you could be subject to very grave penalties, comprising of fines
of $10800 for some violations, and these fines should be paid out from your personal savings rather
than from the SMSP savings.
You should also sign on the SMSF declaration if you are chosen as a legal personal representative
who's been elected as a SMSF trustee or as a director of a corporate SMSF trustee on part of the
following kinds of SMSF members:
An SMSF member who is below 18 years of age or who is under another kind of legal disability
An SMSF member for whom you possess a lasting power of attorney
Late SMSF member
Your duties and responsibilities as a SMSF trustee involves:
o Performing honestly in all the problems affecting the SMSF.
o Applying the degree of care, skill and diligence of an
person.
o Performing in the best interest of the members.
ordinary prudent
o Keeping SMSF assets separate from your personal and business assets (and those of any other
trustees of the fund).
o Not do anything that would impede trustees from performing their functions and powers.
• Formulating and implementing an investment strategy.
o Managing reserves responsibly.

Permitting the members access to certain information
1.3.4 Lodge an election with the regulator
Within 60 days of the setting up of an SMSF, the trustees must lodge an election to be regulated
with the ATO. This election is irreversible and counsels the ATO that the SMSF would be subject to
the requirements of the related superannuation legislation and thus would be eligible for
concessional taxation treatment at 15% rate as a fulfilling fund. If an election notice is not filed, the
SMSF would not be considered as a fulfilling fund for the taxation purposes and the SMSF would be
taxed at the highest marginal tax rate of 45%.
1.3.5 Open a bank account
The trustee of a SMSF would usually be required to establish a bank account so that the fund could
receive the contributions, rollovers and earnings. This account would furthermore be needed to
reimburse the expenditures such as yearly supervisory levy, accounting fees and taxation liabilities.
Establish a bank account
You are required to open a bank account in your fund's name to handle the fund's tasks and receive
the cash contributions, rollovers of super and income from the investments. This account is used for
paying out the fund's expenses and liabilities.
The fund's bank account must be maintained separately from the trustees individual bank accounts
and any of the linked employers' bank accounts.
It's not required that you open a distinct bank account for every member but you should maintain a
distinct record of their entitlement which is known as a member account. Each member account
demonstrates:
Contributions made by or on behalf of the member
Fund investment earnings allocated to them
• Payments of any super benefits; lump sums or income streams.
Types of superannuation funds
There are different types of superannuation funds which a bit different from each other. Now we are
going to discuss about the various types of funds. Superannuation funds can be grouped into eight
categories which are:
Retail funds
Industry funds
Corporate funds
Public sector funds
Retirement Savings Accounts
Master trusts
Self-managed funds
Rollover funds
1.1. Retail Funds
Retail super funds were created by financial and insurance Institutes to serve the people who are
interested in saving for their retirement. In the starting phase, we can say that the early focus of
these funds were on the richer management Jobs customers, especially in executive positions.
These funds generally offers investment advice and customized facility to their member and fix a pay
to provide this service. The owners of this publicly-listed companies expect a good return on their
investment and a part of these profits are obtained from the actions of these funds goes to the
owners of the company, which serves people who want to save for their retirement. These funds are
controlled by investment and banking Institutes.
These superannuation funds are used to offer a large number of insurance options instead of the
default option. Therefore members can lay down the amount of insurance they need after their
death, TPD and income protection. Insurance is done to secure your close ones future.
In brief, the main features of the Retail Superannuation funds are:
Everyone can join the Retail Superannuation funds.
These funds have a wide range of investment choices.
These are recommended by financial advisors who charge a commission.
Now a days in Australia, Commissions are diminished.
Here there are two types of funds which are Accumulation funds and Defined benefit funds, Here
around 90% of these funds are Accumulation funds which are also called as defined contribution
funds which means that the final retirement money depends on the amount of money your
employer contributes to the fund.
Remaining 10% of these funds are known as defined benefit funds which means a member's
concluding super benefit depends on a method that considers the member's closing salary and the
total number of years that a person worked for that company.
Mostly all the retail superannuation funds vary from medium to high cost, but some of them are
giving a low cost fund option also.
The company having this fund targets to preserve some revenue

Large Organizations such as insurance and banking sector mostly have these superannuation funds.
Examples:
AMP Flexible Super
Bendigo Smart Start Super (Bendigo Bank)
BT Super For Life (Westpac)
ING DIRECT Living Super (ING DIRECT)
MLC Masterkey Super (NAB)
Colonial First State (Commonwealth Bank)
OnePath (ANZ Bank)
Suncorp Everyday Super (Suncorp)
Source: https://www.canstar.com.au/superannuation/industry-vs-retail/
1.2 Industry Funds
Industry superannuation funds are generally established by industry bodies like trade union in
Australia to offer their workers in retirement. In the beginning these funds were limited to their
industry but afterwards these funds are released to. almost all of them who are eligible for
superannuation.
Industry funds are not profit organizations. Below are some of the industry super funds include:
Australian Super
REST Industry Super
Sun super
Hostplus
MTAA Super
LUCRF Super
Cbus Super
Legal super
HESTA
The larger amount of industry of super funds are open for anyone to join. The remaining smaller part
is restricted to employees in a particular industry. The main features of an industry fund are:
Industry superannuation funds usually have a smaller number of investment options, which will
meet most of the people's needs
Most of the funds in Industry superannuation are accumulation funds. Still a small portion funds,
mostly older funds have defined benefit members.
These superannuation funds are generally low to mid cost.
Some of them offer MySuper accounts also.
Now we will discuss about one of the industry fund which is mentioned above: Hostplus. The main
objective of the Hostplus fund is
"Hostplus is the industry fund for those that live and love Australian hospitality, tourism, recreation
and sport we're proud to support the industries that make Australia great. Because we're an
industry fund, we put our members first, that's why we keep our fees low, our insurance flexible and
offer a competitive suite of investment options. Simply put, we're dedicated to ensuring our
members retire with more."
People choose Hastplus fund for three reasons which are:
1) For Retirement
2) For Super
3) For Business
For Retirement:
(1) Low fees:
The cost incurred is low ($7.50 a week administration fee plus investment costs).
(ii) Competitive investment returns:
The money of all members in the fund is carefully invested in good opportunities and make sure that
they stay financially fit after they retired.
iii) Financial planning:
Experts in that sector are used to get the facts on how and where to the money of the investors or
members.
(iv) Investment choice:
The members or investors of the fund are given the choice to pick the investment opportunity that
suits their requirements.
(v) Extra Benefits:

Exciting offers are given to eligible members who can enjoy discounted travel, health insurance,
financial services and etc.
(vi) 24/7 Access:
The members or investors can access information about their pension account online anywhere, any
time.
For Business:
(i) Easy online payment tools:
They take care of the businesses of their members online with their easy tools.
(ii) Employer Services Team:
A team is always ready to help with all the queries of the members.
(iii) Industry support
These fund mostly support the industries of Hospitality, Tourism Recreation and Sport.
(iv) 24/7 access:
The members or investors can access Information about their account online anywhere, any time.
() No fees:
There are no fees charged for Hostplus employers.
(vi) Employee benefits:
The employees of the company invested can enjoy a range of benefits through Hostplus.
For super:
Investing your super with Hostplus gives the members access to low fees, competitive performance
and a host of free tools.
• Competitive Investment performance.
Like any super fund, they aim to deliver the best returns to their members. Here they try to help the
funds grow and they offer a range of investment options to suit your needs.
1.3 Public Sector Funds
Public sector funds are mainly formed for employees of Federal and State government departments
as they are mostly open to government employees. The characteristics of these funds are:
Public sector funds have a medium range of investment varieties that satisfies the people's
requirements.
Here, in the public sector funds, most of the long-term members contain defined benefits and
rernaining have an accumulation fund.
These funds have low fees and some of them offer MySuper accounts.
In public sector funds, profits are put back into the fund for the benefit of all members.
Basically there are two classification of funds in public sector funds which are Accumulation funds
and default funds.
Public Sector Superannuation Scheme (PSS)
The PSS is a defined benefits scheme which was closed to new members with mewh effective from 1
July 2005.
New employees who commence employment on or after 1 July 2005 will usually become members
of the PSSAP. However, some new employees will not be affected by this change and will allowed to
be members of the PSS, for example:
When the person is already a member of the PSS due to another consistent instance of employment.
When the person is a former member of the PSS in respect of whom a safeguard benefit under that
scheme has not yet been paid and that person would either becomes a permanent employee or as a
temporary employee or statutory office holder selected to join the PSS.
At the end of 30 June 2005, the person was a statutory office holder and selected to become a PSS
member after 1 July 2005 in association to that office.
At the end of 30 June 2005, the person was a temporary employee and selected to become a PSS
member after 1 July 2005 in association to that employment
A person who selected to transfer to the PSS from the CSS.
These members pay 2% to 10% to their fund account or they can choose to make no payment at all.
These payments are mostly paid each into the PSS Fund. When the company contributes, their
employer also pays approximately 3% of superannuation salary into the PSS Fund. Their defined
benefit is also included in the unfunded element that varies upon on the amount of your payment.
Benefits are generally paid as a lump sum. If they don't want that, then a pension option is also
available in most of the cases. The amount of retirement benefit you will receive usually depends
upon the following factors:
The time that they have contributed to the scheme.
Your average superannuation salary across your last three birthdays
• The level of contributions you have made during your time of membership.
Public Sector Superannuation accumulation plan

Accumulation Fund
The Public Sector Superannuation accumulation plan (PSSAP) was started by the Superannuation Act
2005 for employees of the Australian Government and other employers.
PSSAP provides a tax-effective investment arrangement which helps the members to save their
income for the needs of future part of life. It is an accumulation fund where the savings of the
members accumulate over time. This growth varies upon factors like the member and employer
contributions, Investment returns, rollovers, and fees and charges. The savings are conserved by law.
The members normally can't take out the funds until they touch their preservation age and retire
from the workforce.
Default fund
PSSAP is the default super fund for new Australian Public Sector (APS) employees and new
employees of other participating employers. If the members commenced employment with their
current PSSAP participating employer.
1.4 Corporate Funds
Corporate superannuation are mostly only developed for people who are working for a specific
company, where the membership is existing for ex-employees or for relatives of existing employees.
Employers suggests a default fund for their employees as an substitute to execute Fund rights for
those who don't want to pick their own super fund.
A corporate fund is organized by an employer for its employees.
Larger corporate funds have an employer who runs the fund under a board of trustees who is
selected by the members of the company.
Charactertics of these funds are:
These funds are operated by an employer. These funds will yield the profits to members.
These run by a bigger fund and they suggest you a varied collection of investment opportunities
They vary in low to medium cost funds for big companies and high cost for small companies.
Some of these funds have definite funds members and remaining are accumulation funds.
1.5 Eligible Rollover Fund
An Eligible rollover fund (ERF) is defined as a holding account for missing or inactive members with
little account balances. These type of funds can't get employer offerings. Like other super funds,
some ERFs have low investment earnings and may charge high fees, where as others funds have
decent earnings and low fees.
The main purpose of the Fund is to reunite members with their superannuation. The Fund runs a
program of activities designed to help members achieve this and consolidate their benefits into their
main super account.
For withdrawal, the member can access your benefit as a lump sum or transfer your benefit to
another complying superannuation or rollover fund.
Some risks to think about when your funds are kept in an ERF include potential low investment
returns and ongoing fees. If the previous employer also had an employer-sponsored division set up
for the super fund, then the member has no longer benefit from these features as he is no longer an
employee.
There are certain types of individuals who are suited to apply for an ERF: TATA CONSULTANCY
SERVICES
People who are looking for a new super fund to roll their money into, particularly if they are in
between jobs.
People who want a safe but secure eligible rollover fund.
ERF fees
The fees associated with ERFs include administration fees and/or indirect costs. Administration fees
differ from one EFR to another and cover the cost of keeping the account while indirect costs covers
investment costs. Indirect costs could be charged as a percentage of your asset benefits or your
balance.
1.6 Self-managed super fund
A Self managed super fund (SMSF) is a reserved super fund which is regulated by the Australian
Taxation Office (ATO), that a member can manage himself. The maximum number of members in
SMSFs are 4 members. All members are should be trustees and are accountable for the choices
made about the fund and for complying with relevant laws.
A superannuation fund must meet few basic conditions to be considered as a Self- Managed Super
Fund (SMSF). The basic requirements of a SMSF (also known as a do-it-yourself DIY super fund)
includes the following:
The maximum number of members allowed is 4.
Each member of SMSF should also be a trustee of the SMSF fund, and all the trustees should be
members.
A trustee of the SMSF can't receive any payment for performing the role of a trustee.
Any member of a SMSF cannot be an employee of another member, unless they are relatives.
How do self managed super funds work?
SMSFs are considered as a legal tax arrangement with the single purpose of providing for the
participant retirement. They operate under similar rules and restrictions as ordinary super funds.
Generally in self-managed super funds, Set up costs and annual running expenses are high so the
members will need a large balance to make the fund cost effective.
When the members run their own SMSF they must have:
Need to do the duties of trustee or director, which enforces legal
obstructions.
Have the financial experience and skills to make sound investment decisions
Have enough time to research investments and manage the fund.
Budget for ongoing expenses such as professional accounting, tax, audit, legal and financial advice.
• Keep comprehensive records and arrange an annual audit by an approved SMSF auditor.
Organize insurance, including income protection and permanent
retirement cover.
The money used to offer retirement benefits.
If you decide to set up an SMSF you are personally liable for all the decisions made by the fund even
if you get help from a professional or another member makes the decision.
Source: https://www.ato.gov.au/super/self-managed-super-funds/
SMSF advisers
The members of this fund can pay an adviser a fee to set up, administer or help with the investment
decisions for their SMSF. The member should keep track of what the adviser is doing because they
cannot completely rely or pass on the responsibility of being a trustee or director.
Getting robo-advice on SMSFs
A financial adviser can help you weigh up the pros and cons of running an SMSF and help you decide
whether it's right for you. This advice has traditionally been provided by an actual person but can be
provided by a robo-adviser. Robo-advice is financial advice that's delivered by a computer Instead of
a physical financial adviser. It may be cheaper than seeing an adviser however there are limitations
to what robo-advice software can do.
Ongoing advice
The type of ongoing advice you get will depend on your needs, for example you may use a financial
adviser or broker for investment advice or an accountant for financial management of the fund.
Before engaging a professional to provide advice about the SMSF, The member should check they
are licensed by asking for their Australian Financial Services License (AFSL) number.
1.7 Master Fund
Normally an investment cycle that allows individual investors to finance money into different
essential investments that are functioned by skilled and qualified managers.
Master funds can commonly characterized into three kinds: discretionary funds, fund of funds and
feeder funds. In the last kind, shares are sold to the public only by the feeder fund, but can be
capitalized through the equivalent master fund.
The advantages of a master feeder structure
• Reduces trading costs because there is no need to "split" tax lots.
• It eases the administrative burden of maintaining multiple portfolios.
The general partner's performance fee will be able to maintain the underlying tax attributes from
onshore feeders.
• The fund's combined assets can be used to obtain greater financing benefits (for example, greater
leverage or lower interest rates on borrowed securities).
The disadvantages of a master feeder structure
An offshore fund is normally exposed to 3096 cover-up tax on Australia dividends. If a fund is trying
to escape such trades, It suffers increased costs. So normally it is not advisable.
Investing approaches will not deal with paybacks to the investors. In long term capital gain is
favorable to Australia. Taxes are not a worry for offshore investors, therefore if the master fund
carries a security to obtain favorable tax treatment and this might led to tactic encounters.
Investments like REITS and mutual funds are not applicable for offshore investors due to numerous
regional restrictions. But they are suitable for the Australian investors.
• Irregular divisions of P&L and tax accounting became clumsy, disproving the time and investments
grown from stress-free trade.
Difference between a master feeder and a fund of funds
Many people get confused between a master feeder fund and fund of funds. The primary difference
among a master feeder and a fund of funds is that in a master feeder, when the feeder purchases
shares of the master funds, it gets the benefit of the essential tax attributes of the P&L of the fund.
The feeder can invest in multiple masters, and the master can have more than a feeders, but is
always privy to all the underlying detail of the component P&L. In a fund of funds environment,
typically, the manager is capitalizing in funds that he doesn't take care of. The fund of fund doesn't
get any essential feature of the P&L of the investee funds, but obtains an alteration in NAV or
performing amount, for which it records this appreciation amount.
1.8 Retirement Savings Accounts
Retirement savings accounts are conventional for carrying super reserves. These accounts function
like bank accounts, apart from where boundaries apply upon taking out like regular super accounts.
They are operated for revenue by financial organizations such as banks, building societies, credit
unions and life insurance companies.
Superannuation funds helps in securing the future of people in Australia. These funds are aimed to
serve its members during their retirement planA well-considered fund can create a lot of difference
between living a relaxed and happy retirement and an endless tussle in the future years for most of
Australia citizens. Here are some of the benefits why we should consider superannuation:
Tax-Effective Savings
These funds are aims to serve people in Australia to become self-sufficient when they retire. It
consists of a series of tax concessions which boost contributions.
Salary Sacrifice
Here people who use salary sacrifice option can earn large amount of savings because earnings that
are contributed to the salary sacrifice are only taxed at a rate of 15%. Therefore for people who
come under the tax range of 459%, this contributes large amount of savings.
• Tax-Effective Capital Growth SERVICES
In almost all the cases, the tax rate on cash gained through investments inside the super fund is
lesser as compared to the tax rate on the same investments exterior to super fund. The revenue
made from an investment exterior of the super fund is taxed about 46.5%, while almost all the
superannuation fund returns are taxed between 10-15% dependent on the type of investment.
• Lower Tax Rate During Retirement
As the superannuation fund starts paying the distributed pension, Taxes will not be charged on
revenue. But if your period of retirement starts before 60, there will a 15% tax on the total sum
received from the fund.
• Superannuation Benefits are Protected from Bankruptcy
If the member of the superannuation claims bankruptcy, then their super benefits are protected up
to the Reasonable Benefit Limit (RBL) of their pension. This gives an advantage to the business
owners and individuals to protect their assets against the order of seizing by creditors during
bankruptcy.
Normally, the benefits of superannuation comes under three classifications:
Preserved benefits;
Restricted non-preserved benefits
Unrestricted non-preserved benefits.
Preserved benefits are those benefits that are kept back within in a super fund up to the age where
the employee reaches his retirement. Recently a rule is passed that all members have to hold on till
they attain an age of at least 55. The genuine and authentic retirement age completely depends on
the date of birth of the employers of the company.
Restricted non-preserved benefits are those benefits which are not preserved, can't be opened until
an employee satisfices a rule like dismissing their employer's employment superannuation scheme.
Unrestricted non-preserved benefits are those benefits which don't require the fulfilment of a
condition of release and can be accessed upon the request of the worker.
Before, any person from Australia could utilize their preserved benefits only once they attain age of
55. Nevertheless, after the legislation was passed in 1999, now the employee's preservation age
varies upon their date of birth.
Mostly by 2025, the workers in Australia will desire to open their fund would be at least 60 years old.
Before age 60, the workers must agree to a condition that they will terminate their employment and
will never plan to work again.
Anyone whose age is more than 65 can get superannuation fund irrespective of their employment
status. Active entities in the company who have attained their retirement but if their age is under 65,
they can still get this superannuation fund up to 10% part of the fund using a Transition to
Retirement pension.
1.1 Death Benefits
A superannuation death benefit is defined as a payment made by the member which is given to a
dependent beneficiary or to the trustee of a deceased one after the member is died. The payment of
the fund should be made as soon as possible after the member's death.
The form of the benefit payment which it is to be paid and to whom to pay will depend on the
governing rules of your fund.
There are two ways to pay the deceased's dependents which are:
A super income stream.
A lump sum.
You can pay the deceased's non-dependents by only a lump sum amount option.
The meaning of a dependent is somewhat different for:
who you can pay a death benefit to How the death benefit will be taxed.
In superannuation law, the dependents in a death benefit are:
the spouse of the member
the child of the deceased member
a person in an interdependency association with the deceased member

Which is explaining the special or close association between two people, where they offer the
financial, domestic and personal support for each other.
Treating a death benefit as a member benefit
A superannuation death benefit ascending from the exchange of a super fund pay after the death of
a member is called member benefit. This benefit should be remunerated the most recent of
following:
Six months after the death
three months after the grant of the fund of the deceased's will or letters of administration of the
deceased's estate
If the compensation of the benefit is overdue by law about the claim or by other reasons for delay in
giving out the benefit-Then
six months after the lawful action
Income stream death benefits
When a member is planning to reimbursement the death benefit as a revenue stream, then he must
first calculate the proportion rule of the tax-free and taxable components.
If a member is planning to pay a death benefit revenue stream for a dependent child of the dead
member, except when the child has a permanent disability, then you must:
Will end the payment of the revenue stream on or before the date the child become 25 years old
The outstanding fund should be paid as a tax free lump sum.
Lump sum death benefits insurance premiums
The taxed and untaxed elements are evaluated independently where you have requested or will
request in future, tax deductions for insurance premiums to offer for forthcoming death benefits for
your members. The untaxed element of a lump sum death benefit which is paid to a non-dependent
is enlarged to draw interest of the members of the fund.
You can evaluate the taxed element and the untaxed element of the benefit through an improved
calculation:
Compute the tax-free and taxable components of the member's superannuation interest just before
the lump sum was paid.
Apply these ratio proportions to work out the tax-free and taxable
components of the benefit using the proportioning rule.
The taxed element of the benefit is then calculated as follows:

• Work out an amount by applying the formula= Amount of super lump sum x service days / (service
days + days to retirement)
• Reduce this amount (Not less than zero) by the tax-free component of the lump sum benefit.
The result of this reduction will be the taxed element of the benefit. The untaxed element of the
benefit is equal to the taxable component of the benefit minus the taxed element of the benefit.
'Service days' in death benefits is defined as the number of days in the service period for the lump
sum. These days can be calculated till the date the deceased died.
'Days to retirement' is defined as the number of days from the day the deceased died to the last
retirement date. This is when their employment would have been terminated under contract or they
would have turned 65 years old.
Example: Tax deductions claimed on insurance premiums
Arjun is a member of a super fund that claims tax deductions on premiums it pays on insurance
policies to provide death benefits for its members.
Arjun dies on 1 July 2014.
The start date of Arjun's service period is 10 August 1976. His last day before retirement was to have
been 1 July 2017, when he would have turned 65 years old.
On 4 March 2015, a lump sum death benefit of $280,000 is paid to Arjun's beneficiary. This is paid to
her adult son, Tim, who is a non-dependent.
The service days for the lump sum death benefit are 13,841 (10 August 1976 to 1 July 2014 (date of
death)).
The days to retirement for the lump sum death benefit are 1,095 (1 July 2014 to 1 July 2017).
Just before the benefit is paid, the value of Arjun's super interest is $800,000. This includes a:
tax-free component of $200,000
Taxable component of $600,000.
Step 1
Calculate the tax-free and taxable proportions of Arjun's super interest ($400,000) just before the
benefit is paid:
tax-free component of $200,000 = 25%
taxable component of $600,000 = 75%.
Step 2
Apply these proportions to work out the tax-free and taxable component of Tim's lump sum death
benefit as follows:
$280,000 × 25% = $70,000 tax-free component
$280,000 × 75% = $210,000 taxable component
Step 3
Calculate the taxed element as follows.
Work out an amount by applying the following formula:
1. Amount of super lump sum x service days/ (service days + days to retirement).
2.
$280,000 × 13,841 14,936 = $259,472
3. Reduce this amount by the tax-free component of the lump sum benefit (if any).
Taxed element = $259,472-$70,000
= $189,472
Step 4
Work out the untaxed element by taking away the taxed element from the taxable component of
the benefit.
Untaxed element $210,000-$189,472
= $20,528
The lump sum death benefit consists of the following components:
tax-free component = $70,000 taxable component = $210,000 (comprising the taxed element
($189,472) and the untaxed element ($20,528)
Source:https://www.ato.gov.au/super/apra-regulated-funds/paying- benefits/paying-
superannuation-death-benefits/
Commutation lump sum death benefits
If the nominee of the fund was receiving an income stream when the member died and the income
stream is calculated to pay a lump sum to a nominee, then the proportioning rule is used. The
components of the lump sum benefit must be divided according to this rule as they were for the
income stream.
Example: Below is the taxed and tax-free proportions on super income stream
Emma dies on 1 December 2015 at 66 years old. When she dies, Emma is receiving an account-based
super income stream.
The tax-free and taxable components of her income stream are worked out as follows:
tax-free proportion of 25%
taxable proportion of 75%.
Emma's account balance when she dies is $450,000. This amount is paid to her
beneficiary, her mother Monica, as a lump sum on 11 March 2016. As the lump sum
is paid from the same super interest as Emma's income stream, therefore the
proportions of the tax-free and taxable components were same as they were for her
income stream.
The tax-free and taxable components of Monica's lump sum death benefit are:
Tax-free component = $450,000 × 25%
= $112,500
Taxable component = $450,000-$112,500
= $337,500
As Monica was Emma's dependent, the total benefit is tax-free.
If Monica was a non-dependent of Emma, then the taxable component is assessable.
superannuation-death-benefits
Anti-detriment payment (tax saving amount)
An anti-detriment payment is defined as an extra lump sum amount that is given to a qualified
dependent when a lump sum death benefit is given. The sum constitute a repayment of the 156
amount paid as tax by the decreased member in their time period.
From 1 July 2017, the superannuation death funds will include only an anti- detriment payment as
part of a death benefit if the member dies on or before 30 June 2017. The fund gives the payment to
the beneficiary by 30 June 2019. From 1 July 2019, no anti-detriment payment will be accessible for
the members, no matter when he dies.
A deduction is available when only part of the death benefit is paid to an eligible dependent or only
part is paid as a lump sum. If the lump sum amount is made through the wealth of the deceased
member.
For instance, if 80% of the death benefit is remunerated to the member's spouse and 20% to the
member's sister, apply for a tax deduction for the anti-detriment amount paid. This is 80% of the
commutated sum.
When the death benefit is given to a wife or a dependent child, the total amount inclusive of the
anti-detriment payment is tax-free. But when the death benefit is given to a non-dependent child,
the anti-detriment payment is in taxable component element.
1.2 Retirement Benefits
The Retirement Benefits Fund (RBF) is a public sector superannuation fund. A retiring allowance is
the amount given as a proportion of the minimum yearly allowance payable at retirement time.
Presently the amount is $185,000 per annum. There are certain steps to set up a plan for retirement
that will help the member with his super savings in the long way.
When creating your retirement plan, there are three steps to consider:
1. Set your financial goals.
Build your super savings.
3. Manage your retirement income.
) Set your Financial goals
No matter what stage of life you're in, it's essential to think about your financial goals that are
specific, measurable and achievable. By going back to the goals, the person can track his progress
and gain a better understanding of his financial profile.
2) Build your super savings
Even small savings in these days means you could save more money for retirement in the future. To
make the best of the extra contributions, it's best to think about adding the correct amount of fund
and taxes on it.
Converting the funds to retirement can be a great way to grow your super savings while the member
is still working. Once the members reach their preservation age then they could:
Access their super fund early
Save tax
Grow their super fund.
3) Manage your retirement income.
When the member reach his retirement age e and have either retired permanently or shifted their
job after 60, the member can access his super as :
A regular income by opening a Choice Income account

A one-off lump sum
A combination of the above.
The State Superannuation Scheme is called as a defined benefit scheme that provides
superannuation fund at a member's normal retirement age. The normal retirement age is mostly 60
for all members, except for female members who elected on joining to retire at age 55.
Preservation age is defined as the age at which a member can obtain access to the preserved
benefits that have been accumulated in their superannuation fund.
For members with a normal retirement age of 60, an early voluntary retirement benefit is available
from age 55. This superannuation fund is payable at a reduced rate giving the member that he has
contributed to the scheme continuously for 10 years.
Members aged 65 have an option to exit State Superannuation Scheme while still working, and they
can receive payment of their retirement benefits if it is taken as a lump sum.
Requirement to qualify for TPD Benefit:
• To get a TPD lump sum, the member need to prove that he can't get back to his previous job or any
appropriate job which will suit for his qualifications or knowledge.
If the member lose the use of his arms, legs or eyes, then he might qualify for a TPD benefit even if
he can still work.
There is normally a 6-month qualifying period, but this can be reduced in some special cases.
Many people with an injury or illness will qualify for a TPD benefit.
Many people on Disability Support super fund or workers compensation will qualify for a TPD
benefit.
Automatic Cover
Most employment super funds provide disability cover without any health
questions-up to certain limits.
However if you want extra cover, you may have to fill in a health
questionnaire.
(v) Making Super Disability Claims
a) When to claim:
• Normally it isn't problem even if the member had already paid out his fund offerings.
b) How to Claim:
These claims can also be created by the guardian of a person after they die.
There are different forms to be filled to claim the fund and medical and other reports are to be
submitted.
The member are required to sign medical, workers' compensation and tax authorities and need to go
through health, rehabilitation and others examinations.
TPD claims normally take around 12 months and TTD claims around 2-4 months. Though, these
claims can be longer.
1.4 Retrenchment or Redundancy Benefits
Retrenchment Benefits is the benefit that the employees get when they accept an offer of voluntary
redundancy. He will can claim retrenchment benefit when the employer is dismissed from his job.
These are also called Redundancy Benefits.
Some schemes of the superannuation gives precise redundancy or retrenchment benefits to only
qualified members. Here the employers of the fund can claim the payment of super retrenchment
benefit if the cause mentioned by the employer for his resignation comes under the rules of
retrenchment schemes.
Under the Superannuation Act 1916 and the State Authorities Superannuation Act 1987, a member
can be cut off when the service of the employer:
1. Has to be removed by the employee on the basics that:
When the employee doesn't need the services of the and on termination of his services, he does not
want to fill the employee's position
The work for which the employer or contributor was hired to perform has been completed.
The amount of work that the employer had to perform is decreased and because of that, it has
become compulsory to decrease the number of employees hired by the employer
2. The process of terminating an employee as a result of the acceptance of an offer given by the
contributor in terms of retrenchment made is known as involuntary retirement.
Ami eligible for involuntary retirement benefits?
You will be eligible to accept an involuntary retirement or retrenchment benefit if
you are a PSS member and:
> The employee makes the employer redundant
> The employer accept an offer of retrenchment or a redundancy package from The employee
> The employer will be dismissed on grounds of inefficiency
What are my retrenchment options?

Dependent on the employee situations and the age he will resign, he can choose
one of the following choices:
> preserve his total benefit
> take part of his benefit as a lump sum and keep the balance for future
> take a lump sum with no pension
> take a pension only
> take part of his benefit as a lump sum and change the balance to pension
1.1 Key Requirements for a Self- Managed Super Fund
A Self managed super fund is defined as a super trust organization that delivers financial advantage
to the members in the stage of retirement. The foremost difference between Self managed super
fund and other superannuation funds is that this fund member's are also the trustees of the fund.
This fund is made primarily for providing financial paybacks to the members of the fund in their
retirement.
A superannuation fund need to have some essential characteristics to turn into a Self-Managed
Super Fund Therefore the requirements of this super fund are as following:
The upmost or upper limit number of members acceptable are 4.
Each one of the member of this fund have a duty of being a trustee of this fund and vice versa.
The trustee of this fund can't obtain any sum for executing the character of the trustee.
The member of this fund can't be an employee of different company, if they
are relatives.
Establish and monitor an Investment scheme that guarantees the fund is to be expected to
encounter the member's retirement necessities.
The advisor should have financial knowledge and understanding to create wide-ranging investment
verdicts.
The economical requirements for current overheads like as specialized accounting, tax, authorized
and economic guidance.
There should be broad histories and organize anjnnual assessment by an official auditor.
Establish insurance cover which contains income shield and everlasting retirement.
1.2 Individual Trustee
A trust is defined as a lawful positioning where a trustee has a role to manage assets
for the profit of one or more receivers. They are not like companies. Trusts are not distinct legal
bodies, even though they are considered as a distinct body for taxation commitments. A trustee is an
authorized body who has possessions, control the trust and come
into contracts as trustee of the trust. The trustee can only be one or more entities, or a business.
trust)a trustee will:
Possess the properties of the business
Run the business
Conform the obstacles of the trust bond or will:
Run the business
Few of the further responsibility of the trustee are:
Behave in good faith
Implement sound attention in the management of a trust
Continue the terms and conditions of the trust.
Here now we are going to discuss about the different types of trustees-Individual trustees and
corporate trustees.
The simplest and economical way to start a self-managed super fund is when you chosa Individual
trustees. Here there will be no further formation or foundation cost nended. But in the long run, the
maintenance cost will be very high. Nearly 65% of superannuation funds have individual trustees
because most funds have hüsband and wife as members and these people only act as the trustees of
the fund
are:
All these members should also be the trustees of the super fund
There are four key factors which helps in deciding whether to select to individual trustee or
corporate trustee which are:
Cost
Administration of fund assets
Separation of assets between members and the fund
Penalties
6) Have a control over varying situations or surroundings aver time.
Normally, when a fund has only one member, a firm trustee is the only choice, as the rule does not
permit a single member fund to have a single individual as trustee
The disadvantages of the individual trustee are:
2) Extra expenditure is happening for holding external experts such as accountants and advocates.
3) If you want the super fund to be single member type, then there need to be a minimum of two
trustees, I mean the member plus other person to work as a trustee.
cannot continue as individual trustee and individual member. Another person shall to be allotted as
the second trustee to
continue the fund.
5) All assets are detained in the names of all individual trustees as trustees for the super fund. So if
there is an alteration in individual trustees, the possession of the assets need to be reassigned
causing legal and other extra expenses for the transfer.
6) In most of the Australian states, only lawful possession of land or any other assets can be
documented with the titles office. Therefore individual trustees are usually register with the titles
office in the similar mode as they register if they possessed the land Individually.
7) An Individual who acts as trustee exposes their personal assets to risk if they incur any liability as
trustee of an SMSF.
8) Potential chances of disputes in family relations or alliances caused by decisions made.
9) There are chances of misunderstanding that the fund members may try to influence the decision
maker.
1.3 Corporate Trustee:
The use of a corporate trustee such as National Advisors Trust, is calculated by making an allowance
for the problems and glitches that will ascend after the fleeting of the originators of the trust, when
the receivers are there to absorb the trust and its circulation.
Most of the superannuation funds tend to avoid using a company as a trustee because of the cost
incurring with this arrangement. The fee to start a company is around $800. Once a year, the
company wants to lodge an Annual Review with ASIC and make a payment of $212.

Management of flexible payouts with the presence of the client's reliable advisor.
They need to coordinate with the financial advisor, of wide-ranging communication with grantors
1) The members of the company have limited liability because according to company act, the
company has a separate legal entity from its members.
nds
Sure
suddenly. A corporate trustee does not stop or terminate upon the death of one of its directors.
4) When a new member joins the trust, then normally they have to become a trustee of the fund. In
a corporate trustee, the new director must be appointed to the company.
5) in corporate trust, the trustee need never change. Alterations on the board will only apply to the
6) Establishing a trustee company may offer a chance to alter decision-making processes on the
trustee board, without demanding an alteration to the scheme's rules
7) Having a trustee company reduces the complexity in the implementing and variation of the
scheme's governing documents and contracts.
8) in corporate trustee, mostly moneylenders mostly depend or prefer the superannuation fund.
1To operate a trustee company, acceptance from the administrative department of company law is
required.
3) While directors of a trustee company may get a security from personal liability than individual
trustees, still there are numerous areas where they might get unprotected. D
entity is high
1.4 Corporate and Individual Trustee Structure: Key Differences
There are various differences between corporate trustee and Individual trustee which are as follow:
Registration of Assets:
This is one of the key difference between corporate and individual trustee structure. In an individual
trustee structure, the assets of the fund are registered under the names of the trustees in the
individual fund where as in a corporate trustee structure, the assets of the fund are registered under
the name of the company that has been established to work as corporate trustee.
• Cost
An individual trustee structure is generally less complex. Since it is not required to begin a company,
there is no rule that the members need to understand and monitor corporation law requirements.
Coming to corporate trustee structure, it is more expensive to begin and continue, but it normally
decreases some of the troubles related with a super fund.
• Flexibility
If a superannuation fund is established with a corporate trustee structure, then they can increase
the number of members. For example, a wife or kid. They can even reduce the number of members.
For example, when a member of the trustee dies or no longer can be as a trustee, then there
wouldn't be much a chaos as compared to an individual trustee structure.
When there is an addition or removal of fund members, it's not essential to after the name on the
possession documents as the trustee of the fund doesn't change. Where as in an individual trustee
structure, all the assets are required to re-register held in the superannuation fund with the
respective authoritis and registries every time when there is a change in the number of members.
If the fund has a numerous number of diverse investments, then that can upshot in a lot of
administration, accounts, time, and potentially expenses to accomplish this change.
A superannuation fund which is established with a corporate trustee can have one member and one
director. So, if one of a two member fund leaves or dies in a corporate trustee structure, the fund
will carry on to fulfill the trustee structure rules.
But in the superannuation fund in an individual trustee structure, if one member dies or leaves off,
another individual will need to be appointed as a trustee of the fund. This may create an unwanted
hassle at an already difficult time for the surviving member.
Borrowing Funds
When the member is thinking to borrow to purchase property in your superannuation, most banks
require a corporate trustee arrangement. Most of the banks commonly prefer that a distinctly
accepted legal body is recognized as trustee of the fund.
Liability
A corporate trustee structure can give peace of mind around liability. Your private liability, as a
director of a corporate trustee, is normally limited to the assets held within the superannuation
fund,
An individual trustee arrangement does not offer this type of security and the private assets of the
members are included for the liability claims. This could be mainly significant for the member if he is
considering holding property in super fund as public liability claims can be substantial.
Superannuation funds helps in securing the future of people in Australia. These funds are aimed to
serve its members during their retirement planA well-considered fund can create a lot of difference
between living a relaxed and happy retirement and an endless tussle in the future years for most of
Australia citizens. Here are some of the benefits why we should consider superannuation:
Tax-Effective Savings
These funds are aims to serve people in Australia to become self-sufficient when they retire. It
consists of a series of tax concessions which boost contributions.
Salary Sacrifice
Here people who use salary sacrifice option can earn large amount of savings because earnings that
are contributed to the salary sacrifice are only taxed at a rate of 15%. Therefore for people who
come under the tax range of 459%, this contributes large amount of savings.
• Tax-Effective Capital Growth SERVICES
In almost all the cases, the tax rate on cash gained through investments inside the super fund is
lesser as compared to the tax rate on the same investments exterior to super fund. The revenue
made from an investment exterior of the super fund is taxed about 46.5%, while almost all the
superannuation fund returns are taxed between 10-15% dependent on the type of investment.
• Lower Tax Rate During Retirement
As the superannuation fund starts paying the distributed pension, Taxes will not be charged on
revenue. But if your period of retirement starts before 60, there will a 15% tax on the total sum
received from the fund.
• Superannuation Benefits are Protected from Bankruptcy
If the member of the superannuation claims bankruptcy, then their super benefits are protected up
to the Reasonable Benefit Limit (RBL) of their pension. This gives an advantage to the business
owners and individuals to protect their assets against the order of seizing by creditors during
bankruptcy.
Normally, the benefits of superannuation comes under three classifications:
Preserved benefits;
Restricted non-preserved benefits
Unrestricted non-preserved benefits.
Preserved benefits are those benefits that are kept back within in a super fund up to the age where
the employee reaches his retirement. Recently a rule is passed that all members have to hold on till
they attain an age of at least 55. The genuine and authentic retirement age completely depends on
the date of birth of the employers of the company.
Restricted non-preserved benefits are those benefits which are not preserved, can't be opened until
an employee satisfices a rule like dismissing their employer's employment superannuation scheme.
Unrestricted non-preserved benefits are those benefits which don't require the fulfilment of a
condition of release and can be accessed upon the request of the worker.
Before, any person from Australia could utilize their preserved benefits only once they attain age of
55. Nevertheless, after the legislation was passed in 1999, now the employee's preservation age
varies upon their date of birth.
Mostly by 2025, the workers in Australia will desire to open their fund would be at least 60 years old.
Before age 60, the workers must agree to a condition that they will terminate their employment and
will never plan to work again.
Anyone whose age is more than 65 can get superannuation fund irrespective of their employment
status. Active entities in the company who have attained their retirement but if their age is under 65,
they can still get this superannuation fund up to 10% part of the fund using a Transition to
Retirement pension.
1.1 Death Benefits
A superannuation death benefit is defined as a payment made by the member which is given to a
dependent beneficiary or to the trustee of a deceased one after the member is died. The payment of
the fund should be made as soon as possible after the member's death.
The form of the benefit payment which it is to be paid and to whom to pay will depend on the
governing rules of your fund.
There are two ways to pay the deceased's dependents which are:
A super income stream.
A lump sum.
You can pay the deceased's non-dependents by only a lump sum amount option.
The meaning of a dependent is somewhat different for:
who you can pay a death benefit to How the death benefit will be taxed.
In superannuation law, the dependents in a death benefit are:
the spouse of the member
the child of the deceased member
a person in an interdependency association with the deceased member

Which is explaining the special or close association between two people, where they offer the
financial, domestic and personal support for each other.
Treating a death benefit as a member benefit
A superannuation death benefit ascending from the exchange of a super fund pay after the death of
a member is called member benefit. This benefit should be remunerated the most recent of
following:
Six months after the death
three months after the grant of the fund of the deceased's will or letters of administration of the
deceased's estate
If the compensation of the benefit is overdue by law about the claim or by other reasons for delay in
giving out the benefit-Then
six months after the lawful action
Income stream death benefits
When a member is planning to reimbursement the death benefit as a revenue stream, then he must
first calculate the proportion rule of the tax-free and taxable components.
If a member is planning to pay a death benefit revenue stream for a dependent child of the dead
member, except when the child has a permanent disability, then you must:
Will end the payment of the revenue stream on or before the date the child become 25 years old
The outstanding fund should be paid as a tax free lump sum.
Lump sum death benefits insurance premiums
The taxed and untaxed elements are evaluated independently where you have requested or will
request in future, tax deductions for insurance premiums to offer for forthcoming death benefits for
your members. The untaxed element of a lump sum death benefit which is paid to a non-dependent
is enlarged to draw interest of the members of the fund.
You can evaluate the taxed element and the untaxed element of the benefit through an improved
calculation:
Compute the tax-free and taxable components of the member's superannuation interest just before
the lump sum was paid.
Apply these ratio proportions to work out the tax-free and taxable
components of the benefit using the proportioning rule.
The taxed element of the benefit is then calculated as follows:

• Work out an amount by applying the formula= Amount of super lump sum x service days / (service
days + days to retirement)
• Reduce this amount (Not less than zero) by the tax-free component of the lump sum benefit.
The result of this reduction will be the taxed element of the benefit. The untaxed element of the
benefit is equal to the taxable component of the benefit minus the taxed element of the benefit.
'Service days' in death benefits is defined as the number of days in the service period for the lump
sum. These days can be calculated till the date the deceased died.
'Days to retirement' is defined as the number of days from the day the deceased died to the last
retirement date. This is when their employment would have been terminated under contract or they
would have turned 65 years old.
Example: Tax deductions claimed on insurance premiums
Arjun is a member of a super fund that claims tax deductions on premiums it pays on insurance
policies to provide death benefits for its members.
Arjun dies on 1 July 2014.
The start date of Arjun's service period is 10 August 1976. His last day before retirement was to have
been 1 July 2017, when he would have turned 65 years old.
On 4 March 2015, a lump sum death benefit of $280,000 is paid to Arjun's beneficiary. This is paid to
her adult son, Tim, who is a non-dependent.
The service days for the lump sum death benefit are 13,841 (10 August 1976 to 1 July 2014 (date of
death)).
The days to retirement for the lump sum death benefit are 1,095 (1 July 2014 to 1 July 2017).
Just before the benefit is paid, the value of Arjun's super interest is $800,000. This includes a:
tax-free component of $200,000
Taxable component of $600,000.
Step 1
Calculate the tax-free and taxable proportions of Arjun's super interest ($400,000) just before the
benefit is paid:
tax-free component of $200,000 = 25%
taxable component of $600,000 = 75%.
Step 2
Apply these proportions to work out the tax-free and taxable component of Tim's lump sum death
benefit as follows:
$280,000 × 25% = $70,000 tax-free component
$280,000 × 75% = $210,000 taxable component
Step 3
Calculate the taxed element as follows.
Work out an amount by applying the following formula:
1. Amount of super lump sum x service days/ (service days + days to retirement).
2.
$280,000 × 13,841 14,936 = $259,472
3. Reduce this amount by the tax-free component of the lump sum benefit (if any).
Taxed element = $259,472-$70,000
= $189,472
Step 4
Work out the untaxed element by taking away the taxed element from the taxable component of
the benefit.
Untaxed element $210,000-$189,472
= $20,528
The lump sum death benefit consists of the following components:
tax-free component = $70,000 taxable component = $210,000 (comprising the taxed element
($189,472) and the untaxed element ($20,528)
superannuation-death-benefits/
Commutation lump sum death benefits
If the nominee of the fund was receiving an income stream when the member died and the income
stream is calculated to pay a lump sum to a nominee, then the proportioning rule is used. The
components of the lump sum benefit must be divided according to this rule as they were for the
income stream.
Example: Below is the taxed and tax-free proportions on super income stream
Emma dies on 1 December 2015 at 66 years old. When she dies, Emma is receiving an account-based
super income stream.
The tax-free and taxable components of her income stream are worked out as follows:
tax-free proportion of 25%
taxable proportion of 75%.
Emma's account balance when she dies is $450,000. This amount is paid to her
beneficiary, her mother Monica, as a lump sum on 11 March 2016. As the lump sum
is paid from the same super interest as Emma's income stream, therefore the
proportions of the tax-free and taxable components were same as they were for her
income stream.
The tax-free and taxable components of Monica's lump sum death benefit are:
Tax-free component = $450,000 × 25%
= $112,500
Taxable component = $450,000-$112,500
= $337,500
As Monica was Emma's dependent, the total benefit is tax-free.
If Monica was a non-dependent of Emma, then the taxable component is assessable.
superannuation-death-benefits
Anti-detriment payment (tax saving amount)
An anti-detriment payment is defined as an extra lump sum amount that is given to a qualified
dependent when a lump sum death benefit is given. The sum constitute a repayment of the 156
amount paid as tax by the decreased member in their time period.
From 1 July 2017, the superannuation death funds will include only an anti- detriment payment as
part of a death benefit if the member dies on or before 30 June 2017. The fund gives the payment to
the beneficiary by 30 June 2019. From 1 July 2019, no anti-detriment payment will be accessible for
the members, no matter when he dies.
A deduction is available when only part of the death benefit is paid to an eligible dependent or only
part is paid as a lump sum. If the lump sum amount is made through the wealth of the deceased
member.
For instance, if 80% of the death benefit is remunerated to the member's spouse and 20% to the
member's sister, apply for a tax deduction for the anti-detriment amount paid. This is 80% of the
commutated sum.
When the death benefit is given to a wife or a dependent child, the total amount inclusive of the
anti-detriment payment is tax-free. But when the death benefit is given to a non-dependent child,
the anti-detriment payment is in taxable component element.
1.2 Retirement Benefits
The Retirement Benefits Fund (RBF) is a public sector superannuation fund. A retiring allowance is
the amount given as a proportion of the minimum yearly allowance payable at retirement time.
Presently the amount is $185,000 per annum. There are certain steps to set up a plan for retirement
that will help the member with his super savings in the long way.
When creating your retirement plan, there are three steps to consider:
1. Set your financial goals.
Build your super savings.
3. Manage your retirement income.
) Set your Financial goals
No matter what stage of life you're in, it's essential to think about your financial goals that are
specific, measurable and achievable. By going back to the goals, the person can track his progress
and gain a better understanding of his financial profile.
2) Build your super savings
Even small savings in these days means you could save more money for retirement in the future. To
make the best of the extra contributions, it's best to think about adding the correct amount of fund
and taxes on it.
Converting the funds to retirement can be a great way to grow your super savings while the member
is still working. Once the members reach their preservation age then they could:
Access their super fund early
Save tax
Grow their super fund.
3) Manage your retirement income.
When the member reach his retirement age e and have either retired permanently or shifted their
job after 60, the member can access his super as :
A regular income by opening a Choice Income account

A one-off lump sum
A combination of the above.
The State Superannuation Scheme is called as a defined benefit scheme that provides
superannuation fund at a member's normal retirement age. The normal retirement age is mostly 60
for all members, except for female members who elected on joining to retire at age 55.
Preservation age is defined as the age at which a member can obtain access to the preserved
benefits that have been accumulated in their superannuation fund.
For members with a normal retirement age of 60, an early voluntary retirement benefit is available
from age 55. This superannuation fund is payable at a reduced rate giving the member that he has
contributed to the scheme continuously for 10 years.
Members aged 65 have an option to exit State Superannuation Scheme while still working, and they
can receive payment of their retirement benefits if it is taken as a lump sum.
Requirement to qualify for TPD Benefit:
• To get a TPD lump sum, the member need to prove that he can't get back to his previous job or any
appropriate job which will suit for his qualifications or knowledge.
If the member lose the use of his arms, legs or eyes, then he might qualify for a TPD benefit even if
he can still work.
There is normally a 6-month qualifying period, but this can be reduced in some special cases.
Many people with an injury or illness will qualify for a TPD benefit.
Many people on Disability Support super fund or workers compensation will qualify for a TPD
benefit.
Automatic Cover
Most employment super funds provide disability cover without any health
questions-up to certain limits.
However if you want extra cover, you may have to fill in a health
questionnaire.
(v) Making Super Disability Claims
a) When to claim:
• Normally it isn't problem even if the member had already paid out his fund offerings.
b) How to Claim:
These claims can also be created by the guardian of a person after they die.
There are different forms to be filled to claim the fund and medical and other reports are to be
submitted.
The member are required to sign medical, workers' compensation and tax authorities and need to go
through health, rehabilitation and others examinations.
TPD claims normally take around 12 months and TTD claims around 2-4 months. Though, these
claims can be longer.
1.4 Retrenchment or Redundancy Benefits
Retrenchment Benefits is the benefit that the employees get when they accept an offer of voluntary
redundancy. He will can claim retrenchment benefit when the employer is dismissed from his job.
These are also called Redundancy Benefits.
Some schemes of the superannuation gives precise redundancy or retrenchment benefits to only
qualified members. Here the employers of the fund can claim the payment of super retrenchment
benefit if the cause mentioned by the employer for his resignation comes under the rules of
retrenchment schemes.
Under the Superannuation Act 1916 and the State Authorities Superannuation Act 1987, a member
can be cut off when the service of the employer:
1. Has to be removed by the employee on the basics that:
When the employee doesn't need the services of the and on termination of his services, he does not
want to fill the employee's position
The work for which the employer or contributor was hired to perform has been completed.
The amount of work that the employer had to perform is decreased and because of that, it has
become compulsory to decrease the number of employees hired by the employer
2. The process of terminating an employee as a result of the acceptance of an offer given by the
contributor in terms of retrenchment made is known as involuntary retirement.
Ami eligible for involuntary retirement benefits?
You will be eligible to accept an involuntary retirement or retrenchment benefit if
you are a PSS member and:
> The employee makes the employer redundant
> The employer accept an offer of retrenchment or a redundancy package from The employee
> The employer will be dismissed on grounds of inefficiency
What are my retrenchment options?

Dependent on the employee situations and the age he will resign, he can choose
one of the following choices:
> preserve his total benefit
> take part of his benefit as a lump sum and keep the balance for future
> take a lump sum with no pension
> take a pension only
> take part of his benefit as a lump sum and change the balance to pension
1.1 Key Requirements for a Self- Managed Super Fund
A Self managed super fund is defined as a super trust organization that delivers financial advantage
to the members in the stage of retirement. The foremost difference between Self managed super
fund and other superannuation funds is that this fund member's are also the trustees of the fund.
This fund is made primarily for providing financial paybacks to the members of the fund in their
retirement.
A superannuation fund need to have some essential characteristics to turn into a Self-Managed
Super Fund Therefore the requirements of this super fund are as following:
The upmost or upper limit number of members acceptable are 4.
Each one of the member of this fund have a duty of being a trustee of this fund and vice versa.
The trustee of this fund can't obtain any sum for executing the character of the trustee.
The member of this fund can't be an employee of different company, if they
are relatives.
Establish and monitor an Investment scheme that guarantees the fund is to be expected to
encounter the member's retirement necessities.
The advisor should have financial knowledge and understanding to create wide-ranging investment
verdicts.
The economical requirements for current overheads like as specialized accounting, tax, authorized
and economic guidance.
There should be broad histories and organize anjnnual assessment by an official auditor.
Establish insurance cover which contains income shield and everlasting retirement.
1.2 Individual Trustee
A trust is defined as a lawful positioning where a trustee has a role to manage assets
for the profit of one or more receivers. They are not like companies. Trusts are not distinct legal
bodies, even though they are considered as a distinct body for taxation commitments. A trustee is an
authorized body who has possessions, control the trust and come
into contracts as trustee of the trust. The trustee can only be one or more entities, or a business.
trust)a trustee will:
Run the business
Conform the obstacles of the trust bond or will:
Run the business
Few of the further responsibility of the trustee are:
Behave in good faith
Implement sound attention in the management of a trust
Continue the terms and conditions of the trust.
Here now we are going to discuss about the different types of trustees-Individual trustees and
corporate trustees.
The simplest and economical way to start a self-managed super fund is when you chosa Individual
trustees. Here there will be no further formation or foundation cost nended. But in the long run, the
maintenance cost will be very high. Nearly 65% of superannuation funds have individual trustees
because most funds have hüsband and wife as members and these people only act as the trustees of
the fund
are:
All these members should also be the trustees of the super fund
There are four key factors which helps in deciding whether to select to individual trustee or
corporate trustee which are:
Cost
Administration of fund assets
Separation of assets between members and the fund
Penalties
6) Have a control over varying situations or surroundings aver time.
Normally, when a fund has only one member, a firm trustee is the only choice, as the rule does not
permit a single member fund to have a single individual as trustee
The disadvantages of the individual trustee are:
2) Extra expenditure is happening for holding external experts such as accountants and advocates.
3) If you want the super fund to be single member type, then there need to be a minimum of two
trustees, I mean the member plus other person to work as a trustee.
cannot continue as individual trustee and individual member. Another person shall to be allotted as
the second trustee to
continue the fund.
5) All assets are detained in the names of all individual trustees as trustees for the super fund. So if
there is an alteration in individual trustees, the possession of the assets need to be reassigned
causing legal and other extra expenses for the transfer.
6) In most of the Australian states, only lawful possession of land or any other assets can be
documented with the titles office. Therefore individual trustees are usually register with the titles
office in the similar mode as they register if they possessed the land Individually.
7) An Individual who acts as trustee exposes their personal assets to risk if they incur any liability as
trustee of an SMSF.
8) Potential chances of disputes in family relations or alliances caused by decisions made.
9) There are chances of misunderstanding that the fund members may try to influence the decision
maker.
1.3 Corporate Trustee:
The use of a corporate trustee such as National Advisors Trust, is calculated by making an allowance
for the problems and glitches that will ascend after the fleeting of the originators of the trust, when
the receivers are there to absorb the trust and its circulation.
Most of the superannuation funds tend to avoid using a company as a trustee because of the cost
incurring with this arrangement. The fee to start a company is around $800. Once a year, the
company wants to lodge an Annual Review with ASIC and make a payment of $212.

Management of flexible payouts with the presence of the client's reliable advisor.
They need to coordinate with the financial advisor, of wide-ranging communication with grantors
1) The members of the company have limited liability because according to company act, the
company has a separate legal entity from its members.
nds
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suddenly. A corporate trustee does not stop or terminate upon the death of one of its directors.
4) When a new member joins the trust, then normally they have to become a trustee of the fund. In
a corporate trustee, the new director must be appointed to the company.
5) in corporate trust, the trustee need never change. Alterations on the board will only apply to the
6) Establishing a trustee company may offer a chance to alter decision-making processes on the
trustee board, without demanding an alteration to the scheme's rules
7) Having a trustee company reduces the complexity in the implementing and variation of the
scheme's governing documents and contracts.
8) in corporate trustee, mostly moneylenders mostly depend or prefer the superannuation fund.
1To operate a trustee company, acceptance from the administrative department of company law is
required.
3) While directors of a trustee company may get a security from personal liability than individual
trustees, still there are numerous areas where they might get unprotected. D
entity is high
1.4 Corporate and Individual Trustee Structure: Key Differences
There are various differences between corporate trustee and Individual trustee which are as follow:
Registration of Assets:
This is one of the key difference between corporate and individual trustee structure. In an individual
trustee structure, the assets of the fund are registered under the names of the trustees in the
individual fund where as in a corporate trustee structure, the assets of the fund are registered under
the name of the company that has been established to work as corporate trustee.
• Cost
An individual trustee structure is generally less complex. Since it is not required to begin a company,
there is no rule that the members need to understand and monitor corporation law requirements.
Coming to corporate trustee structure, it is more expensive to begin and continue, but it normally
decreases some of the troubles related with a super fund.
• Flexibility
If a superannuation fund is established with a corporate trustee structure, then they can increase
the number of members. For example, a wife or kid. They can even reduce the number of members.
For example, when a member of the trustee dies or no longer can be as a trustee, then there
wouldn't be much a chaos as compared to an individual trustee structure.
When there is an addition or removal of fund members, it's not essential to after the name on the
possession documents as the trustee of the fund doesn't change. Where as in an individual trustee
structure, all the assets are required to re-register held in the superannuation fund with the
respective authoritis and registries every time when there is a change in the number of members.
If the fund has a numerous number of diverse investments, then that can upshot in a lot of
administration, accounts, time, and potentially expenses to accomplish this change.
A superannuation fund which is established with a corporate trustee can have one member and one
director. So, if one of a two member fund leaves or dies in a corporate trustee structure, the fund
will carry on to fulfill the trustee structure rules.
But in the superannuation fund in an individual trustee structure, if one member dies or leaves off,
another individual will need to be appointed as a trustee of the fund. This may create an unwanted
hassle at an already difficult time for the surviving member.
Borrowing Funds
When the member is thinking to borrow to purchase property in your superannuation, most banks
require a corporate trustee arrangement. Most of the banks commonly prefer that a distinctly
accepted legal body is recognized as trustee of the fund.
Liability
A corporate trustee structure can give peace of mind around liability. Your private liability, as a
director of a corporate trustee, is normally limited to the assets held within the superannuation
fund,
An individual trustee arrangement does not offer this type of security and the private assets of the
members are included for the liability claims. This could be mainly significant for the member if he is
considering holding property in super fund as public liability claims can be substantial.
Introduction
Superannuation contributions are known as a currency sum or equity, which is transferred to a

conforming super fund, with respect to the individual whose age is under 75. These super
contributions also contain private and employer contributions.
Super contributions and earnings on those contributions are the key to accumulating a substantial
retirement nest egg. Find out how you can make concessional (before-tax) contributions, non-
concessional (after-tax) contributions, receive co-contributions and more.
Contributions to superannuation funds are added every 3 months, by employers for the sake of their
employees. These funds, sideways with the contributions from the employee, are then financed on
the employees' sake by giving stocks and other assets. These accumulate bonuses and benefits that
permits the funds to raise gradually. Super funds are a significant part of an employee's plans when
they retire. By selecting the correct one and since the choice is given, and preserving a method of
employment that reaches the standards for the fund to prepare a retirement.
The member can attain 18% tax offset on superannuation contributions, maximum of $3,000. The
member makes on sake of his close relation like spouse. He can also divide his employer super
contributions with his wife. Contribution division can be made only after the year end.
For income or net outflows made on or after 1 July 2014, the minimum SG contributions rate of 9.5%
will be applicable.
1.1 How are the funds treated and accepted Contributions
There are minimum standards for accepting contributions into your SMSF, and the trust deed of your
fund may have more rules. Whether a contribution is allowable depends on:
whether you have the member's tax file number (TFN) - If not, you can't accept member
contributions
the type of contribution-for example, you can accept mandated employer contributions, such as
super guarantee contributions from a member's employer, at any time
the age of the member-for example, you generally can't accept non- mandated contributions for
members aged 75 or over
whether the contribution exceeds the member's fund-capped contributions limit.
Excess concessional contribution charge
The excess concessional contributions (ECC) charge is applied to the additional income tax liability
arising due to excess concessional contributions included in your income tax return. The intent of
the ECC charge is to acknowledge that the tax is collected later than normal income tax. The charge
is payable for the year a person makes excess concessional contributions and applies from the 2013-
14 income year.
Non-concessional contributions cap

Non-concessional contributions include personal contributions for which you do not claim an income
tax deduction.
If you have more than one fund, all non-concessional contributions made to all of your funds are
added together and counted towards the non-concessional contributions cap.
The non-concessional cap for an income year is a multiple of the concessional contributions cap.
If you are under 65, you may be able to make non-concessional contributions of up to three times
the annual non-concessional contributions cap in a single year. If eligible, when you make
contributions greater than the annual cap, you automatically gain access to future year caps. This is
known as the 'bring-forward' option.
From 1 July 2017 the bring-forward amount and period is dependent on your total superannuation
balance on the day before the financial year contributions that trigger the bring forward.
1.2 Types of Contributions
Employer contributions
The requirement of the Superannuation Guarantee (administration) Act 1992 states that employers
provide employees with a minimum level of superannuation. Generally your employer must pay
9.25% of your earnings into a super account on your behalf. This law applies to all working
Australians aged between 18 and 70, except those earning less then $450 per month. Employer
contributions are concessional contributions.
Employers are not required to make employer contributions for employees earning less than $450
per month, nor for employees aged under 18. If however employees are earning $450 per month
before tax or aged under 18 but working more than 30 hours per week full-time, part-time or casual,
the employer is required to pay superannuation regardless of whether the person is under 18.
Personal contributions (non concessional contributions)
Formerly known as undeducted contributions, non-concessional contributions are after tax

contributions made to your own super account for which it is not possible to claim an income tax
deduction.
People can choose to make extra voluntary contributions to their superannuation and receive tax
benefits for doing so. Between 2007 and 2013 a regime of excess concessional contributions tax
applied at a legislated rate of 31.5%.
Salary sacrifice
An arrangement between you and your employer where you agree to reduce your pre-tax salary by
a nominated amount to be contributed to your super fund instead. These concessional contributions
are paid in pre taxed dollars which will often save you tax as contributions are taxed at 15% instead
of your marginal tax rate. Please note that the concessional contribution cap includes both employer
and salary sacrifice contributions.
For other purposes, such contributions are called "reportable superannuation contributions", and for
some purposes they are counted back as a benefit of the employee, such as for calculation of
"income for Medicare levy surcharge purposes".
To be valid, a salary sacrifice arrangement must be agreed between employer and employee before
the work is performed. This agreement is usually documented in writing in pro forma form
Spouse contributions
This can also come under non concessional contributions and are made on behalf of an eligible
spouse.
Superannuation co-contributions
If you make personal contributions and you earn within a maximum amount of income, the
government may make a co-contribution to your superannuation account.
Concessional Contributions Cap
Concessional contributions are those made for you by an employer, or by you via salary sacrifice, or
as contributions you claim as a tax deduction (known as personal deductible contributions).
The concessional contribution cap depends on your age. If you are age 49 or younger then your cap
is $30,000 for the 2016-17 financial year. If you are age so or older as at 30 June 2016 your cap for
the 2016-17 financial year is $35,000.
Remember, this limit includes contributions you make via salary sacrifice or claim a tax deduction on,
plus those made by your employer.
If you exceed this cap all excess concessional contributions will be taxed at your marginal tax rate
plus an additional charge, determined by the ATO. Your excess contributions tax can be paid directly
from your super account using the form provided by the ATO.
From 1 July 2017 the concessional contributions cap will be $25,000 for everyone, regardless of age.
Non Concessional Contributions Cap
Non concessional contributions are also known as voluntary or after-tax contributions. This cap is
separate to the above concessional contributions cap. The limit under this cap is $180,000 for the
2016/17 financial year, and will be reduced to $100,000 starting in the 2017/18 financial year. If you
are under the age of 65 you can bring forward the non-concessional contribution cap from the
subsequent two financial years. This is known as the bring forward rule.
From 1 July 2017, you will not be able to make non-concessional contributions if you have a
superannuation balance over $1.6 million across all of your accounts. If you do, you will be deemed
to have exceeded your cap. If your balance is close to $1.6 million, you will only be eligible to make
non-concessional contributions that take you up to this limit.
1.3 Investment Restrictions

All investments by your SMSF must be made on a commercial 'arm's length' basis. The purchase and
sale price of fund assets should always reflect true market value, and the income from fund assets
should always reflect a true market rate of retum.
Generally:
you can't buy assets from, or lend money to, fund members or other related parties (there are some
exceptions to this rule)
your fund can't borrow money.
If you don't comply with the investment restrictions we may impose significant penalties, including
disqualifying you as a trustee and even prosecution. It's a good idea to speak to an SMSF
professional to make sure your investments comply with the law.
With the awareness and growth of Self Managed Superannuation funds (SMSFs) at an all time high, a
significant issue that is emerging is the importance for trustees to be highly knowledgeable as to
their responsibilities in running these funds. Of these, probably the most important responsibilities
for you to come to grips with as a trustee are the restrictions that the law imposes with regard to the
investments within your SMSF.
Failure to do so can easily result in serious breaches of these laws, which in tum can have disastrous
financial consequences with trustees being fined and/or the fund losing its complying status. Whilst
the superannuation law does not state exactly what a fund can and cannot invest in, it does however
restrict a number of investment practices. Ignore them at your peril.
Investments on an arms length basis
The first and most straightforward rule is that investments must be made and maintained on a strict
commercial basis, that is buying and selling of assets must always reflect their true market value.
Similarly, any income from these assets should always reflect a true market rate of return.
Borrowing
Except in limited circumstances, you cannot borrow money in your SMSF. The exceptions include
borrowing (for not more than go days and the borrowing does not exceed 10% of total assets) to pay
member benefits or surcharge liability, and to settle security transactions (for not more than 7 days)
as long as it was not foreseen as being needed at the initial time of transaction. New regulations now
also provide the ability for borrowing for investment purposes via a "Limited recourse borrowing
arrangement" structure. See the articles on "Borrowing" in the SMSF Technical education &
strategies section for more details.
Loans to members or a members relative
Trustees cannot engage in providing financial assistance or loans to members of the fund (or their
relatives). The concept of the loan is very straightforward, however financial assistance can be a
trap. For example the use of a holiday home (owned by the SMSF) by a member or members relative
for no cost would constitute a contravention of this restriction. Further to this, the property (or any
other asset of the fund) could not be used as a guarantee to secure a personal loan for a member or
members relative.
Acquisition of assets from 'related parties'
Trustees are prohibited from acquiring assets from a 'related party' of the superannuation fund. The
limited exceptions to this rule include assets acquired at market value, if:
- the acquisition is an in-house asset' which, after being acquired by the trustees
would not result in the level of 'in-house assets' of the superannuation fund exceeding more than
59% of the superannuation fund's assets;
-the asset is a listed security (for example, shares, units or bonds listed on an approved Stock
Exchange);
- the asset is 'business real property. (SISA 66) 'Business real property of an entity
generally relates to land and buildings used wholly and exclusively in a business.
Trustees of SMSFs are permitted to acquire up to 100% of the fund's total assets as 'business real
property'.
In house assets
An in house asset is an investment in, a loan to, or leases with a related party of the fund. You
cannot have more than 5% of the funds assets invested in this way. The exception is business real
property subject to a lease between the fund and a related party. This can be up to 100% of the
funds assets. Note that there are some transitional arrangements for those with in-house asset
structures existing before 11th August 1999. In addition SMSFs may invest in a unit trust or a
company, without that investment being considered an in-house asset, if certain conditions are met
[Superannuation Industry (Supervision) Regulations 1994 (SISR) 13.22C]. The main conditions being
that the trust or company:
does not borrow;
- has no assets with a charge over them;
does not loan money to individuals or other entities (other than deposits with authorised deposit-
taking institutions);
- does not acquire an asset from a related party of the superannuation fund other than business real
property acquired at market value;
does not directly or indirectly lease assets to related parties, other than business real property;
does not conduct a business; and
conducts all transactions on an arm's length basis.
Related Party
So what is a related party? Quite simply, this includes all members of the fund and their associates,
their employer sponsors, and any of their associates or employer sponsor's associates. Associates
include relatives, business partners, and any companies or trusts that they control.
Derivatives
Derivatives are allowed in SMSFs, however you need to be aware of how you calculate your
exposures for your Investment strategy, and you will also need a Derivatives Risk Statement (as per
Reg 13.15A) if an asset of the fund is held as margin on any of your derivatives. See our article on
Derivatives for more details.
Sole purpose test
Overlaying all of this is the sole purpose test. This test is there to basically ensure that your SMSF is
maintained for the purpose of providing benefits to members upon their retirement, or their
dependants in the event of the member's death before retirement. If you make an investment and it
appears that you are gaining current benefit from the use of that asset, you may be contravening the
sole purpose test. For more info, see our article on the sole purpose test.
1.1 Taxation of Superannuation
Objectives
Eliminate tax obstacles to facilitate a further continuous changeover to retirement.
Improved objective about super tax reductions to accomplish the goals of the superannuation
structure.
The taxation of superannuation is taxed at three points-
Tax on contributions
Tax on investment earnings
Tax on withdrawals
Tax on contributions:
Generally superannuation contributions come under two classifications- concessional and non-
concessional contributions. Concessional contributions are defined as contributions where the
member or an employer can get a tax deduction. These contributions are also known as "before-tax"
contributions.
These contributions contain superannuation guarantee contributions, salary sacrifice contributions,

other emplayer contributions and certain contributions termed as a personal tax deduction. The
taxation of these contributions is done within the fund. The taxable part of the fund does not alter
the tax to be paid by the super fund, they will be an aspect in computing the tax to be paid on
withdrawals of a superannuation fund.
Non-concessional contributions are defined as the contributions where the member or an employer
doesn't get a tax deduction. These contributions are also called as after tax contributions. Normally,
the taxation of these contributions is not done within the fund.
The total sum of tax the member has to contribute for his superannuation fund is usually
determined by the type of contribution and his personal conditions. Some of those examples are
given below:
Employer and salary sacrificed contributions
These are also called as concessional contributions. Employer and salary sacrificed super
contributions are taxed at 15% when they are received by the superannuation fund.
• Smart tip
Without a tax file number to the superannuation fund, the member has to pay more tax.
Low income earners
When the member make an income of $37,000 or less, the tax he has to pay on his superannuation
funds, up to $500, will be mechanically added back into his superannuation account fund through
the low income super contribution. From 1 July 2017, this will be substituted by the Low income
super tax offset contribution (LISTO).
High Income earners
When the member's combined salary and superannuation contributions exceed $300,000, you have
to pay Division 293 tax. This is an extra 15% tax on the lessor of his concessional contributions or the
total sum in surplus of the Division 293 salary threshold. This threshold will decrease to $250,000 on
1 July 2017.
Personal contributions
After-tax personal contributions and those whose get under the government's co- contribution
scheme are not taxed when the member come into superannuation fund.
Consolidating super
Almost in all the cases, when the amount is shifted from one superannuation fund to another when
combining or swapping funds, no further tax is payable. Tax has to be paid only when the member is
shifting from an untaxed fund, such as an older style government fund.
There are some restrictions on how much the member can pay to super and there are fines for going
over these restrictions.
Source: https://www.moneysmart.gov.au/superannuation-and-retirement/how- super-works/tax-

and-super
Tax on investment earnings:
Revenue which is received in the fund which is also known as investment earnings are taxed at a
maximum rate of 15%. Capital gains which have a maturity period more than 12 months are taxed at
10%
The total sum of tax payment of the fund will be decreased by tax deductions or tax credits. For
example, a growth fund will pay only 7% tax as its dividend salary permits it to tax credits.
Exempt income
The investment profits of superannuation funds consequential from the possessions backing
pensions is exempt returns of the fund. In the 2016 federal budget, the government planned to
remove it from 1 July 2017, the elimination for investment earnings on a retirement phase account if
the balance in the account is more than $1.6 million.
Assessable income
Most of the other investment revenue of super funds is usually available profits of the fund and is
taxed to 15%.
Allowable deductions
Expenditures of the superannuation fund, such as administration cost, investment management cost
and insurance installments are permissible deductions in contrary to the fund revenue. Life
insurance installments paid by the fund are deductible by the fund from available income whereas
the same installments paid directly by the Individual may not be deductible.
Tax on withdrawal- see photo
1.2 Tax concessions for complying funds
Here the Australian government desires that all the people save for the superannuation fund. The
idea of the government is the more the people store fort the superannuation fund till they retire, the
less the government has to allocate the funds for supporting the people in the form of pension. To
motivate people to fund to their retirement reserves, the government offers tax concessions on
aspects like:
The employer has to contribute at least 9.5% for the superannuation fund.
Through their pre-income tax salary sacrificing, the member can contribute
additionally
All these superannuation funds are taxed at a fixed rate of 15%. This rate is less than the income tax
rate.
Tax concessions for personal super contributions
Personal contributions can only be tax concession if the below given conditions are fulfilled:
The member has to contribute to a fulfilling superannuation fund for himself to attain the
superannuation benefits (s290-155).
The member can only reduce the contribution part for the financial year in which the contribution is
made.
The member has to submit a valid announcement to the trustee of the fund (s290-170).
The trustee of the fund has to give the member a proof like receipt of the valid notice.
If the conditions defined in this segment are fulfilled then a person has a privilege of tax deduction
for 100% of personal contributions made to his superannuation fund. Personal contributions, where
a valid concession notice is submitted and recognized are called concessional contributions, which
are part of a person's concessional contributions cap. Surplus of concessional contributions needs to
pay extra tax.
Employer tax concessions for super
The employers can entitle a tax reduction up to 100% of any superannuation fund contributions
which is made in the name of employer to his superannuation fund. Earlier there were bounds
related to age which were eliminated from 1 July 2007. Since there is no bound on the total sum of
fund where an employer can entitle tax deduction.
An employer can get up to 100% tax concession for superannuation contributions which is made in
the name of employer either:
On or before the day that is 28 days after the end of the month in which the employer turns 75
When the contribution reduces the employer's SG charge percentage
It is mandatory that the employer has to make the contribution by an Australia law, industrial award,
determination or notional agreement preserving State awards that is in force.
Former employees
Employers can apply for a tax concession for contributions paid by him within four months after he
resigned from the company, if:
The employer can claim the deduction if the contribution was made by the member was an
employer of the company and either of the following:
The contribution has to satisfy the member's SG responsibility considering the individual.
The contribution is linked to a single expense in substitute of income that is connected to a specific
duration in which the member was an employer.
Controlling interest
The member can apply for a tax concession for a superannuation contribution made in respect of the
other member who is not the member's employee, but an employer with recognition of where a
member has a controlling interest.
Employee
To reduce a contribution for an employer, He must be eligible for following:
An employer within the extended description of employer in section 12 of the Superannuation

Guarantee Act 1992
Involved in making the allowable salary of the employer
An Australian citizen who is involved in the member's business.
The company can apply for tax concession for contributions made on the name of the member who
are not involved in making the permissible salary of the business, nor involved in the business.
However, individuals who are not SG employees will still need to be engaged in producing the
assessable income of the business.
Low income superannuation Earners
Members which have an accustomed taxable earnings below $37,000 is eligible for a low income
superannuation contribution. The maximum limit is around $500 per annum. Here the government
decided to contribute and has proposed to reimburse low income member for the 15% tax on
deductions offerings made on the name of the member or employer.
The low income super offerings has been cancelled for the contributions made from
1 July 2017
A member can only claim the low income superannuation contribution if they fulfil the below
conditions:
A deductible payment which includes a part of reserves and estimated taxed payment, is paid by or
for the member. This is frequent in an employer SG or award offerings made after an employee
moves into an income sacrifice arrangement, or a private contribution for which the member applies
for a tax concession.
A member's accustomed taxable revenue will not be more than $37,000. Accustomed taxable
revenue is defined as the total amount of the member's taxable revenue.
Commonly, accustomed outlying benefits ie the taxable worth of fringe profits provided to the
individual during the FBT year
Overall net venture losses ie the total sum required by which concessions given to financial
investments and rental belongings and facilities will be more than the net salary form financial
reserves and rental possessions
Tax exempted pensions and payments (doesn't count super income stream profits which are tax free
for the member whose age must be at least 60)
Reportable super fund money (i,e concession super contributions made for the member by the
company or member itself, which include wage sacrifice fund).
High Income Tax Earners
Division 293 tax, which is a further 15% aid tax to be paid by high wage earners with salary more
than $300,000, will be applicable to those whose earning is more than $250,000 from 1 July 2017.
The description of revenue mainly used to decide whether a client has to pay an additional 15% tax
on everything or on selected deductible contributions which are revenue for additional purposes,
less reportable superannuation fund contributions, plus 'low tax super contributions'.
It is essential to write down the description of income for Division 293 purposes contains:
Taxable income (It contains the gross sum where the personal trust distribution tax has to pay).
Reportable outlying benefits.
Total gross investment loss (It contains gross monetary investment loss and gross rental assets loss)
Low tax super contributions (non-additional deductible contributions), which
contains super guarantee, salary sacrifice and private deductible contributions. Division 293 tax is
applicable to all low tax super fund contributions that surpass the $250,000 limit point, thinking that
they will occupy the upper part of revenue.
1.3 Capital Gains Tax:
Capital gains tax (CGT) is defined as a tax which is applied on the revenues that a member gets
through selling an asset.
Capital gains tax is also known as the income tax that the member need to pay on his gross
investment revenue and it also contains the annual income tax return. For instance, when the
member wants to sell a property or asset, it will come down capital gains tax.
Usually, Capital gain is considered as a difference between the members had paid for it and the
profit he received for it. The member can also get profit if the superannuation fund allocates a part
of profits to him.
It is defined as the difference between the total sum incurred by the member and what he receive
when he sold off the asset.
The member usually pays tax on asset gains. It comprises a portion of the member income tax which
doesn't include a separate tax.
Maximum number of private possessions are exempted from capital gains tax. Home, car, and other
private belongings like furniture come under this category Here capital gains tax also doesn't involve
the depreciating possessions which are mainly used for taxable resolutions, such as commercial tools
or furnishings in a leasing assets.
If the member is an Australian citizen, Capital gains tax is applicable to the member possessions
whereas for foreign citizens are entitled to capital gain or loss if capital gains tax occurs to a property
which is called as Taxable Australian property.
If the member has a capital gain and suppose he has hold a property for more than twelve months,
the member has to right to claim 50% discount on his gross capital gain amount.
Businesses and members generally pay different capital gains tax rates. Here the firm is not eligible
to any of the capital gains tax discount and they have to pay 30% tax on all gross capital gains. Here
the member has to pay the same rate which is equal to his income tax rate in that particular year. In
some super funds, the tax rate shall be 15% and concession of 33.3%.
Extra eligibility conditions for $500,000 retirement discharge
A corporate firm may select to disrespect an investment gain from a capital gain tax occurring with
respect to a working asset of a mini corporate firm by means of the $500,000 retirement discharge.
The essential rules for eligibility are following:
The essential regulations for a corporate firm relief to satisfy are:
For members:
Have an option to contempt the investment gain (i.e. deducted amount from capital gain tax) has to
be stated in writing on or before the day the member files his tax return for the year of the capital
gains tax or he should be permitted extended time by the Commissioner respectively.
o Before the member chooses his option and if he is under age 55, then the member has to give a
sum equivalent to the capital gain tax deducted sum to a super fund. If the member is age 55 or
above, then the payment will be given directly.
•For Firm or trust:
o Have an option to contempt the investment gain (i.e. deducted amount from capital gain tax) has
to be stated in writing on or before the day the firm or trust files their tax return for the capital gain
tax year or he should be permitted extended time by the Commissioner respectively.
o The firm or trust would had made payment to minimum one of its capital gains tax allowance
investors within 7 days after it selected an option or 7 days after payment of investment earnings.
o If the recipient is under 55 (just prior to the payment), the company or trust must make the
payment by contributing it to a complying super fund on the recipient's behalf. If the recipient is age
55 or over, the payment may be received directly.
1.4 Imputation credits
Imputation credits have a special characteristics related to self-managed super fund. These are also
called as tax credits or franking or franked Dividends. They will either deduct the self-managed super
fund tax payment or the member can get a reimbursement from the Australian Taxation Office.
These credits are similar for the self-managed superannuation fund and for the member. It means
the payment received is added by the total sum of these credits to accomplish a received up
dividend. The tax rate assessed on this amount will be 15%. Then the superannuation fund can claim
for a tax compensation for the following imputation credit. For example, consider the dividend
amount is $80, the self-managed super fund will get $56 cash and imputation credits will receive $24
respectively. Here the self-managed super fund has to pay tax rate of 15% which is equal to 15% of
$80 income = $12 and set out the $30 imputation credits contrary to the tax which is need to be
paid. The Australian Taxation Office will reimburse the member fund amount of $15.
The advantages of these credits in a self-managed super fund is that it has only tax rate of 15%,
while the same type of credits in franked dividends has higher tax rate i.e. 30%. It implies that the
credit readily accounts for the tax to be paid on the dividend received and deduct the self-managed
super fund tax liability.
These credits are also utilized to cut down the sum of income tax to be paid by the member's self-
managed super fund or if the credits are more than the total tax bill, then the credits may be
reimbursed to their self-managed super fund by the Australian Taxation Office.
These are tremendously authoritative because the tax paid by a self-managed super fund is only 15%
when it is in the growth stage and 0% in pension stage. It means when a self-managed super fund
gets a fully franked dividend, the franking credit will not only compensate tax payable on the
dividend but also it will either compensate tax to be paid on the self-managed super fund's other
earnings or will reimbursed by the Australian Taxation Office.
The importance of imputation credits in a self-managed super fund
One of the most important advantage of using self-managed super fund is capital selection &
regulating it. Additionally to this concept of taxation regulation, where the trustees create particular
asset allocation resolutions with respect to the taxation income of those choices.
The important and influential tax device for trustees are these imputation credits acknowledged
mostly from direct capital allocation in Australian shares or to a smaller degree through self-
managed super funds. These credits are also used to compensate the tax to be paid on the taxable
component of the fund.
Here taxable component of the fund comprises of capital income, taxable contributions and capital
gains. Addition to this, if these credits of the fund compensate all the taxable component of the fund
and there will be more amount of left over which will be appealed as a reimbursement.
The main issue around these credits is that the income tax rate for superannuation funds is 15%
whereas for the same credits in fully franked dividends is higher as 30%
for the respective dividend.
Example: consider the simple example below where the SMSF only holds NAB shares and CBA
shares:
In this example, not only will the fund pay no tax on the dividend income of these two
shareholdings, but it will have $315 of excess imputation credits to use to offset against other tax
liabilities of the fund (such as other income, capital gains, and taxable contributions). If none exists,
then the fund can receive a refund of this amount.

Super Funds and Asset Classes

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Super Funds and Asset Classes

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2.

1 Different types of funds in Superannuation

2.1.1 Retail funds

2.1.3 Self-Managed Super Funds

2.2 What is SMSF?

The maximum number of members allowed is 4.

2.3 Advantages of Self-Managed Super Funds

Super Fund continues after your demise

2.4 Disadvantages of Self-Managed Super Funds

No way of approaching the Superannuation Complaints Tribunal

You can go for up to four individual trustees, or

A Corporate trustee (necessarily, a company acting as a trustee for the fund)

A SMSF trustee is responsible for:

Drafting the funds investment strategies and making the investments:

Accepting the contributions and paying out benefits:

Appointing an approved auditor:

2.5 Is a Self-Managed Super Fund right for you?

2.5.1 Key considerations for the SMSF trustees

You should have an suitable ninimum balance to run your SMSP

2.6 Chonsing your investment strategy?

Identify your Investor profile

TATA CONSULTANCY SERVICES

1 When do you plan on accessing your super?

2 Your earnings from the investment

Learn the basics

There are four major investment profiles. They are as follows:

Getting your Investment right

To decide on the best alternative, you should:

• Understand the risks associated

Understand the asset classes

• Look at the expected returns for each of the investment profile

.Realize the importance of diversification

Life cycle Investment Strategy

Let's understand the Life cycle Investment Strategy

What is Life cycle Investment Strategy?

Tho is it meant for?

How does this process work?

Make an Investment choice for your super account

This investment choice is suited to the investors who:

• Are most likely to utilize their money in the short-term

This investment choice is suited to the investors who:

Are near to or who have reached their retirement

This investment choice is suited to the investors who:

Wish to generate wealth over the long-tera

2.7 The Major Asset Classes

2.8 Stages of Fund- Accumulation and Pension Funds

Regulation and Legislation Covering

To establish a trust, you require the following:

The recognizable beneficiaries

The intent to establish the trust.

1.2 Who can be a member and who can be a trustee?

The trustee is accountable for:

o Take the contributions and giving out the benefits

o Assigning an approved auditor

has been found guilty of an offence concerning dishonest behavior

o is an undischarged bankrupt such as insolvent

o Possess the properties of the business

Run the business

Allocate the revenue of the business

Conform the obstacles of the trust bond or will.

Few of the further responsibilities of the trustee are:

o Behave in good faith

o Implement sound attention in the management of a trust

Should maintain clear books and records of transactions