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SMSF investment in a private company or business

Self-managed super funds (SMSFs) are allowed to invest a private company or business provided the business is operated for the sole purpose of providing retirement benefits for fund members and it is allowed under the trust deed.

SMSF trustees must take into account the sole purpose test when determining whether purchasing a private company or business is appropriate. The sole purpose test means your fund needs to be maintained for the sole purpose of providing retirement benefits to your members or to their dependants if a member dies before retirement.

Under the sole purpose test, the SMSF is eligible for concessional tax treatment. However, trustees who contravene the sole purpose test (i.e. provide a pre-retirement benefit to someone) could lose the fund’s concessional tax status and trustees could face severe civil and criminal penalties.

When trustees are considering investing in an entity that carries on a business, they must ensure their SMSF complies with their investment strategy, arm’s length transactions and the rules surrounding related parties.

SMSF trustees must ensure they do not cross the line between investing in a business and using their SMSF to run a business. Some indicators that the SMSF has crossed the line include those where:

SMSF’s looking to invest in a private company or business must ensure their SMSF trust deed permits the investment; the SMSF has a written and up-to-date investment strategy and investments are made in line with the strategy.

Trustees must also ensure investments are made and maintained on an arm’s length basis; assets are not acquired from related parties (unless they are an exception) and the transaction does not breach the in-house asset limit.

Posted on 12 October '16 by , under Super.

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The ATO reported that 45% of working Australians were not aware that they had multiple super accounts in 2016. Having multiple super accounts is particularly common for individuals who have had more than one job. If this is you, it is important to identify and manage your super accounts because having more than one can be costly as a result of account fees from multiple funds.To combat this, you may want to consolidate your super, which moves all your super into one account. Not only does this save on fees, but it also makes your super easier to manage and keep track of.

Before consolidating your super, it is important to do the following:

Research your funds' policy
Compare your active super accounts so you can make the right choice about which one you should close. Things to assess include:

  • Exit fees
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  • Performance of the funds

Check employer contributions
Changing funds may affect how much your employer contributes, as some employers contribute more to certain funds. Check your current accounts to see if changing funds will affect this. Once you have selected a super fund, regardless of whether you choose a new super fund or one of your existing ones, provide your employer with the details they need to pay super into your selected account.

Gather the relevant information
When consolidating your super, you will need to have the following details ready:

  • Your tax file number.
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