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Common SMSF mistakes to avoid

Running a self-managed super fund can be a great strategy for your super and your retirement, provided you manage it correctly.

To ensure you can enjoy the later stages of life and retire comfortably, you will need to be aware of common SMSF mistakes and how to avoid them.

Record keeping

Bad record keeping when it comes to SMSFs is very common and very problematic. If the ATO decides to look into your SMSF and your record keeping is subpar, you and the rest of the members of the fund could land themselves in hot water. Good record keeping practices are a great preventative measure for being liable for fines and penalties should the ATO choose to investigate the fund. It is also a great habit to get into as proper documentation makes all decision making regarding your fund much more legitimate.

Financial assistance or loans to members

By law, you cannot loan or offer financial assistance to a member of the self-managed super fund at any time, either directly or indirectly. Many members entertain the mindset that because it is their money, they can allocate loans to other members and to themselves, but this is not the case. Should the ATO catch a member of an SMSF doing this, they will face harsh penalties. They may also lose all concessional tax benefits, which impacts the whole fund and not just the guilty member.

Contribution cap

According to the Australian Taxation Office, if a member of a self-managed super fund makes a contribution or their contributions in any given financial year exceed the contribution caps, they may be liable for an additional tax on the excess contributions. As of 1 July 2017, the contribution cap for all members of an SMSF regardless of age is $25,000 which is taxed at a rate of 15 per cent. If members contribute over this amount, they could be taxed at 47 per cent on additional contributions.

Education

For the most part, most mistakes or errors surrounding your SMSF and the management of the fund can be avoided if you and the other members in the fund educate themselves on rules, regulations and strategies to remain compliant. With the internet available virtually everywhere, you can always read up on and stay up to date with ways to run the SMSF effectively. Just beware of where you are getting your information from and ensure it is a trustworthy site. You can also always speak to your financial advisor for guidance and advice.

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News

Protect yourself from early super release scams

August 7, 2018

When it comes to protecting your nest egg, avoid getting caught out by a promoter of an illegal early release super scheme.

Early release super scheme scams will involve a promoter contacting you and offering to help you access your super early. They usually target individuals under significant financial pressure or those who are not knowledgeable about super laws and the repercussions and penalties involved in illegally accessing your super.

You can only access your super when you meet a condition of release.

Generally, when you:
– Are 65 years old (even if you have not yet retired).
– Reach your preservation age and retire.
– Reach your preservation age and begin a transition to retirement income stream while still working.

There are special circumstances where you may be able to access your super early.

These special circumstances include:
– Severe financial hardship
– Temporary or permanent incapacity
– Compassionate grounds
– Temporary residents leaving Australia
– Super death benefits (inheriting super)
– Super less than $200
– Terminal medical condition

To avoid falling for an illegal early super release scam, be wary if the promoter:
– charges high fees and commissions;
– requests identity documents;
– claims you can access your super and put the funds towards whatever you wish;
– and tries to persuade you to transfer or rollover your super from your existing fund to a self-managed super fund (SMSF) in order to access your super before you are legally entitled.