Mariner Financial believes self-managed superannuation funds (SMSFs) are increasingly attractive in the lead-up to the Government’s July 1, 2007 superannuation reforms deadline, but is reminding financial planners and their clients of the trustee obligations tied to SMSFs.
Kate Anderson, Mariner’s technical services manager, pointed out a number of vital considerations including asset selection, who assets are acquired from, and if they fall under an exception of the provisions.
Whether an asset is classified as having come from a related party has been a common question from planners, as investors seek to benefit from the $1 million undeducted transitional contribution cap by transferring assets in-specie to their SMSF.
Trustees of SMSFs are generally prohibited from acquiring assets from related parties, which prevents such parties from selling most assets to their SMSF or contribution assets in-specie.
Anderson said that in-house asset restrictions are also an important consideration, with SMSFs not permitted to invest more than 5 per cent of their capital in an in-house asset.
There are a number of exceptions including a life policy issued by a life insurance company, an investment in a pooled superannuation trust, real property subject to a lease and an investment in a widely held unit trust.
Other standard superannuation tests must also be applied to ensure SMSFs comply, including the sole purpose test and arm’s length transactions.
“[SMSFs] need to bear in mind that the primary purpose of superannuation is saving for retirement and that all investments must be suitable for this purpose,” Anderson said.
