renovations

DIY Repair and Renovation Pressure Points for SMSFs

Trustees of self-managed superannuation funds (SMSFs) face strict tax and super laws when undertaking repairs and renovations on real estate held within the SMSF. 

Many trustees wonder what they can legally do to enhance the value of their fund’s property without falling foul of these strict rules. 

Trustees must ensure that any services provided to a SMSF are undertaken on an arm’s length basis. Failure to do so may result in some of the fund’s income being taxed at 45% under the Non-Arms Length Expenditure (NALE) rules rather than the general superannuation tax rate of 15% or nil if the fund is in pension phase.    

Broadly, these rules can apply where the cost of expenses connected with a fund’s property investments, such as property management expenses, repairs and maintenance, etc are less than might be expected in an arm’s length situation.    

This does not mean however that a trustee who provides any service to an SMSF must charge a fee – see more information below. 

Further, the SMSF needs to be invoiced directly for any goods and materials as otherwise the fund will be deemed to have acquired them from the members directly which is prohibited. 

Key Considerations 

  • Who provides the service? Consider activities undertaken by a person in their individual capacity vs in their trustee capacity 
  • Who is invoiced for the goods or service? Acquiring building materials and any other goods or services connected with the property from related parties, even if at market value, will breach the super laws. 

Trustee v Individual capacity 

A fundamental rule for SMSFs is that a trustee cannot be remunerated for their duties as trustee. This is embedded in superannuation law. Examples of trustee duties include opening a bank account, making investments, collecting rent and paying expenses, and repairing and maintaining assets. However if a service is provided in their individual professional capacity then a fee must be charged.     

Examples 

Peter is the trustee of his SMSF and he is also a licensed electrician by trade. The SMSF owns a residential property in which Peter undertakes electrical repairs that can only be done by a licensed electrician. Peter is considered to be acting in his individual capacity because the activities have been performed pursuant to a licence/qualification.  The fund must be charged an arm’s length fee for the work. 
Michael’s SMSF owns a commercial property and does not engage the services of a property management business. Michael attends to all administrative duties in connection with the lease (eg collecting rent, renegotiating lease terms upon expiry, organising repairs). Michael also mows the lawn, tends to the garden at the property and makes minor repairs using his personal mower and tools. He does not provide these services to others. These activities are obligations imposed on Michael because he is a trustee of an SMSF (ie they are trustee duties). Michael cannot charge the SMSF fees for these services as he performs them in his capacity as trustee. 
Andrew is a licensed builder and performs minor repairs on a jammed door in his SMSF’s investment property using his tools of trade. On another occasion, Andrew builds a deck at the property, largely using timber and materials left over from another job.  Ad-hoc maintenance activities are obligations imposed on Andrew because he is a trustee of his SMSF (ie they are trustee duties). The use of his tools of trade for such activities are minor and infrequent.   Building the deck however gives rise to Andrew’s specialist skills as a builder, with such services being offered to the public. As Andrew is acting in his individual capacity he must charge an arm’s length fee to the fund for the work performed.     

Further to the example of Andrew above, as the materials for the deck are sourced from Andrew, the SMSF has unknowingly breached the super laws. To avoid such compliance issues, the SMSF trustee must source all materials directly from the supplier and ensure the SMSF is invoiced, not the trustee in their individual capacity.   

Consulting a professional before undertaking any repairs or renovations is crucial to ensuring compliance with the law. 

CONTACT ALLAN HALL SUPERANNUATION

health insurance

Navigating SMSFs and Insurance

Key Rules and Essential Considerations

If you’ve chosen to manage your own SMSF, it’s likely you’re also proactive and responsible regarding insurance.

Whether you currently hold life insurance outside super or within an existing super fund, starting an SMSF requires attention to your insurance strategy.

SMSF trustees must assess whether to obtain suitable insurance coverage for each fund member as part of developing their investment strategy.

What are the rules?

Legally, all SMSFs must prepare a documented investment strategy during setup.

This strategy—including any insurance coverage—must be regularly reviewed by the fund’s trustees to ensure it aligns with members’ evolving needs and circumstances. Compliance with this investment strategy is checked annually by a licensed SMSF auditor.

In 2015, the Federal Government’s Super System Review found that SMSF members were more likely to hold insurance outside super compared to members in other superannuation sectors. Consequently, SMSFs are not required to provide default insurance for members as many public sector funds do.

However, SMSF trustees still need to carefully consider each member’s financial situation to determine if they have adequate insurance coverage. Key considerations include:

  • Current debt levels of members
  • Whether members have dependents and, if so, how those dependents could be financially supported in the event of the member’s death or inability to work.

What types of insurance cover can SMSFs provide?

SMSFs are permitted to offer any insurance cover that aligns with one of these superannuation conditions of release:

  • Death (life insurance)
  • Permanent incapacity leading to the member’s permanent cessation of work (total and permanent disability insurance or TPD)
  • Temporary incapacity that causes the member to stop working temporarily (income protection insurance)
  • Terminal illness diagnosis (by two medical professionals) indicating likely death within two years, generally included as a feature in life insurance policies.

Note: With TPD insurance, insurers apply different definitions and features. A key distinction in TPD policies is occupation type, with two options:

  1. ‘Own occupation’ provides benefits if the member cannot work in their specific role
  2. ‘Any occupation’ offers benefits only if the member is unable to work in any gainful role they are reasonably suited for.

SMSFs cannot hold ‘own occupation’ TPD policies unless issued before 1 July 2014, as policies issued after this date must meet a condition of release to ensure proceeds are accessible before members reach preservation age. The ‘any occupation’ definition aligns with the permanent incapacity condition, so it is the permissible definition.

Each of the above conditions of release allows a fund member to access their super funds regardless of reaching preservation age.

Once you determine the insurance cover type you need, you can weigh the benefits of holding it within your SMSF, an existing super fund, or personally, outside super.

Ensure your SMSF’s insurance strategy meets legal standards and protects your members — review your coverage options and compliance obligations today.

CONTACT ALLAN HALL SUPERANNUATION

assets

Valuing fund assets for SMSFs

Each year you need to value your SMSF assets and provide supporting evidence to your auditor.

One of the many responsibilities SMSF trustees have every income year is valuing your fund’s assets at market value.

The market value of an asset is the amount that a willing buyer and seller would agree to in an arms-length transaction. These valuations will be used when preparing your fund’s accounts, statements and SMSF annual return (SAR).

Your asset valuations will be reviewed by your approved SMSF auditor as part of the annual audit prior to lodgement of your SAR. Your auditor will check that assets have been valued correctly, assess and document whether the basis for the valuations is appropriate given the nature of the asset. They are not responsible for valuing fund assets.

Make sure you get your valuations done before going to your auditor.

It’s your responsibility to provide objective and supportable evidence to your auditor for the valuation of the fund’s assets, including all relevant documents requested to prevent delays in auditing the fund. Failure to do so could result in a potential late lodgement of your annual return or a contravention if mistakes have been made.

Start researching now to find what type of evidence your need to support the valuation as this can take time. For some asset types the law requires valuations to be undertaken by a qualified independent valuer. Find out more by visiting SMSF valuation guidelines.

CONTACT ALLAN HALL SUPERANNUATION

stopwatch countdown to deadline

$3 Million Super Tax in Limbo

Senate Delays Raise Doubts Over Timing and Impact

The Better Targeted Super Concessions Bill which includes the $3 million superannuation tax, faces further uncertainty as it has not been scheduled for debate in the Senate this month. 

The Australian government’s proposal to impose an additional 15% tax on superannuation balances exceeding $3 million is progressing through the legislative process.

The draft legislation, introduced to Parliament on 30 November 2023, was referred to the Senate Economics Legislation Committee, which tabled its report on 10 May 2024. The report recommended the bill be passed without changes.

The proposed tax, scheduled to take effect on 1 July 2025, aims to apply a 30% concessional tax rate to future earnings for superannuation balances above $3 million.

Implications for Super Fund Members

The delay raises doubts about whether the bill will be passed before the end of the parliamentary sitting year. The Senate’s draft schedule, released last Friday, does not include the bill for debate.

This change is expected to impact approximately 80,000 individuals, or 0.5% of superannuation account holders. Without Senate approval this year, there are concerns about insufficient time for affected super fund members to restructure their arrangements. 

Members with superannuation balances nearing or exceeding $3 million are encouraged to stay informed and consult financial advisors about potential impacts on their retirement planning.

CONTACT ALLAN HALL SUPERANNUATION

Compliance cogs

Developing a Compliant and Effective SMSF Investment Strategy

Your SMSF investment strategy  

Managing a Self-Managed Super Fund (SMSF) requires a well-structured investment strategy to ensure that retirement goals are met and the fund meets the ‘sole purpose test’.  

This test requires the fund to be maintained solely for the purpose of providing retirement benefits to members or their dependants if the member dies before retirement.   

All investment decisions need to be made in the members’ best interests and also to meet the sole purpose test. The decisions regarding how the funds are invested need to be documented in the investment strategy. 

As per Australian superannuation laws, trustees must develop, implement and regularly review the SMSF investment strategy, ensuring it aligns with the fund’s objectives and its members’ circumstances: 

  • Reflect Member Needs: Circumstances change; make sure the strategy still fits members’ retirement goals and risk profiles 
  • Adapt to Market Changes: Markets shift; adjust the strategy to reflect current economic conditions and protect fund performance 
  • Audit Readiness: Avoid potential audit issues by ensuring the strategy matches actual investments, preventing any compliance breaches 
  • Fund Future-Proofing: Use this review to plan for the next financial year, adjusting for diversification, liquidity and evolving fund goals. 

An SMSF investment strategy must consider crucial factors, including risks, diversification, liquidity and insurance coverage for members. It should address how the fund will make, hold and realise assets in a way that meets members’ retirement needs, factoring in their age, employment status and risk appetite. The strategy must be tailored to the fund’s unique circumstances and must go beyond simply restating legislative requirements. 

Trustees are free to choose their investment types, provided they comply with superannuation laws. However, placing all investments in one asset class can lead to concentration risk, especially if the asset is leveraged. To mitigate such risks, trustees should outline how the strategy addresses the lack of diversification and ensures the fund’s long-term stability. 

Regular reviews of the investment strategy are essential 

Significant events like market changes or members transitioning to pension phase should prompt a review to ensure liquidity and cash flow needs are met. Additionally, trustees must demonstrate that these reviews have taken place, with documented evidence available for auditors. 

Auditors will assess whether the SMSF has a compliant investment strategy and if it was adhered to throughout the year. In case of breaches, trustees must rectify the situation promptly to avoid penalties or disqualification. 

For expert advice on creating or reviewing an SMSF investment strategy, trustees should consult a licensed financial adviser to ensure the strategy’s effectiveness in meeting retirement goals. 

The fund’s accountant is generally not able to provide this but can assist trustees to complete a compliant template to create a suitable investment strategy for the fund. 

CONTACT ALLAN HALL SUPERANNUATION

contribute to Superannuation

Time to review Industry Super?

Red Flags in Industry Super Spark Scrutiny

A news article highlights concerns about governance, accountability and service standards within Australia’s $4 trillion superannuation industry.

Recent litigation by ASIC against Cbus Super for delays in death and disability claims has brought attention to systemic issues in the sector. These include allegations of fiduciary duty breaches by trustees, lack of a binding code of conduct, and governance conflicts tied to union affiliations on boards.

Key issues

  • Transparency and regulatory oversight remain insufficient, leaving members vulnerable
  • Some funds have begun addressing service issues by insourcing claim management and improving processes
  • However, the broader sector faces scrutiny for its handling of members’ retirement savings.

If you’re in an industry super fund, now is the time to review your arrangements.

To explore alternatives, including the benefits of an SMSF, reach out to Allan Hall Financial Planning for expert advice tailored to your retirement goals.

CONTACT ALLAN HALL FINANCIAL PLANNING 

Related reading

running a business

Running an SMSF publication now available

Managing Your SMSF: A Comprehensive Guide for Every Stage

From contributions to reporting, this guide offers essential insights for those running their SMSF.

If you are thinking of starting an SMSF or already have an SMSF you should refer to this publication. It provides guidance on:

  1. contributions and rollovers
  2. managing investments
  3. paying benefits
  4. administering and reporting.

This ATO publication completes the suite of lifecycle publications and complements two existing publications Starting a self-managed super fund and Winding up a self-managed super fund.

Looking for the latest news for SMSFs? 

You can stay up to date by visiting our SMSF News or by speaking with our specialist SMSF Team.

CONTACT ALLAN HALL SUPERANNUATION

super

Important Year-End Super Considerations for 2023-24

ACT NOW to ensure your super is in order before 30 June 2024 

In this article:

Personal Contributions

If you are looking to maximise your personal contributions in 2023/24, please carefully review the limits and information provided below. 

There will be an increase in the contribution limits taking effect from 1 July 2024 so these are also noted below for planning purposes.

Financial YearConcessional Cap (pre-tax)Non-concessional Cap (after tax)
 (Employer / Salary Sacrifice Personal Deductible)(Personal After Tax & Subject to Total Super Balance <$1.9m)
2023/24$27,500$110,000
2024/25$30,000$120,000

Concessional Contributions

Your contributions must be received in your super fund before 30 June 2024 to ensure that:

  • you are eligible to claim a deduction in 2023/24 for your contributions made;
  • the contribution is counted against your limit in the correct financial year.  

Please remember that 30 June 2024 falls on a Sunday so please do not leave your contributions until the last minute. They need to be cleared in the fund’s bank account by no later than Friday 28 June 2024. Please allow at least three days for any interbank transfer to occur. 

Be sure to check the amount of actual employer or personal contributions already received / due to be received in your super fund before making any top up contributions.

Any person aged 67-74 must meet the work test during 2023/24 in order to be able to claim a deduction for any personal contributions.  See below for further detail.  Any person aged 75 or older is unable to make personal contributions.

‘Catch Up’ Concessional Contributions

These rules commenced on 1 July 2018 so we are now into the fifth year of ‘catch up’ contributions whereby a person with a super balance of less than $500,000 as at 30 June 2023 is able to make a personal concessional contribution in 2023/24 equal to the unused amount of the concessional contribution limits applicable from 2018/19 to 2022/23. Please note that 2023/24 is the last year in which any unused contributions from 2018/19 can be claimed as they drop off after five years.  

Financial YearApplicable limit
2018/19$25,000
2019/20$25,000
2020/21$25,000
2021/22$27,500
2022/23$27,500

For example, Sam had employer contributions of $15,000 for each of 2018/19, 2019/20 and 2020/21 and $18,500 for each of 2021/22 and 2022/23. His total superannuation balance at 30 June 2023 was $380,000.  If Sam has higher than normal taxable income in 2023/24, due to say, a capital gain then, in addition to his current year 2023/24 contributions he can contribute an extra $48,000 as a personal concessional contribution before 30 June 2024 to reduce his taxable income. The extra $48,000 comprises $30,000 in unused contributions from 2018/19 to 2020/21 and $18,000 in unused contributions from 2021/22 and 2022/23. 

Please contact us if you want to check your unused catch up contribution amount.

Non Concessional Contributions

It is possible to ‘bring forward’ up to 3 years of contributions in 2023/24 if you were under age 75 on 1 July 2023 and your total superannuation balance at 30 June 2023 was within the thresholds noted below:

Total Super Balance as at 30 June 2023Age <75 on 1 July 2023
Your Total Super Balance is the combined total of all balances in super funds of which you are a member 
Less than $1,680,000$330,000
Greater than $1,680,000 but less than $1,790,000$220,000
Greater than $1,790,000 but less than $1,900,000$110,000
Greater than $1,900,000$0

Please note for planning purposes that the bring forward thresholds will change on 1 July 2024 with effect for 2024/25. These changes are noted in the following table below:   

Total Super Balance as at 30 June 2024Age <75 on 1 July 2024
Less than $1,660,000$360,000
Greater than $1,660,000 but less than $1,780,000$240,000
Greater than $1,780,000 but less than $1,900,000$120,000
Greater than $1,900,000$0
Strategy Tip
  1. If wanting to maximise super contributions, consider contributing only $110,000 in 2023/24 to enable a contribution of $360,000 in 2024/25, provided all eligibility criteria are met.   
  2. If wanting to equalise super balances between spouses, consider a withdrawal from the high balance and a contribution into the low balance. This is useful for optimising the member balances to take full advantage of the pension cap and various eligibility provisions associated with a person’s total superannuation balance. It also has the effect of lowering the ‘taxable’ portion of that member’s benefit which reduces any future tax payable on death benefits received by the beneficiaries. Please talk to us if you are keen to learn more about this.

If you are aged 67 to 74 years, you must satisfy a work test in order to be eligible to claim a tax deduction for your personal concessional contributions.

Work Test

To satisfy the work test, you must have worked at least 40 hours in a consecutive 30-day period in the 2023/24 financial year. 

If you are aged 75 or over, your super fund is only able to accept mandated employer contributions (i.e. superannuation guarantee amounts) on your behalf.

Minimum Pension 2023/24

If you are in pension phase, please check to ensure you have withdrawn your minimum pension for this financial year before 30 June 2024.  Where these requirements have not been met your fund will be subject to 15% tax on its pension asset investment earnings, rather than being tax-free.

For our SMSF clients, the amount would have been notified to you in the completion letter in the FY23 financials package.  Please contact us if you are unsure of your minimum pension payment for 2023/24. 

CONTACT US if you would like advice on any of the above strategies that may benefit your circumstances. 

ALLAN HALL SUPERANNUATION

smash piggy bank hammer

Illegal access to superannuation

Accessing your super early may be illegal

There are only a few reasons that you might be allowed to access your super early.

For most people, you can only access your superannuation when:

  • you retire and turn 60
  • you turn 65 (regardless of whether you’re working).

Otherwise, it is illegal.

If you illegally access your super early, you could:

  • lose your retirement savings
  • pay extra tax, penalties and interest
  • be disqualified as a self-managed super fund (SMSF) trustee and have your name published online.

Be careful if someone offers to help you access your super early

Some people may say they can help you set up an SMSF so you can access your super for reasons such as paying off your credit card, buying a house or to go on a holiday. This is not true, it is illegal.

These people (known as ‘promoters’) will often:

  • charge you a lot of money
  • tell you to transfer some or all your super from your existing super fund to the SMSF
  • tell you that you can use as much as you need for personal expenses.

Identity theft

These promoters may also ask for your personal information. If you give it to them, they can steal
your identity.

With your personal information, they can steal your super for themselves.

What should I do?

If a promoter contacts you, call us on 13 10 20 straight away to get advice.

Do not agree to anything and do not sign any documents or give them your personal details.

Don’t access your super before you retire unless you meet one of the conditions that makes it legal to access your super and receive relevant approval.

CONTACT ALLAN HALL SUPERANNUATION

Disclaimer: This article contains general advice only and has been prepared without taking into account particular objectives, financial circumstances and needs. The information provided is not a substitute for legal, tax and financial product advice. Before making any decision based on this information, you should assess its relevance to your individual circumstances. The information provided in this newsletter is objectively ascertainable and therefore does not constitute financial product advice.  If you require personal advice, please contact us to arrange an appointment with one of our licensed SMSF advisors.