Extended SMSF Glossary
Here is a glossary of definitions for SMSF (Self-Managed Super Fund) related terms that might be helpful for those exploring or engaging with the world of SMSFs. This glossary provides basic definitions and is a starting point for understanding the terminology related to SMSFs. For specific advice or more detailed information, consult one of our SMSF Specialists.
- SMSF (Self-Managed Super Fund): A private superannuation fund regulated by the Australian Taxation Office (ATO) that you manage yourself.
- Trustee: An individual or corporate entity responsible for managing the SMSF, ensuring compliance with relevant laws and regulations.
- Member: A participant in the SMSF. All members must be trustees, either as individuals or directors of a corporate trustee.
- Corporate Trustee: A company acting as the trustee of the SMSF, with each member being a director of that company.
- Individual Trustee: Individual persons who act as trustees for the SMSF. There must be at least two individual trustees.
- Sole Purpose Test: A legal requirement that ensures the SMSF is maintained for the sole purpose of providing retirement benefits to members.
- Compliance: Adherence to the rules and regulations governing SMSFs, as set out in the Superannuation Industry (Supervision) Act 1993 as set out by the ATO and other regulatory bodies.
- Limited Recourse Borrowing Arrangement (LRBA): A loan taken out by an SMSF to purchase an asset, where the lender’s recourse against the borrower is limited to that asset.
- Investment Strategy: A detailed plan outlining how the SMSF’s assets will be invested, considering risk, return, liquidity, and members’ retirement needs.
- Contribution Caps: The maximum amount that can be contributed to a superannuation fund without incurring additional tax.
- Preservation Age: The age at which you can start accessing your superannuation funds, depending on your date of birth.
- Auditor: A qualified individual who examines the SMSF’s financial statements and assesses compliance with superannuation laws.
- Pension Phase: The stage when the SMSF starts paying regular income to a member, usually after reaching preservation age.
- Accumulation Phase: The period during which the SMSF is accumulating assets to provide retirement benefits for members.
- Binding Death Benefit Nomination: A legal statement that allows an SMSF member to specify who will receive their superannuation benefits in the event of their death.
- Rollover: The process of transferring superannuation funds from one superannuation entity to another, such as from a public super fund to an SMSF.
- In-House Asset: An investment in, a lease with, or a loan to a related party of the fund, subject to strict rules and limitations.
- Actuarial Certificate: A document provided by an actuary, certifying calculations related to an SMSF’s income, often required when an SMSF has members in both accumulation and pension phases.
- Drawdown: The minimum amount that must be withdrawn from an account-based pension, including SMSF pensions, each year.
- Asset Allocation: The distribution of the SMSF’s investment capital among different asset classes, such as stocks, bonds, real estate, and cash.
- Related Party Transactions: Investments or transactions between the SMSF and a person or entity that has a close relationship with the fund, which must be conducted at arm’s length and follow specific rules.
- Capital Gains Tax (CGT): A tax on the profit made from selling an SMSF investment, such as real estate or shares.
- Concessional Contributions: Pre-tax contributions to an SMSF, which are taxed at a concessional rate within the fund.
- Non-Concessional Contributions: Contributions made from after-tax income, not taxed within the fund.
- SIS Act (Superannuation Industry (Supervision) Act): The primary legislation governing superannuation in Australia, including SMSFs.
- Total Superannuation Balance (TSB): The sum of an individual’s superannuation interests, including accumulation and pension phase interests.
This glossary can provide a basic understanding for both beginners and those well-versed in the world of SMSFs, offering clear definitions of key terms and concepts.