Questions about DIY Super? Let us help
Find answers here about DIY Super – both on Self Managed Super Funds (SMSF) or Small APRA Funds (SAF) using our Perpetual Trustee Service.
Commonly asked questions about DIY Super
- Q. What is DIY Super?
- A. A DIY Super fund (or Do-It-Yourself Super Fund) is a small superannuation fund arranged under Super law to give you more control of how your superannuation assets are invested.
A DIY fund allows you to:- have up to a maximum of 4 members
- invest directly in assets like shares and real property (including business premises)
- make use of more sophisticated financial planning strategies
- specifically manage the tax position of your superannuation assets
- consolidate your family's super within a single fund
- Q. Are there different types of DIY Super?
- A.
A DIY Super fund is a small or private super fund generally divided into two main types:
- Self-Managed Superannuation Funds or SMSF (regulated by the Australian Tax Office)
- Small APRA Funds or SAF (regulated by the Australian Prudential Regulation Authority) A high level summary of key differences between a Small APRA Fund (SAF) and a Self Managed Super Fund (SMSF), is set out in the table below:
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Small APRA Fund (SAF) Self Managed Super Fund (SMSF) Regulated by Australian Prudential Regulation Authority (APRA).
Regulated by Australian Taxation Office (ATO)
Must use a 'Registerable Superannuation Entity' (RSE) as trustee
You and every member must be a trustee (special rules apply for single member funds and private company trustees)
Potential for litigation, fines and gaol rest with the trustee
No member of the fund is an employee of another member unless they are relatives
No trustee change on death or loss of capacity
Potential for litigation, fines and gaol rest with the fund members
You must have a succession plan for trustees in the event of death, loss of capacity or disqualification, otherwise a government authority may take over the running of the fund
A self-managed superannuation fund (SMSF) is one where:- There are fewer than five members;
- All members are trustees and there are no other trustees;
- No member of the fund is an employee of another member, unless those members are relatives;
- No trustee or director of the corporate trustee can be paid for being a trustee.
Any DIY Funds that do not meet (or do not wish to meet) the SMSF definition are classified as:
- a non-complying fund, which means they do not qualify for concessional tax treatment, or
- an SAF and must have a 'Registrable Superannuation Entity' appointed as trustee of the fund.
Perpetual is an 'Registrable Superannuation Entity' (RSE). To qualify as a RSE Licensee, an organisation comply with standards covering proper governance, managing relationships with third parties, maintaining adequate resources and implementing sound risk management systems.
- Q. When is DIY Super an appropriate option?
- A. If you want to take control (and responsibility) of how your superannuation money is invested, a DIY Super fund lets you invest in direct property, shares and other assets. You may also be looking for ways to maximise your tax planning and estate planning.
DIY might be appropriate for you if you are:
- a business owner or professional person seeking to protect selected assets through a DIY fund arrangement
- a retiree who is looking to take a more active role controlling their retirement income or minimising costs associated with managing their retirement wealth
- A family group (maximum 4 members) who, through pooling their super, are able to obtain fee advantages in a DIY environment
Bear in mind there are a number of strict compliance rules that govern Self-Managed Super Funds. The ATO and APRA (who regulate these funds) outline specific areas of trustee governance with their tax office compliance approach.
- Q. How do I know which DIY fund is better for me?
- A. A qualified financial adviser will be able to help you determine which style of DIY fund (a small APRA fund vs a Self Managed Super Fund) is best for you.
Despite having greater control, as a trustee you bear specific compliance risks of running a SMSF. The ATO has increased SMSF regulation and scrutiny. Auditors are now required to report any actual or potential compliance breaches to the ATO, and penalties may apply.
Some of the ways to ensure your funds remains compliant include- Review your investment strategy regularly
- Keep correct minutes and records of your decisions as trustee
- Do not invest in your own or a ‘Related Party’s’ assets
- Do not borrow to buy assets
- Do not use trusts to get around lending/borrowing rules
- Do not lend money to a ‘Related Party'
- Q. What assets can I include in a DIY fund?
- A. As a DIY investor with Perpetual you can choose from the follow types of assets:
- Real property (commercial and residential property)
- Australian and international listed securities
- Corporate debentures
- Cash, bank bills and fixed interest securities
- Managed investments
- Unit trusts and unlisted companies
- Certain derivative investments
A DIY account manager can help you with more information or which specific assets are permitted.
Bear in mind there are a number of strict compliance rules that govern DIY or self-managed super funds. The ATO (who regulates these funds) has outlined specific areas of trustee governance with their tax office compliance approach.
- Q. How much time will I need to administer a DIY fund?
- A. If you use the Perpetual's DIY Super Trustee Service or Perpetual’s SMSF service, the entire administrative burden and responsibility of custody is handled by Perpetual. This allows you to focus on the all important investment decisions for your fund. However, if you set up an SMSF, you need to be prepared for a greater time commitment.
- Q. What is custody?
- A. Custody refers to the safekeeping of assets on behalf of another. The custodian aggregates portfolios, collects and reconciles income, settles asset purchases and sales, re-values assets and facilitates any offshore investments. For your DIY fund this means all of the paperwork associated with your fund’s operation and management is handled by Perpetual.
