March 24th 2016

The ATO has recently published advice aimed at helping new SMSF trustees to establish their new fund but unfortunately they have made some embarrassing errors in the 9 step advice process which also puts the trustees in some jeopardy if they follow the advice.  The process follows the video at this link below:

The ATO advice begins with this statement:

"Your SMSF needs to be set up correctly so that it's eligible for tax concessions, can receive contributions and is as easy as possible to administer."  and continues with headings for a nine step process.

The first two heading steps are correct and so is 3/1 but at 3/2 the ATO says: "to create a trust you need

  • trustees
  • assets (an initial nominal consideration to give legal effect to the trust can be used – for example, $10 attached to the trust deed)
  • identifiable beneficiaries
  • the intention to create a trust."

"assets (an initial nominal consideration to give legal effect to the trust can be used – for example, $10 attached to the trust deed)"  the advice is silent on exactly how this $10.00 attachment should be effected.

But a superannuation trust differs from all other trusts for the following two reasons.

A.The trustees may only do the things permitted by the trust deed and if the deed permits any money to be held by the trustees before the fund becomes a Regulated Superannuation Fund, that permission in the deed would be excluded by s7 of the Superannuation Industries Supervision Act 1993 (SISA) which says:

"s7:SIS Act 1993
7 Application of Act not to be excluded or modified

This Act applies to a superannuation entity despite any provision in the governing rules of the entity, including any provision that purports to substitute, or has the effect of substituting, the provisions of the law of a State or Territory or of a foreign country for all or any of the provisions of this Act."

Conversely if the deed did not allow the money to be contributed before the fund is Regulated the trustees would be in breach of the deed provisions if they accepted monies before Regulation of the fund.


B. A SMSF trustee is prohibited from accepting contributions money unless the fund is a “Regulated” Australian Superannuation Fund in accordance with SISA s19(4).

(Also note that a SMSF can not establish a bank account without a Tax File No and ABN.)

Finally, it seems to the author that if the trustees did follow the ATO advice it would result in the SMSF becoming a Non Complying fund from inception and any monies contributed would not be tax deductible to a Member or an Employer.

· Concessional (deducted) contributions would be assessed in the fund at the highest personal marginal rate 45%
   (not 15%) and any fund expenses improperly incurred may also be disallowed.
· The ATO general interest charge is also usually charged on the tax costs due above.
· The pension exemptions including the Transition to Retirement Pension are not available,
· A Small Business concessional CGT Rollover amount may be disallowed and may have to be unwound.


By A4Companies Director, Anthony Willcocks.

May 1st 2012

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October 2012


The SMSF borrowing
legislation was introduced in Sept. 2007 and amended in June 2010. Our 34 years of SMSF experience has enabled us to develop a market lead in a number of directions with more sophisticated and beneficial SMSF strategies for our clients. Cutting Edge strategies from our parent company Fintel Group Pty. Limited has enabled us to include exciting new items such as our
Super Loan Indemnity Trust and Super Loan Offset Account.

Cash flows
- Repaying the loan interest and capital more efficiently. Make super fund SGL contributions monthly and extra contributions quarterly. Monitor Super Fund and Warrant Trust cash flows monthly and quarterly After making allowance for contributions tax and fund expenses, use the balance to make instalment payments to the Warrant Trust trustee. Paying regularly will reduce interest costs, increase super fund equity and reduce the gearing more quickly. Use our specialist strategies including our Super Loan Indemnity Trust™ and Super Loan Offset Account™. Also coming soon will be our Super Home Property Trust™.  These new developments allow a wide range of new legal cutting edge options to be followed including:

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Any individual personal strategy design and advice on A4Companies SMSF Trusts is on an hourly fee basis in addition to document License fees and secretarial services fees.