SMSF for other family members?

Hi
Anyone here has experience in investing for other members of the family in SMSF?
I am in interesting in the logistic of it like keeping track of their contribution, tax return and accounting etc..

Currently, it just my wife and I but my kids going to working teens soon and they will start a casual or part-time job and eventually transition into full working adult life and I am doing a better job of managing their investment than the majority of Superfund.

Obviously, they have no interest what so ever about money and don't think they care much about super but hopefully by the time they do I have it all set up for them and they have a nice nest egg.

Currently, they have some saving and I invested on their behalf just under my name but I have a spreadsheet to keep track of their returns and paid them dividend twice a year according to their
share in the portfolio and even then they still don't care, when I hand them a couple hundred bucks for their dividend each 1/2 they just said thanks dad.

They are good savers but don't care about investment or anything like that but I just keep going for them and by the time they have grown up and money matters then they have a sizable amount to start their journey.

coming budget going to lift 4 members SMSF to 6 members so it lines up nicely

 

I manage all of my families superannuation investments however they are all trustees of their own funds.

We use BGL 360. And a SMSF is a good way to educate kids on investing and managing assets.

The decision to have kids in your smsf needs a bit of thought. It can be dangerous.

 

How will they learn if you do everything for them?

Maybe investigate a low fee industry fund. Most run seminars, get them to attend a couple so that they understand their investment options.

If they do want to be in your fund, make investment choices so that they can leave when they get older and want more independence.
Marg

 

when they turn 18 I can make them all trustees of the fund, what about reporting part you don't need to separate them? you can just lodge as one big SMSF fund and I keep a spreadsheet for them with their contributions and return if they ever need to withdraw and go their own way?

I am unlikely to outspend my SMSF so it ends up going to them so having them already there make it easier.

my SMSF is now individual trustee but I will convert it to the Corporate trustee soonish

 

A spreadsheet probably wont meet your obligations as trustee.

You need to account and report individual member balances in the financials prepared and member statements provided to each member every year and through your SMSF reports submitted to the ATO.

BGL360 has a version for trustees that would at least ensure you try and meet your reporting obligations to members of the SMSF. Would be tragedy if you resulted in making the fund non complying by using spreadsheets.

 

You, as the trustee, can choose to be segregated. Read the deed.

Yes depending on the trustees and where they live. This has some cost benefits and some drawbacks.

Excel is the modern day shoe box. Use a cloud SMSF software program.

They have lots and lots of software engineers who write this stuff and it is their full time job.

Yes and no. The SMSF needs to look at death benefit nominations or death benefit agreements as part of your overall succession planning and family charter.

What is good for one is not good for another.

I ended up doing that. Tried to be a cheap accountant and eventually saw the error of my ways. Was quite painful to transfer across but it can be done.

Each person is different.

 

Thanks for the tips, Will do some reading, transfer my asset to corp trustee should be relatively easy as it all 100% in the stock market, I just do an off-market transfer form.

 

A SMSF can only have up to 4 members.It is non-complying for more than 4. There is no proposed law to change it to 6 and I would doubt it would get passed even if proposed. There would be serious concerns with broadening numbers of members. The fundamental basis for the original Occupational Super Standards which were the basis for a SMSF in later years was that all members and all trustees were the same people and that each was equally involved in decision making. Its very difficult in practice for 4 members. Adding kids can be done but there are legal issues to consider. The deed may need to be amended and member applications and changes must occur.

There are numerous reasons NOT to involve younger members in the parents superfund. Basically if you wouldnt invest in your kids house and guarantee their debts why would you be involved in super without some serious legal and financial advice ? Two adult kids can have a balance of $2 and outvote you. Or legally sell down your investments and invest in something like Mickcoin if they meet and choose to do so. Or if you lack capacity they can mismanage your super leaving you vulnerable. Its hard to address that issue.

You also may breach rules if you make contributions for a child in some instances. They are still required to be a member, and a trustee Director and possess a TFN. As a parent you may think you are a legal guardian but BOTH of you cant be a childs power of attorney in a SMSF.

I am unlikely to outspend my SMSF so it ends up going to them so having them already there make it easier. This statement may be quite incorrect - a mistake. If you have a pension account at that time it must pay a minimum and will reduce over time. If its reversionary and the kids are entitled to a reversionary pension (IF) then all may be OK if the pension nomination is valid. If its not it must be paid out as a death benefit. If its in accumulation on your death the balance must be paid out and must leave the SMSF. My "SMSF" is a incorrect term....

I suspect you have little understanding of SMSF regs and rules and should seek advice.

Accounting for each members share of their contributions and earnings is done by SMSF software and should not be done in traditional accounting software and (almost) never using excel. Things like preservation elements, specific dates and tax free and taxed elements all play a part. Along with death nominations, even insurance etc.

SMSF reporting and compliance is like making explosives. Best not done without help

 

will find out today if she announces it can go to six

SMSF number limit to be lifted from four to six

 

Good luck getting peanut shorten onto that. No way in hell will he agree.Media will carve her up for making dumb announcements while PM is away.. All states need to agree too as I recall since the 4 member cap is imposed by state trustee acts (fun fact). Imagine if 4 1 states says no.

What with the coalition ? Do they like to think of every idea Shorten wont vote for.
They may as well suggest deregulation of the financial planning industry.

ALP hate SMSFs

 

It was announced today Greater flexibility for self-managed super funds | The Hon Kelly O’Dwyer MP

 

This is a big change.

 

Terry I will bet you a lunch this will not get approved. The "assistant" has lost the plot twice in two days.

She defended the Banks the day before while the boss was in France. Now she expects state premiers who are ALPto side with her v shorten. Laughing. Without 100% state and territory support the state trustee acts wont be changed. Its a line in the sand. Real silly

They cant manage banks and lenders. But want to play three card marley with super. Its Hitlers Bunker

 

So is the press release a done deal or still needs to be approved by States?

Even with the expansion from 4 to 6 I don't think I'd invite our over 18 into our SMSF. Too much power for his minute contribution.

 

No it isnt a done deal.

It hasnt even been put through as draft legislation. A prime minister or acting prime minister cant just say something one day and its law the next.

Now for the discussions and debates.

 

Thanks for the info I am in the planning stage and still has a fair way to go yet, I will seek legal advice etc when the time comes, I am just researching and digging at this stage

 

Financial advice is what you should get first. Heaps of mistakes can be made in deciding to start a SMSF

ATO media on the issue last week Self-managed superannuation funds: self-managed but supported

 

Had toyed with idea of having siblings in the same SMSF, however ended up myself and wife only. We did spoke to siblings on numerous occasions, though interested, however not as keen and different long term visions - (ie. selling out (living their lives fully) rather than passive incomes).

Like your kids, they are good savers however not keen in investments. If they don't have an interest in investments, any events/ spooks in the markets may generate an impulse reaction.

I've always been curious though, @Paul@PFI -
- are there ways to set up contract within the SMSF - where the fund has first right to decide how to pay out a member? ie. instead of lump sum required by law in certain circumstances, payment is spread over 'x' years. Allowing the fund to make decisions on when is the best time to sell assets as required.

 

That question concerns legal advice. That said my reply is not legal advice but a caution.

A member has a unrestricted right to rollover or withdraw (subject to conditions of release) at any time. Death of a member may also trigger a compulsory obligation to PAY benefits and liquidity isnt a matter that allows default on that obligation. This may impact the fund liquidity and may be a key reason for any SMSF to not consider property (eg what happens if the marriage dissolves, member dies etc ?). A trustee cant make an agreement that is contrary to law. The agreement seems intended to act to defer or avoid member entitlements being available. Since approx 2004 all members benefits must VEST and cannot remain unvested like old school funds used to. The trustee could be sued if an aggrieved member initiates action in the Supreme court. Unlike other super funds a SMSF member cannot bring a issue to the superannuation complaints tribunal. The member must take action in the supreme court. The court has broad powers

And the very nature of how a trustee may vote and be obliged to comply with trust law may also pose a concern. Super laws are framed on the foundation of each SMSF member having involvement in decisions as a trustee and non-unanimous decisions could be a breach of trust law and leave a court with concerns for its governance under the deed and also in practice.