Self-managed super funds (SMSFs) are notoriously surrounded in legal terminology, which, unfortunately, is rather important to understand to make sure you don’t do anything illegal.
Here at Redrock, we’re pretty good at understanding it and how to get SMSF loans, so we’ve decided to help you out.
Your fund can have either individual or corporate trustees, but either way, you have to have them. If you choose individual trustees, you will need someone in addition to yourself (who is not a member of your SMSF) to be a trustee alongside you, if you are the only member. Otherwise, all members have to be trustees.
Or if you decide on corporate trustees, you set up a company where you are the only director and member. If your fund has more than one person, all members need to be directors of this company.
Basically, what you own and what your fund own have to be kept completely separate, specifically in terms of how they’re used. For example, you buy a holiday house with your fund. But because you bought it with your SMSF, you (and your family) can’t use it. Even if it is right on the seaside and you want to impress your neighbours. Sorry. If you get found out, the government will make you sell it – even if it is at a loss – and you’ll probably end up having to pay a fine.
Sole purpose test
This one links quite well to ‘in-house assets’. The sole purpose test is, well, a test that determines reason why your SMSF is holding an asset. Asking “what am I using it for?” is the easiest way to figure out if your asset passes the test. If you are going to benefit from it at all (besides through the fund), the asset fails this test. All assets purchased by your SMSF need to be for investment purposes only. If you’re confused or concerned about anything related to SMSFs, our team at Redrock can help.