The phrase "do-it-yourself" implies that with a little information and a few basic skills, the lay person is capable of duplicating the work of a professional to the same standard. In this regard it is quite a misnomer, which many people who have tried to tile their own bathroom can attest. However, there is something about this phrase that brings out the competitor in people, and before they know it, they are up to their elbows in something they know very little about. Self managed superannuation funds are a case in point (SMSF) . This is a complex area that may attract people with a DIY mentality with potentially disastrous results.
The average wage and salary earner leaves the management of their superannuation up to expert fund managers, but along comes DIY super, and everyone is an expert. As if the responsible management of a retirement investment is not enough to deal with, the tax rules and legislative changes surrounding self managed superannuation funds need to be understood, monitored and action taken. The new gearing rules that are currently in place are a great example of how quickly things can change, so it is imperative that fund managers are on top of changes at all times in order to comply effectively.
The superannuation laws have been amended for limited recourse borrowing by superannuation funds entered into on or after 7 July 2010. Some of these changes include:
=> Better protection for super fund assets if a default on borrowing occurs.
=> Only under very limited circumstances can an existing asset be replaced by a different asset.
=> Trustees of super funds cannot borrow to improve an asset.
=> Borrowing is only permitted over a single asset, or a number of identical assets with the same market value.
The provision on borrowing does not mean that a SMSF cannot borrow money. However there are a number of complex conditions around the gearing rules that must be satisfied for the transactions to be compliant, and contravening those conditions could have civil or criminal consequences.
There are other changes to the gearing rules that raise the question of the ability of a DYI fund to manage the whole process without expert assistance. Even with the best understanding of these changes, any transactions undertaken are still complex, and completing any of the necessary steps in the wrong order could have implications for the payment of stamp duty.
With the enormous responsibility place on fund managers to acquire and keep on top of the requirements for knowledge and compliance, the concept of DIY Super is something not to undertaken lightly or by any means without proper knowledge.
Author Resource:
The average business owner managing an SMSF Brisbane without expert help should be looking around for expert assistance as the gearing rules around DIY super Brisbane become more complex. SMSF company SMSF Brisbane can give qualified assistance.
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