Joint Venture Super Funds

SMSF Managers Must Know The ATO Rules Around Joint Venture Projects

At first glance, it seems reasonable that self managed super funds would be a good vehicle to partner with as an investment strategy that could be beneficial to both partners. Often, these funds have large amounts of capital that, while not necessarily lying idle, may be able to access a higher return on investment in a venture that is a little more speculative than the traditional vehicles. If there is a benefit to both parties, vested interests may adopt the attitude that there could be no harm done to either side in such a venture. There are traps, however, in taking this approach.

Self managed superannuation funds are regulated by the Australian Taxation Office (ATO) which has a more restrictive view of what constitutes a joint venture than what is commonly accepted. This ruling is set out quite clearly in the GST 2004/2 legislation. When managing DIY super Brisbane fund managers considering entering into joint venture arrangements must first examine whether the situation they are about to enter is a genuine joint venture or is, in fact, a partnership.

The ATO is looking for a written agreement that shows clearly that the following arrangements are in place:
=> A sharing of product or output in defined portions
=> The existence of a specific economic project as opposed to a continuing business
=> Joint control of the venture
=> Well-defined separation of interests, rather than a joint undivided interest, in assets contributed to the venture
=> Joint venture participants are usually liable for their own debts which they incur individually as principals

Fund managers must not lose sight of the purpose of establishing the fund in the first place, and that is to provide the members with an income in retirement. For this reason, there are a number of hoops to jump through before the SMSF can comply. The trustees must scrutinise both the super laws and their trust deed to check:

=> does the venture meets the sole purpose test i.e. is the purpose a retirement income, who are the other parties in the joint venture and would they then be running a business?
=> the fund’s investment strategy to make sure the assets aren’t used as security to borrow
=> is there a clear separation of member personal assets and super fund assets i.e. are all dealing at arm’s length and meeting the in-house asset tests.

Before documents are prepared, you should always consult a professional before you enter into any sort of joint business arrangement. SMSF Brisbane investors should be very cautious as any step in the wrong direction could leave their fund non-compliant, and expose the members to unnecessary tax liabilities.

Super Contributions Caps

Changes To Super Contributions Caps Could Cost You

You Will Pay Extra Tax If You Breach The Contributions Cap?

While super funds have taken a hammering in the last two years due to the global economic conditions, they are still one of the best vehicles for holding and managing assets that will be needed in retirement. The tax advantages of keeping assets in super funds are well documented, and a succession of federal governments have tried to provide appropriate processes and vehicles to encourage it, well aware that without some form of self-funded retirement savings, Australia simply cannot afford large numbers of unfunded retirees. However, the super rules are complex and some people who are subject to the regulations around super contribution caps are finding that they are inadvertently paying too much tax.


In order to discourage over-excessive contributions into super, there are caps in place for the contributions, but during the actual change to superannuation rules, there have been unexpected consequences. People with an SMSF Brisbane (self managed superannuation fund) need to understand the rules and limitations around the caps, so they can make the best decisions for their assets. They must realise that any super contributed over a cap amount in any financial year is subject to extra tax.

There are several ways that individuals can in all innocence, end up in hot water with regard to attracting a higher tax rate than necessary. Every persons situation is different, and the final crunch comes when the tax return is prepared which of course, takes into account a range of income sources and claimable expenses. It is difficult if not impossible, to undo a legitimate contribution further down the track, when lodging a tax return makes it clear that part of the contribution will be taxed at 46.5%.

Suppose, for example, that when the accountant prepares the tax return, the taxpayer can’t claim all of the concessional contributions as a tax deduction because there is not enough income in that year, remembering that you cannot create a tax loss when personal contributions are claimed as a tax deduction. When contributions were initially made, it was unlikely that this situation would occur, but the result now is that only partial contributions can be claimed, and this results in individual tax payers needing to pay more tax overall.

Obviously this is just one example. There are many other variations, and people engaged in DIY Super Brisbane would be wise to seek expert assistance before trying to apply any of this information to their own situation. Although the Australian Tax Office have high power to decide on contributions in different ways, they don't often do so (with a small amount of excess contribution cases being exempted from pental tax).

SMSF managers must pay close attention to contribution cap concession limits. As proponents of DIY Super, they could be disadvantaging themselves through not understanding the concession boundaries.