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Rolling your super fund into your SMSF

One of the most common mistakes people make is not having a clear investment strategy on receipt of funds into the SMSF.



One of the first steps trustees will usually take when setting up a self-managed super fund (SMSF) is to roll the proceeds of any existing super funds the members own into the SMSF.
 
Usually, the process involves the members completing forms from their existing super fund to transfer the funds in these accounts into their SMSF. Insurance is another consideration as new policies may be required when closing one super fund and establishing an SMSF.

As AMP financial planner Mark Borg explains, trustees will need to provide the retail or industry fund with the ABN and bank details of their SMSF.  

“Many request a bank statement. It is important that the name noted for the member of the existing superannuation fund and the name noted on the SMSF are the same,” says Borg.  

“They need to be exactly the same – Tim and Timothy may be the same person, but they are not the same name.  Before requesting the rollover it’s important to ensure the names all match,” he adds.

As for any tax considerations SMSF trustees should make when rolling over funds into an SMSF, he says generally most rollovers will not trigger a tax liability.  

“Care should be taken when rolling over an asset in specie from one SMSF to another as this will probably trigger a CGT event,” he adds.

Avoiding mistakes


Rhiannon Kanoniuk is a director and practice principal of financial advice firm Pekada. She says there are plenty of mistakes for trustees to avoid when it comes to rolling over a super fund into an SMSF.

“One of the most common mistakes people make is not having a clear investment strategy on receipt of funds into the SMSF,” says Kanoniuk.

“The initial work of completing the SMSF set up and rollover can sometimes be followed by paralysis of what to invest in, meaning funds may sit idle in cash for a period of time,” she adds.  

So it’s very important for trustees to think through and plan their investment strategy prior to initiating the rollover.

“It’s also essential for the trustees to know the rules around what an SMSF can invest in, and importantly what it can’t,” she adds. For instance, there are onerous rules around how SMSFs can invest in property.

Liquidity is another consideration, says Kanoniuk. 

“When you have an SMSF, you need to remember to leave an amount in cash that will fund any expenses in relation to running the SMSF. You don’t want to be in the position of selling assets at an inopportune time to fund things like accounting fees, insurance premiums or loan repayments,” she says.

Trustees must also not forget to re-establish any insurances held in the previous fund, if appropriate.

Says Kanoniuk: “It is easy to forget that you may have important insurance cover within your existing fund, and by rolling this into an SMSF you may lose this. As part of your fund’s investment strategy you should be considering the insurance needs of all members and put in place appropriate cover where required.”

Another common mistake is forgetting to redirect contributions into the new fund. If your employer is contributing into an existing fund, make sure they have all of the details required to pay into your SMSF prior to rolling over funds.

Being proactive


It’s easy to avoid these mistakes with a little work. 
 
“Ensure your investment strategy is completed and also actionable prior to rolling over your funds. This involves setting up appropriate broking and bank accounts. This will mean you are ready to go once funds hit your SMSF bank account,” says Kanoniuk.

Plan out your incomings such as contributions and investment earnings, as well as outgoings such as accounting fees, insurance premiums and pension payments for the year. This is also the point at which to ensure you have enough cash available to cover any shortfalls.

“If you are still at a stage of life where insurance is required, have this set up prior to rolling over funds, or at least leave a minimum amount in your existing account to pay for premiums until you can put a new policy in place. This also protects you should you not be able to put insurance in place for medical or other reasons,” she adds.
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