Deck 12: Self-Managed Superannuation Funds

Question 1

A SMSF member/trustee cannot be a(n):

A) employee of another fund member unless their earnings are less than $60,000 p.a.
B) employee of another fund member unless they sign an exclusion form and submit to the regulator within 60 days of becoming an employee.
C) employee of another fund member unless they are a relative.
D) both a and c

Answer 1

C

Question 2

SMSFs are regulated by the:

A) APRA.
B) ATO.
C) ASIC.
D) none of the above.

Answer 2

B

Question 3

Actions by trustees for a particular offence that are held to be non-compliant with the superannuation rules can result in the trustees being exposed to:

A) both civil prosecution up to a maximum penalty of $220,000 and criminal action with a maximum penalty of 5 years in prison.
B) either civil prosecution up to a maximum penalty of $220,000 or criminal action with a maximum penalty of 5 years in prison.
C) either civil prosecution up to a maximum penalty of $220,000 or criminal action with a maximum penalty of 10 years in prison.
D) none of the above.

Answer 3

A

Question 4

SMSF trustees cannot:

A) borrow more than $500,000 for an individual asset acquisition.
B) undertake transactions on an arm's length basis.
C) lend money or provide financial assistance to members.
D) both b and c

Question 5

Commercial terms regarding property acquisitions for a SMSF include:

A) acquiring assets on an arms-length basis.
B) paying rentals at above or below market rates.
C) both a and b
D) none of the above.

Question 6

Real returns from an investment portfolio:

A) exclude the effects of inflation in the quoted return.
B) include the effects of inflation in the quoted return.
C) must be equal to the rate of inflation.
D) none of the above.

Question 7

The purchase of an asset by a SMSF from a member will be regarded as being on an arm's length basis when it is purchased at:

A) not more than market value.
B) not less than market value.
C) market value.
D) none of the above.

Question 8

In comparison to large superannuation funds, available research shows that SMSF members tend to:

A) have smaller superannuation balances.
B) be younger.
C) both a and b
D) none of the above.

Question 9

In-specie member superannuation contributions to a SMSF cannot include:

A) real business property.
B) widely held managed funds.
C) non-concessional contributions.
D) none of the above.

Question 10

When a superannuation fund member rolls their accumulated superannuation benefit from a large superannuation fund to a SMSF what percentage of their existing life insurance cover can they transfer between the funds?

A) 0%
B) 25%
C) 45%
D) none of the above

Question 11

Jointly owned assets where a SMSF is one of the parties is recommended to be legally held in which form?

A) Joint tenants.
B) Tenants in common.
C) Either a or b
D) None of the above.

Question 12

A SMSF auditor must be:

A) a registered company auditor.
B) a member of a designated organisation.
C) either a or b
D) appointed for a continuous period of no more than 5 years.

Question 13

An APRA approved trustee can be appointed to run a:

A) small APRA fund.
B) SMSF.
C) both a and b
D) none of the above.

Question 14

The small business retirement exemption:

A) is not subject to indexation.
B) is available to small business owners at least 55 years of age.
C) requires the business to have been held for more than 10 years.
D) all of the above.

Question 15

SMSFs:

A) have access to the Superannuation Complaints Tribunal.
B) are protected by a government and industry compensation scheme if they suffer losses through the fraudulent behaviour of trustees.
C) both a and b
D) none of the above.

Question 16

A SMSF will be more readily able to meet its liquidity requirements if it invests in which one of the following investment portfolio allocations?

A) Growth-only assets.
B) 75% growth assets and 25% income assets.
C) 50% growth assets and 50% income assets.
D) 25% growth assets and 75% income assets.

Question 17

Business real property for a SMSF:

A) can be acquired from a related party on commercial terms without being subject to the 'in-house asset' test.
B) includes property used for primary production.
C) can comprise 100% of the total SMSF assets.
D) all of the above.

Question 18

When a SMSF undertakes borrowings to acquire an investment the lenders recourse against the SMSF is limited to:

A) the asset subject to the borrowing.
B) any real property held by the SMSF.
C) both a and b
D) 50% of the total fund assets.

Question 19

The residency status of a SMSF will not be jeopardised where the trustees:

A) travel overseas for no more than 30 months before returning for at least 28 days.
B) travel overseas for no more than 24 months before returning for at least 14 days.
C) travel overseas for no more than 24 months before returning for at least 28 days.
D) none of the above.

Question 20

A SMSF member moving their accumulated fund balance of their member account from the accumulation phase to the pension phase will:

A) no longer be able to make contributions to their member account in pension phase.
B) have any unrealised accumulated capital gains tax liability removed from their member account.
C) be required to undertake a minimum drawdown each year from their member account.
D) all of the above.

Question 21

In Australia non-account-based income streams are much less popular than account-based income streams for superannuation members in pension phase even (in the past) when non-account-based income streams were readily available to SMSF members. Briefly discuss some of the reasons for this preference for account-based income streams by all (SMSF/non-SMSF) superannuation members in pension phase.

Question 22

Briefly discuss possible reasons why changes were made to the SIS Act in 2011 regarding SMSFs investing in collectables/personal use assets.

Question 23

At a recent SMSF seminar on suitable SMSF investments it was stated by the presenter that SMSF trustees must be careful when undertaking transactions with fund members or related parties that such transactions are conducted on an 'arm's length basis'. What is the meaning of the term 'arm's length basis' and what is its relevance to transactions with fund members or related parties?

Question 24

Ms. Adele Fenton sought your advice as an experienced SMSF specialist regarding making an in-specie superannuation contribution to her SMSF. Outline the general advice that would need to be provided to Adele.

Question 25

As an experienced superannuation and SMSF adviser you regularly discuss the merits or otherwise of your clients moving their accumulated superannuation account balance from a large APRA regulated fund to a SMSF. Other than the additional significant responsibilities of becoming a trustee of a SMSF (including all administrative and investment responsibilities) what other issues might you raise with clients as potential negatives of a transfer of funds to a SMSF?

Question 26

The Pedersen family of Johannes (47 years of age), Britt (42 years of age) and Karl (18 years of age) have recently established a SMSF maintaining all SMSF assets in a single investment pool. After completing a risk profile assessment for each fund member it has been determined that the best overall investment mix for the fund would be to allocate 60% of the fund assets into growth assets with the remaining 40% of the asset portfolio allocated as income assets. What type of risk profile would this asset allocation be classified as and why would many SMSFs with similar member age characteristics likely have a similar recommended investment mix? Also provide the Pedersen family some potential assets that could form part of the growth asset allocation.

Question 27

Under what circumstances must an actuary be appointed to a SMSF and what is their primary role when appointed?

Question 28

Why are there likely economies of scale in operating a SMSF?

Question 29

Given that commonly many of the operational tasks undertaken by a SMSF are outsourced to various SMSF professionals (such as accountants, investment advisers, solicitors etc.), briefly discuss why do SMSF members remain directly liable (for compliance and potential civil/criminal penalties) for the actions of the fund.

Question 30

Where it has been decided to manage all SMSF assets in a single investment pool for a fund with multiple members, what are some of the issues that need to be considered by SMSF trustees when setting the fund investment objectives/strategies?