Course outline
Module 1
Module 1: Introduction to SMSFs
Introduction to SMSFs
Knowledge check
Q1. What is the maximum number of members permitted in a standard self-managed super fund (SMSF) in Australia?
- A. Two
- B. Four ✓
- C. Six
- D. Unlimited
Why: An SMSF can have up to four members. Each member is typically also a trustee (or director of a corporate trustee), and the limit of four keeps the fund within the simplified regulatory framework administered by the ATO.
Q2. Who is ultimately responsible for complying with superannuation law within an SMSF?
- A. The fund's accountant
- B. The Australian Taxation Office
- C. The trustees of the fund ✓
- D. The fund's financial adviser
Why: The trustees (or directors of a corporate trustee) carry the legal responsibility for running the fund in accordance with the trust deed and superannuation law. They can engage professionals to help, but the duty remains with them.
Q3. Which of the following is a key characteristic that distinguishes an SMSF from a retail or industry super fund?
- A. Members have no say in investment decisions
- B. Members are the trustees and control the fund's investments ✓
- C. The fund is managed by a government body
- D. Contributions are capped at a flat rate for all members
Why: In an SMSF the members are also the trustees, giving them direct control over how fund assets are invested and managed. In retail and industry funds, a separate trustee company manages the fund on behalf of members.
Q4. What must an SMSF generally do to ensure it is a complying fund for tax purposes?
- A. Invest only in listed shares
- B. Meet the sole purpose test and other regulatory requirements ✓
- C. Pay tax at the top marginal rate on all income
- D. Lend money exclusively to members at a fixed rate
Why: To be a complying super fund, an SMSF must satisfy requirements including the sole purpose test, which requires it to be maintained solely to provide retirement benefits to members. Complying funds receive concessional tax treatment on earnings.
Q5. What is a trust deed in the context of an SMSF?
- A. A tax return lodged annually with the ATO
- B. The legal document that sets out the rules for the fund's operation ✓
- C. A certificate confirming the fund's investment returns
- D. An insurance policy covering fund members
Why: The trust deed is the foundational legal document governing the SMSF. It sets out how the fund is established, who the trustees are, and the rules for managing assets, contributions, and benefit payments.
Module 2
Module 2: Legal Structure and Trustee Duties
Legal Structure and Trustee Duties
Knowledge check
Q1. Under Australian superannuation law, who is generally responsible for complying with the Superannuation Industry (Supervision) Act 1993 (SIS Act) in a self-managed super fund (SMSF)?
- A. The fund's external auditor
- B. The individual trustees or the directors of the corporate trustee ✓
- C. The Australian Taxation Office (ATO)
- D. The financial planner who established the fund
Why: Trustees (individuals or the directors of a corporate trustee) hold legal responsibility for complying with the SIS Act, the trust deed, and related regulations. The auditor reviews compliance but does not bear the primary responsibility, and the ATO regulates rather than manages the fund.
Q2. What is the maximum number of members permitted in an SMSF?
- A. Two
- B. Four ✓
- C. Six
- D. Ten
Why: An SMSF can have no more than four members. Each member must also generally be a trustee (or director of the corporate trustee), so the four-member limit applies to both membership and trustee roles.
Q3. Which of the following is a key requirement of the sole purpose test for an SMSF?
- A. The fund must provide retirement benefits to members or their dependants ✓
- B. The fund must invest only in Australian listed shares
- C. The fund must be audited every month
- D. The fund must lend money to its members at a fixed rate
Why: The sole purpose test requires that the fund be maintained solely to provide retirement benefits to members (or their dependants on death). Activities that serve other purposes, such as providing private benefits before retirement, breach this test.
Q4. Which trustee duty requires the trustees to act in the best financial interests of all members?
- A. The duty to maintain a corporate trustee structure
- B. The duty to act honestly in relation to the fund ✓
- C. The duty to lodge tax returns for members
- D. The duty to appoint an investment manager
Why: Trustees must act honestly and in the best interests of members, which is a core fiduciary duty. Maintaining honesty and acting in members' best interests underpins the trustee obligations under the SIS Act and general trust law.
Q5. If a trustee of an SMSF is disqualified or becomes bankrupt, what must happen?
- A. The fund must be wound up immediately with no further action
- B. The trustee must be removed and the fund must be altered so that the disqualified person is no longer a trustee ✓
- C. The fund's auditor takes over as trustee
- D. The ATO appoints a new trustee within 24 hours
Why: A disqualified person cannot act as a trustee. The fund must be restructured so the disqualified individual ceases to be a trustee, typically by appointing a replacement or changing to a corporate trustee structure. Winding up is not automatically required, and the auditor and ATO do not take over the trustee role.
Module 3
Module 3: Setting Up Your Fund
Setting Up Your Fund
Knowledge check
Q1. Which of the following is a key requirement when setting up a self-managed super fund (SMSF) in Australia?
- A. The fund must have at least 10 members
- B. The fund must be established under a trust deed ✓
- C. The fund must be registered with the Reserve Bank of Australia
- D. The fund must invest only in listed shares
Why: An SMSF is established as a trust, and it must have a trust deed that sets out the rules governing the fund. The deed is the foundation document for the fund's operation. SMSFs can have up to six members, not a minimum of ten, they are regulated by the ATO rather than the RBA, and they have broad investment flexibility.
Q2. What is the maximum number of members allowed in an SMSF?
- A. Two
- B. Four
- C. Six ✓
- D. Ten
Why: An SMSF can have a maximum of six members. This limit distinguishes SMSFs from larger APRA-regulated funds. Each member must generally be a trustee or a director of a corporate trustee.
Q3. Who is responsible for ensuring that the members of an SMSF are also its trustees?
- A. The Australian Taxation Office
- B. The fund's auditor
- C. The members themselves ✓
- D. The financial planner
Why: Members of an SMSF are generally required to be trustees, or directors of a corporate trustee, so they are personally responsible for the fund's management. This is the 'sole purpose' and 'member-trustee' principle. Regulators do not appoint trustees, and auditors and planners do not take on this legal role.
Q4. Which document must an SMSF prepare to outline how the fund will invest its money and manage risk?
- A. An investment strategy ✓
- B. A marketing brochure
- C. An annual tax return
- D. A bank loan application
Why: Trustees must formulate and regularly review a written investment strategy that considers diversification, liquidity, risk, and the members' retirement needs. This is a legal requirement under the superannuation law and is central to proper fund setup.
Q5. What is the main purpose of an SMSF's sole purpose test?
- A. To limit the fund to investing in one asset class
- B. To ensure the fund is maintained solely to provide retirement benefits to members ✓
- C. To allow the fund to be used as a family business vehicle
- D. To restrict the fund to a single member
Why: The sole purpose test requires that an SMSF be maintained for the sole or primary purpose of providing retirement benefits to members, or their dependants on death. Using the fund for other purposes, such as providing current benefits to members before retirement age in ways not permitted, can breach the rules.
Module 4
Module 4: Investment Strategy and Compliance
Investment Strategy and Compliance
Knowledge check
Q1. Under Australian superannuation law, what is the primary document an SMSF trustee must prepare to guide how the fund's assets are invested?
- A. A annual financial statement
- B. An investment strategy ✓
- C. A member contribution schedule
- D. A tax return summary
Why: Under the Superannuation Industry (Supervision) Act 1993, trustees must formulate and regularly review a written investment strategy that considers the fund's risk, return objectives, diversification, liquidity, and the ability to pay benefits as they fall due.
Q2. Which factor must an SMSF investment strategy specifically consider in relation to the fund's members?
- A. Each member's preferred holiday destinations
- B. The insurance needs of the members ✓
- C. The members' social media activity
- D. The members' employment history
Why: An investment strategy must consider whether the fund should hold insurance cover for members, such as death, total and permanent disability, or income protection cover, taking into account the members' circumstances.
Q3. What does the sole purpose test require of an SMSF?
- A. That the fund invests only in property
- B. That the fund is maintained solely to provide retirement benefits to members or their dependants ✓
- C. That the fund pays dividends to the trustee each year
- D. That the fund is registered with a state government body
Why: The sole purpose test requires that an SMSF be maintained solely to provide retirement benefits (or benefits on death) to members or their dependants. Breaching it can result in the fund being non-complying and taxed at the highest rate.
Q4. Which of the following is an example of an in-house asset that is generally restricted for an SMSF?
- A. Government bonds
- B. Listed shares in a widely held company
- C. A loan made to a fund member or related party ✓
- D. Units in a managed investment scheme
Why: In-house assets include loans to, investments in, or leases with members or related parties. The in-house asset rule generally limits these to no more than 5% of the fund's total market value to protect member retirement savings.
Q5. Why must SMSF trustees ensure the fund's investments are made on an arm's length basis?
- A. To guarantee the highest possible investment returns
- B. To ensure transactions with related parties occur on commercial terms, preventing benefits to members outside the super framework ✓
- C. To avoid paying any tax on fund income
- D. To allow trustees to borrow money from the fund at no interest
Why: Arm's length dealings mean transactions are conducted on commercial terms as if between unrelated parties. This prevents the fund being used to provide non-commercial benefits to members or related parties, which is a key compliance requirement.
Module 5
Module 5: Contributions and Member Benefits
Contributions and Member Benefits
Knowledge check
Q1. In Australia, what is the name of the concessional (before-tax) contribution cap that applies to employer contributions, salary sacrifice and personal deductible contributions in an SMSF?
- A. Non-concessional contributions cap
- B. Concessional contributions cap ✓
- C. Transfer balance cap
- D. Division 293 threshold
Why: The concessional contributions cap limits the amount of before-tax contributions that can be made to super each financial year. Contributions above this cap are included in the member's assessable income and taxed at their marginal rate, less a tax offset.
Q2. Which type of contribution is made from after-tax money and is not taxed again when it enters the fund?
- A. Employer SG contributions
- B. Salary sacrifice contributions
- C. Personal deductible contributions
- D. Non-concessional contributions ✓
Why: Non-concessional contributions are made from after-tax income. Because tax has already been paid, they are not taxed again within the fund, which is why they are subject to their own separate annual cap.
Q3. What is the minimum age at which a member can generally access their super benefits if they were born after 30 June 1964 and have retired?
- A. 55
- B. 58
- C. 60 ✓
- D. 65
Why: For members born after 30 June 1964, the preservation age is 60. Once a member reaches preservation age and retires, or turns 65 regardless of employment status, they generally meet a condition of release and can access their benefits.
Q4. Which benefit type in an SMSF pays the member a regular stream of income during retirement, rather than a single lump sum?
- A. Lump sum accumulation benefit
- B. Death benefit
- C. Pension (retirement phase income stream) ✓
- D. Insurance payout
Why: A retirement phase pension is an income stream paid to the member at regular intervals, subject to minimum annual drawdown requirements. It differs from a lump sum, which pays out the balance all at once.
Q5. In an SMSF, what must the trustees do before accepting a contribution from a member to ensure it is valid?
- A. Obtain approval from the ATO for each contribution
- B. Confirm the member's identity and that the contribution is allowed under the fund's rules and super law ✓
- C. Invest the contribution within 24 hours
- D. Transfer the money to a bank account in the member's name
Why: Trustees must ensure contributions are accepted only if the fund's governing rules and superannuation legislation permit them, including checking the member's eligibility and identity. Trustees are responsible for compliance and ATO approval is not required for each contribution.
Module 6
Module 6: Tax and Reporting Obligations
Tax and Reporting Obligations
Knowledge check
Q1. Which tax rate applies to investment earnings in an SMSF in the accumulation phase?
- A. 0% on all investment earnings
- B. 15% on net investment income ✓
- C. 30% on net investment income
- D. Marginal tax rates of the fund members
Why: Complying SMSFs in the accumulation phase are generally taxed at a flat 15% on net income (including assessable contributions), with capital gains on assets held for more than 12 months taxed at an effective rate of 10%.
Q2. What is the general tax rate on realised capital gains for an SMSF on assets held for more than 12 months?
- A. 0%
- B. 10% ✓
- C. 15%
- D. 30%
Why: Assets held for more than 12 months attract the one-third capital gains tax discount, so the effective rate on the capital gain is 10% (15% x 2/3) in the accumulation phase.
Q3. In the retirement phase, what is the tax rate on investment earnings of an SMSF that is paying retirement phase pensions?
- A. 15%
- B. 10%
- C. 0% ✓
- D. 30%
Why: Assets supporting retirement phase income streams are exempt from income tax on earnings and capital gains, so the effective tax rate is 0%.
Q4. Which form must an SMSF lodge annually with the Australian Taxation Office to report its income and tax position?
- A. Form BAS
- B. Form NAT 1 only
- C. SMSF Annual Return (SAR)
- D. Form IT 2030 only
Q5. Which of the following is an annual reporting obligation for an SMSF?
- A. Lodging an annual SMSF Annual Return and an independent auditor's report ✓
- B. Registering the fund with ASIC each month
- C. Paying GST on all fund investments quarterly
- D. Submitting a personal tax return for each member only every five years
Why: Each SMSF must have its financial statements audited annually by an approved SMSF auditor and lodge an SMSF Annual Return with the ATO.
Module 7
Module 7: Winding Up and Ongoing Maintenance
Winding Up and Ongoing Maintenance
Knowledge check
Q1. What is the first step trustees should take when deciding to wind up a self-managed super fund?
- A. Immediately transfer all assets to a personal bank account
- B. Obtain the advice of a qualified professional and review the fund's trust deed and governing rules ✓
- C. Notify the ATO only after all assets have been sold
- D. Close the fund by lodging a final tax return without any member consultation
Why: Before winding up, trustees should seek professional advice and review the trust deed and governing rules, since these set out how and when a fund may be wound up and how benefits must be paid out.
Q2. Which of the following is generally required before an SMSF can be wound up?
- A. All fund assets must be cashed out or transferred and all members' benefits must be paid or rolled over ✓
- B. The fund must retain at least one property asset until the end of the financial year
- C. Only the auditor needs to approve the winding up
- D. The fund must wait five years after the last contribution
Why: A fund can only be wound up once its assets are realised or transferred and all member balances have been paid out or rolled over to another fund, leaving no outstanding benefits.
Q3. What must trustees do with the SMSF's bank account once the fund has been wound up?
- A. Keep it open indefinitely for future contributions
- B. Transfer the balance to a relative's account
- C. Close the account only after all final payments, expenses and tax liabilities have been settled ✓
- D. Convert the balance into a term deposit for five years
Why: The bank account should only be closed after all final payments, expenses, and tax obligations have been paid, ensuring no liabilities remain once the fund ceases.
Q4. Which ongoing obligation must an SMSF continue to meet every year, even when it is being wound up?
- A. Lodging an annual return and ensuring the fund is audited ✓
- B. Holding a public annual general meeting
- C. Registering the fund with ASIC as a public company
- D. Paying dividends to unrelated shareholders
Why: An SMSF must lodge its annual return and have an independent audit for each financial year it remains in existence, including the year in which it is wound up.
Q5. After an SMSF is wound up, what should trustees do regarding the fund's final tax obligations?
- A. Ignore them because the fund no longer exists
- B. Lodge a final SMSF annual return and notify the ATO that the fund has been wound up ✓
- C. Pay tax only when members turn 65
- D. Ask a member to pay the outstanding tax personally
Why: Trustees must lodge a final annual return and notify the ATO that the fund has been wound up, so that the ATO can finalise the fund's registration and tax position.