Accumulation fund
An SMSF is an accumulation fund if the SMSF provides its members with a benefit which is the total of:
- contributions made into the fund by, or on behalf of, the member, plus
- earnings on those contributions, minus
- any costs attributed to the member.
This SMSF is considered an accumulation fund even if the SMSF or any of its accounts is supporting a super income stream benefit.
Active member
A member is considered to be an active member of an SMSF if:
- they are a contributor to the SMSF, or
- contributions to the SMSF have been made on their behalf (and they are not covered by the next paragraph).
A member on whose behalf contributions have been made to the SMSF is not an active member if:
- they are not a resident of Australia
- they are not currently a contributor, and
- the only contributions that were made on their behalf after they ceased to be an Australian resident were made in relation to a time when they were an Australian resident.
Arm's length income
Income is arm's length income unless it meets the definition of non-arm's length income. Complying SMSFs must consider each component of their income and decide if it is non-arm's length income.
Australian super fund
If an SMSF satisfies all 3 of the following tests at the same time at any point in the income year, then it is an Australian super fund for the entire income year:
- The SMSF was established in Australia, or at least one of the SMSF’s assets is located in Australia.
- The central management and control of the SMSF is ordinarily in Australia.
- Either
- the SMSF has no active members, or
- it has active members who are Australian residents and who hold at least 50% of
- the total market value of the SMSF’s assets attributable to super interests held by active members, or
- the sum of the amounts that would be payable to or in respect of active members if they voluntarily ceased to be members.
If the SMSF does not meet the definition of Australian superannuation fund at all times during the income year, the SMSF is not a complying SMSF and it will not receive the concessional rate of tax.
For more information, see Taxation Ruling TR 2008/9 Income tax: meaning of ‘Australian superannuation fund’ in subsection 295-95(2) of the Income Tax Assessment Act 1997.
Central management and control
The central management and control of an SMSF is ordinarily in Australia if the SMSF’s strategic and high level decisions are regularly made in Australia. These decisions are generally made by the trustees of the SMSF.
The SMSF will continue to meet the central management and control requirement in cases where the SMSF’s central management and control is temporarily, that is for a period of 2 years or less, outside Australia. The SMSF will not continue to meet the central management and control requirement if the central management and control of the SMSF is permanently outside Australia.
Child
A person's children include:
- their adopted children, stepchildren or ex-nuptial children
- their spouse's children
- someone who is the person's child within the meaning of the Family Law Act 1975 (for example, a child who is considered to be a child of the person under a State or Territory court order giving effect to a surrogacy arrangement).
Compassionate grounds
A release on compassionate grounds is a lump sum payment paid to a member in order to meet an eligible expense. Eligible expenses include:
- medical treatment or medical transport for you or your dependant
- preventing foreclosure of forced sale of your home
- modifying your home or vehicle to accommodate special needs arising from your or your dependant's severe disability
- palliative care for you or your dependant
- expenses associated with the death, funeral or burial of your dependant.
The ATO is responsible for determining whether a person has satisfied the criteria for a release of super benefits under compassionate grounds. A member needs to apply to the ATO and receive an approval determination from the ATO before the amount can be paid.
These determinations only permit a single payment of super up to the amount approved. The payment needs to be taxed as a normal super lump sum, with any tax withheld being in addition to the amount approved.
For more information, see Early access on compassionate grounds.
Complying SMSF
The compliance status of an SMSF affects how you report income and the tax rates that apply. An SMSF is a complying super fund if:
- it is an Australian superannuation fund at all times during the income year, and
- we have not issued the SMSF with a Notice of non-compliance.
A tax rate of 45% applies to the taxable income of a non-complying SMSF. In the year that an SMSF becomes a non-complying SMSF, the SMSF will typically pay additional tax as a result of that change in its status. For more information, see T Assessable income due to changed tax status of fund.
Contribution
A contribution can be anything of value that increases the capital of an SMSF provided by a person whose purpose is to benefit one or more members of the SMSF.
For more information about our view on the meaning of contribution, how a contribution can be made and when a contribution is made, see Taxation Ruling TR 2010/1 Income tax: superannuation contributions.
Death benefit
A death benefit is a lump sum benefit payment or income stream benefit payments made by the SMSF to a person other than the member because of the death of the member of the SMSF.
For more information, see Death of a member.
Defined benefit fund
An SMSF is a defined benefit fund if the SMSF provides its members with a benefit that is calculated from a formula based on a combination of factors, including the years of membership in the SMSF and average salary level over a specific time.
Dependant
A dependant for death benefit purposes is:
- a spouse or de facto spouse of the deceased
- a former spouse or de facto spouse of the deceased
- a child of the deceased under 18 years of age
- a person who, at the time of death, relied on the deceased for financial maintenance, or
- any person who, at the time of death, lived with the deceased in a close personal relationship where one or both of them provided the other with financial and domestic support and personal care.
A non-dependant for super death benefit purposes is a person who does not fall into one of the categories of dependants listed above.
Exempt current pension income
If the SMSF paid retirement phase superannuation income stream benefits to one or more members during the current income year, some or all of its otherwise assessable income is tax exempt under the 'exempt current pension income' rules unless it is non-arm's length income or assessable contributions. This tax exempt income is known as 'exempt current pension income' or ECPI.
For more information, see How expenses are treated when an SMSF has ECPI.
First Home Super Saver Scheme
The First Home Super Save scheme (FHSS) scheme allows individuals to make voluntary contributions (both before-tax concessional and after-tax non-concessional) into their super fund to save for their first home. Individuals can apply to have a maximum of $15,000 of their voluntary contributions from any one financial year included in their eligible contributions to be released under the FHSS scheme, up to a total of $50,000 contributions across all years.
- Individuals need to be 18 years old or older to request a FHSS determination or a release of amounts under the FHSS scheme.
- Individuals cannot have owned any property in Australia before including land, investment or commercial property (unless financial hardship applies).
- Individuals can only use the scheme once.
Forestry managed investment scheme initial participant
The SMSF is an initial participant in a forestry managed investment scheme (FMIS) if:
- the SMSF obtained its forestry interest in the FMIS from the forestry manager of the scheme, and
- the SMSF’s payment to obtain the forestry interest in the FMIS results in the establishment of trees.
The forestry manager of an FMIS is the entity that manages, arranges or promotes the FMIS.
A forestry interest in an FMIS is a right to the benefits produced by the FMIS (whether the right is actual, prospective or contingent and whether it is enforceable or not).
Forestry managed investment scheme subsequent participant
The SMSF is a subsequent participant in an FMIS if it acquired its interest through secondary market trading. This means it acquired its interest other than as an initial participant, usually by purchasing that interest from an initial participant in the scheme.
Low income super amounts (LISA)
Low income super amounts (LISA) can be either a low income super contribution (LISC) or a low income super tax offset (LISTO).
LISC applied for the 2012–13 to 2016–17 income years and was replaced with LISTO from 1 July 2017. Eligibility criteria for LISTO remained essentially the same as for LISC.
Net exempt income
A resident SMSF's 'net exempt income' is the SMSF's gross exempt income less expenses (other than capital expenses) incurred in deriving the exempt income and any taxes payable outside Australia on that exempt income.
Net exempt income includes:
- exempt current pension income
- amounts that are not included in assessable income because family trust distribution tax has been paid
- tax-exempt distributions from pooled development funds.
Non-residential real property
Non-residential real property includes land and buildings that are used for commercial or business purposes. This includes premises that are used for both business and residential purposes.
Permanent incapacity benefit
A permanent incapacity benefit is a lump sum benefit payment or income stream benefit payments paid by the SMSF to a member who is unlikely, due to ill health (physical or mental) to ever engage in gainful employment of the type for which they are reasonably qualified by education, training or experience and their condition has been certified by at least 2 medical practitioners.
For more information, see Conditions of release.
Pooled superannuation trusts
A pooled superannuation trust (PST) is a resident unit trust regulated by the Australian Prudential Regulation Authority (APRA). A PST is used for investing assets of a number of super funds or approved deposit funds, other PSTs and certain other specified entities.
Related party
Related parties of an SMSF are:
- all members of the SMSF and their associates
- all standard employer-sponsors of the SMSF and their associates.
Associates of a member of the SMSF include:
- every other member of the SMSF
- relatives of any member of the SMSF
- business partners of any member of the SMSF
- companies and trustees of trusts that any member of the SMSF controls (either alone or with their other associates).
A standard employer-sponsor is an employer who contributes to the SMSF for the benefit of a member, under an arrangement between the employer and the trustee of the SMSF.
Associates of a standard employer-sponsor include:
- business partners
- companies or trustees of trusts that the employer controls (either alone or with their other associates)
- companies and trustees of trusts that control the employer.
Release authority payment
A release authority payment is an amount released and paid to the ATO in response to a release authority issued to the fund for:
- first home super saver scheme
- excess concessional contributions
- excess non-concessional contributions
- Division 293 tax (due and payable and deferred debt liabilities).
For more information, see Release authorities.
Residential real property
Residential real property means premises which are lawfully:
- occupied as a place of residence, or
- suitable for occupation as a place of residence.
If the premises are suitable as a place of residence but are used for commercial or business purposes, it is non-residential real property.
Retirement phase superannuation income stream benefit
A retirement phase superannuation income stream benefit is a superannuation income stream benefit paid from a superannuation income stream that is in retirement phase. A superannuation income stream is in retirement phase if a superannuation income stream benefit is payable from it but it does not include:
- a transition to retirement income stream (TRIS) unless the recipient is 65 or older, or has notified the SMSF they have met a condition of release with a nil cashing restriction (retirement, terminal medical condition or permanent incapacity), or
- the superannuation income stream is specified in a commutation authority issued by the Commissioner and the SMSF has not complied with the authority.
A superannuation income stream is also in retirement phase if it is a deferred superannuation income stream where the intended recipient has met a condition of release with a nil cashing restriction (retirement, terminal medical condition, permanent incapacity or attained age 65).
Self-managed superannuation fund (SMSF)
SMSFs are entities used for providing for individuals' retirement. Members of an SMSF are its trustees or, if the SMSF has a company trustee, are the directors of the company. This means the members of the SMSF run it for their benefit.
Generally your super fund with more than one member is an SMSF if:
- it has 2 to 6 members
- no member of the fund is an employee of another member of the fund unless they are related
- each member of the fund is a trustee and each trustee is a member of the fund, and
- no trustee of the fund receives any remuneration for their services as a trustee of the fund.
Alternatively, your super fund is an SMSF if it has a company as a trustee (known as a corporate trustee) and:
- the fund has 2 to 6 members
- each member of the fund is a director of the company and each director of the company is a member of the fund
- no member of the fund is an employee of another member of the fund unless they are related, and
- no remuneration is received by either the trustee company or a director of the company for services to the SMSF.
Your super fund is an SMSF if it has only one member and:
- the trustee of the fund is either
- the member of the fund and a second person who is either a relative of the member or is not the member’s employer, or
- a company where
- the member is the sole director of the company, or
- the member is one of 2 directors of the company and the second director is a relative of the member or is not the member’s employer
- no remuneration is received by either the trustee (individual or company) or a director of the company for services to the fund.
Severe financial hardship benefit
A member may be able to access some of their super where they are experiencing severe financial hardship. Prior to making a payment due to severe financial hardship, the trustee must be satisfied that the member has met the eligibility criteria, based on the members age.
Criteria 1 – Where the members age is below their preservation age plus 39 weeks, they must meet both of the conditions below:
- they have received an eligible Commonwealth income support benefits continuously for 26 weeks
- they are not unable to meet reasonable and immediate family living expenses.
The payment must be a single amount up $10,000 (including tax), but no less than $1,000.
Criteria 2 – Where the members has reached their preservation age plus 39 weeks, they need to meet both of the conditions below before a payment can be made:
- they have received an eligible Commonwealth income support benefits cumulative period of 39 weeks after reaching their preservation age
- they are not gainfully employed when applying for the release.
There are no restrictions on how much can be withdrawn if the member meets criteria 2.
For more information, see Conditions of release.
SMSF supervisory levy
SMSFs pay an annual supervisory levy to us. The supervisory levy to be paid with the SMSF annual return 2024 is for 2024–25.
For more information, see SMSF supervisory levy.
Spouse
A spouse of a member (at the relevant time) includes another person (of any sex):
- with whom the member is in a relationship that is registered under a prescribed state or territory law, or
- who lives with the member on a genuine domestic basis in a relationship as a couple although not legally married to the member.
Temporary incapacity benefits
Temporary incapacity benefits are amounts paid as an income stream to a member because they temporarily ceased gainful employment due to physical or mental ill health, but were not permanently incapacitated.
For more information, see Conditions of release.
Terminal medical condition benefits
Terminal medical condition benefits are super benefits paid to a member with a terminal medical condition where 2 registered medical practitioners have certified that the member suffers from an illness, or has incurred an injury, that is likely to result in the member’s death within 24 months of the date of certification.
For more information, see Conditions of release.
Transition to retirement income stream
A transition to retirement income stream is a super income stream paid to a member who has reached their preservation age but is still working and has converted part or all of their accumulated benefits to an income stream.
For more information, see SMSF – transition to retirement income streams.
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