Introducing the Family Super Fund

There are more than 400,000 self managed superannuation funds (SMSF) or DIY super funds operating in Australia.  The majority of these funds have been established for one reason only and that is to enable members of the fund to control the investment of their superannuation monies.  Although this is a powerful driver, this single focus limits the strategic possibilities of the fund.

In short these unique super funds have a very special place in Australia if designed and used properly - they allow the aggregation and investment of a family's superannuation benefits as well as providing a pool of monies and assets to look after family members including children and grandchildren at the time of an accident, sickness, permanent disability, death, pre-retirement and retirement. 

To make the most of a SMSF, turn it into a Family Super Fund. 

What type of SMSF do you have? A DIY, SMSF, or Family Super Fund?

We have found that there is a wide range of SMSF clients - those that want to do everything themselves (the DIY'ers), the SMSF’ers and those that are happy to build their fund into a strong, strategic Family Super Fund.   Let’s have a look at each of these types of small, four member, superannuation funds:

1. DIY superfund 

This is a super fund where there is a strong hands on focus by the trustees of the fund - the true Bunnings DIY style of fund.   The trustee generally does the accounts of the fund.  The management of the investments is undertaken by the trustee. Due to the complexity of the superannuation and taxation laws the trustee will need an accountant to compile the tax return and must have an audit under the SIS Act 1993.  As can be imagined, unless the trustee is in one or two simple property investments there is a lot of work that must be done by the trustee – for a trustee trading shares it is a full time job. 

Of course once the fund goes to pension mode with ideally, the trustee running a simple but strong SMSF strategy of a retirement accumulation account running alongside for any surplus superannuation benefits the DIY fund gets left behind.  The use of reserves, multi-generational reversionary pensions and other important but simple SMSF strategies are a rarity.  The possible cost to the family for those running a DIY super fund is enormous.

2. Self Managed Super Fund

This is the one that the majority of SMSFs run.  Again the focus is on investments but the trustees of a SMSF generally have the advantage of tax and superannuation advice from their accountants and financial planners.  Strategy in a SMSF may be around pensions, estate planning, maybe some insurance and taxation strategies.  The strategic input will depend on the SMSF skills of the advising professional and the willingness of the trustee to learn and enquire what is possible within their fun

3. Family Super Fund

The Family Super Fund is the same tax structure as a DIY super fund and a SMSF but the key focus is on the family.  Surprisingly of the 400,000 SMSFs in Australia that have the opportunity of bringing up to four members of a family into the fund, only 10% have chosen to do so. This is a great loss of opportunity. To see the difference between the Family Super Fund and the DIY or SMSF fund consider some of the following Family Super Fund strategies:

• An adult child member in the fund has an accident and spends six months off work.  The trustees of the Family Super Fund can begin to pay out salary continuance benefits to the incapacitated member to ensure that their salary and wages are kept to a level they were before the accident.

• The retiree members of the fund use some of their superannuation benefits to fund a deposit on a property that is acquired with a loan from a bank.  However the younger members of the fund pay off the loan with on-going salary sacrifice contributions made by their employer.  When the property is ultimately sold any capital gain is split between the members relevant to their capital investments.

• Mum is the sole remaining parent member of the fund and has been diagnosed with dementia.  The adult child members are in the fund guiding her superannuation benefits towards the best in health and psychological care for their mother.

• The retiree pension members of the fund invest in Australian shares with imputation credits.  These credits are used by the trustee of the fund to reduce any of the fund's tax liabilities including any contributions tax liability of the younger members of the fund that salary sacrifice.

For further information or to discuss which superannuation fund is right for you please contact Superannuation Principal, Mark Geldens on 02 8346 6000 or via markgeldens@lawlerpartners.com.au