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Description of Self Managed Superannuation Funds and Small APRA Funds

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Last amended: 10 March 2011

Self managed superannuation funds

The Superannuation Industry (Supervision) Act 1993 defines a self managed superannuation fund (SMSF) as a superannuation fund meeting the following criteria:

  • less than five members, and
  • all members are trustees, or are directors of the corporate trustee
  • no other person is a trustee, or a director of the corporate trustee
  • no member is an employee of another member unless the members are related
  • no trustee receives remuneration for acting as trustee
Exceptions to trustee requirements for SMSFs

The following exceptions apply to certain SMSFs and trustees:

  • If the SMSF has only one member, there may be two trustees or two directors of the corporate trustee provided that either:
  • the two trustees or directors are related, or
  • the two trustees or directors are not in an employee/employer relationship
  • If a member is under a legal disability or is subject to a guardianship order or similar arrangement, their personal legal representative may act on their behalf as trustee or director of the corporate trustee
  • If the member is a minor, their parent, guardian or personal legal representative may act on their behalf as trustee or director of the corporate trustee
  • If the member is deceased, their personal legal representative may act on their behalf as trustee or director of the corporate trustee until the deceased member's benefits are paid out from the fund
Small Australian Prudential Regulatory Authority (APRA) Funds

A Small APRA Fund (SAF) is a superannuation fund with less than five members that does not meet the criteria for an SMSF. The trustee of an SAF must be a corporate trustee approved by APRA. The trustee may receive remuneration for acting as trustee.

Types of income stream available from SMSFs and SAFs

Prior to 1 January 2006, SMSFs and SAFs were able to provide any type of income stream except for a defined benefit income stream. From 1 January 2006, SMSFs and SAFs may only offer allocated income streams and market linked income streams. However, any lifetime or life expectancy asset test exempt income streams that commenced prior to that date may continue to be paid.


A superannuation fund is defined in the VEA as being:

  • a fund that is or has been a complying superannuation fund within the meaning of section 45 of the Superannuation Industry (Supervision) Act 1993 in relation to any tax year; or
  • an Australian superannuation fund (within the meaning of the Income Tax Assessment Act 1997) that is not a complying superannuation fund mentioned in paragraph (a) in relation to any tax year; or
  • a scheme for the payment of benefits upon retirement or death that is constituted by or under a law of the Commonwealth or of a State or Territory; or
  • an RSA within the meaning of the Retirement Savings Accounts Act 1997; or
  • any of the following funds (unless the fund is a foreign superannuation fund):
  • a fund to which paragraph 23(jaa), or section 23FC, 121CC or 121DAB, of the Income Tax Assessment Act 1936 (as in force at any time before the commencement of section 1 of the Taxation Laws Amendment Act (No. 2) 1989) has applied in relation to any tax year;
  • a fund to which paragraph 23(ja), or section 23F or 23FB, of the Income Tax Assessment Act 1936 (as in force at any time before the commencement of paragraph (a) of the definition of superannuation fund in former subsection 27A(1) of the Income Tax Assessment Act 1936) has applied in relation to the tax year that started on 1 July 1985 or an earlier tax year;
  • a fund to which section 79 of the Income Tax Assessment Act 1936 (as in force at any time before 25 June 1984) has applied in relation to the tax year that started on 1 July 1983 or an earlier tax year.

According to section 5J(1) of the VEA, an income stream includes:

  • an income stream arising under arrangements that are regulated by the Superannuation Industry (Supervision) Act 1993; or
  • an income stream arising under a public sector scheme (within the meaning of that Act); or
  • an income stream arising under a retirement savings account; or
  • an income stream provided by a life insurance business (within the meaning of the Life Insurance Act 1995); or
  • an income stream provided by a friendly society (within the meaning of the Income Tax Assessment Act 1996); or
  • an income stream designated in writing by the Commission for the purposes of this definition, having regard to the guidelines determined under subsection 5J(1F) of the VEA;
  • but does not include any of the following:
  • available money;
  • deposit money;
  • a managed investment;
  • a listed security;
  • a loan that has not been repaid in full;
  • an unlisted public security; or
  • gold, silver or platinum bullion.

 

 

A defined benefit income stream is an income stream  where the payments are not fully determined by a purchase price. Instead, payments are made with reference to a set formula based on:

  • the person's salary before retirement,
  • years of service, and/or
  • the governing rules of the income stream.