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SA Can SMSF Set Me Up in Business with My Superannuation?

Discussion in 'Superannuation Law Forum' started by okanynameyouwishthen, 18 March 2015.

  1. okanynameyouwishthen

    okanynameyouwishthen Well-Known Member

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    Hey folks the title isn't quite descriptive, so I will ask my question as a "here's my plan".

    I'm currently still unemployed & don't seem any closer to finding a job unfortunately & starting to feel financial stress big time. Whilst at my interview with my job network provider last week discussing options & feeling a little harshly adjudged regarding my commitment to job seeking.
    As I left the meeting I was defending my actions etc. & said to the woman " If I had the money to buy a decent white econovan I would have no issue being a contract courier before the end of that week?"
    As I was driving home racking my brain how to source the funds & realising dead ends I couldn't avoid the ironic fact that I have 6 figure superannuation fund sitting in its same spot it was 26 months ago when the last contribution went into it regarding work. As I have had previous involvement with early release clauses for it I know you can't just withdraw early to purchase a car or van or anything personal really.
    I just thought I'd pose the question here first before embarking on the no doubt huge researching ( & spinning around in circles ) mission to gain answers.

    Is it utter "pie in the sky" wishful thinking that I may be able to somehow set myself up as a self employed delivery driver ? As in a legally registered small business ?
    I'm half expecting the "rules" on SMSF stating something similar to the ones regarding SMSF to purchase property. As in you can't pay your own mortgage off using the money ( that is yours ) yet it would be fine to buy a rental " over the road " & possibly watch it lose your money by non family members.
    It's probably o.k. to throw your money away in anther's business that your not personally involved in
    Anybody here have any thoughts or preferably personal knowledge regarding usage of monies within a SMSF if I was to set one up?

    Cheers & sorry if none or most of what i wrote makes sense to others.
    Ohh I can't even finish with a Lol !!!!
    ok :-(
     
  2. Ian Macleod

    Ian Macleod Well-Known Member

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    As a trustee of your SMSF, you’re responsible for making sure that no conflict of interest arises. To avoid a conflict of interest, superannuation law requires you to make and maintain investment transactions on an arm’s length basis. This means that investment transactions must be conducted on a commercial basis as if there was no relationship between the parties.

    For instance you can't buy a house, claim it as an investment, and then rent it to a family member at a discount. The ATO will not be impressed.

    If I wanted to buy a classic car in my SMSF because I see it as a good investment that's perfectly ok, but I can't drive it. I can buy artwork but I can't hang it on the wall in my house. Everything you do with the funds financial resources must pass the at arms length test which is whether “a prudent person acting with due regard to their own commercial interests would have made such a transaction.”

    Apart from the fact that the fund cannot lend money to a related person, would it be a wise investment to buy an Econovan to be used as a courier business?
     
  3. okanynameyouwishthen

    okanynameyouwishthen Well-Known Member

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    Wise investment?

    Well It would when doing so would mean I have employment & can therefore make mortgage payments again thus keep from losing home to the bank.

    If it were allowable I'd actually go for a refrigerated light truck or a 14' taut-liner & lock in a contract/existing run.

    Maybe time to " accept" bank getting the house & me being homeless on top of jobless praying insanity &/or the elements don't claim me during the ensuing 15 years 200K sits idle is a financially better option than using that money today .

    Hypothetically shifting that 200K from its now static account to the bank would instantly create a 300K (today's conservative market figure) freehold property.
    What do you reckon that 300K freehold property would be worth 15 years from now ?

    Theoretically there exists potential of property market bubbles bursting I suppose but I assume at not much more risk that exists of another global financial crisis that could decimate my fund as it sits now.

    I'd imagine that may help me borrow say 50K to set myself up as a self-employed driver thus creating the possibility to squirrel away contributions to my by now cash poor ( 0 ) yet asset healthy ( 300K growing ) superannuation .
    That statistically retirement age being reachable would also be greatly improved by way of having a job & a home should be factored in but isn't .
    Just so long as the rules & tests are adhered to !!??!
    ok
     
  4. Ian Macleod

    Ian Macleod Well-Known Member

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    I don't mean to sound like a stickler for the rules or unsympathetic, I was just pointing out how the ATO treat retirement savings. The rules for trustees are very strict and the ATO are quite aggressive when enforcing them.

    There are rules around hardship which allow for early access your super in certain situations. My understanding is you generally need to be in a position where you cannot work - total and permanent disability etc. Whether the impending loss of ones house falls into the hardship definition you would have to consult with your trustee or the ATO. Here's some reading material to get you started Gaining early access to superannuation | ALRC

    Severe financial hardship
    19.64 The Superannuation Act and SIS Regulations provide for early release of superannuation benefits on the grounds of ‘severe financial hardship’.[67] Fund trustees are responsible for determining the release of benefits on this basis. Different conditions for early release apply, depending on the age of the member, in particular whether the member is under or over ‘preservation age’.[68]

    19.65 To satisfy the ground of ‘severe financial hardship’ under regs 6.01(5)(a) and 6.01(5A) of the SIS Regulations,applicants (if under preservation age) must prove that they:

    • have been receiving ‘Commonwealth income support payments’[69]
    • were still in receipt of those payments at the date of the written evidence provided in support of the application (which must not be more than 21 days prior to the application);[70] and
    • are unable to meet reasonable and immediate family living expenses.[71]
    19.66 If these requirements are satisfied, the trustee may release a lump sum of between $1,000 and $10,000.[72]
     

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