BETA Release of SMSFs
What you can and can't model in the BETA release
Please note that SMSFs are currently in a BETA release. This means that:
- You can model SMSFs with:
- Two people
- These Investments: Cash, shares/managed funds
- We encourage you, where possible, to use the 'Control by %' option for controlling assets in the SMSF
- The results (online and in documents) will now cover SMSFs
- You should be aware of some limitations listed below
- If an SMSF has any of the following you should submit the case to our SDS service (these items will be clearly marked with the rocket icon), as you cannot model these in the websolve:
- Three or four members
- Complex requests outside the scope of the current interface
- More than one SMSF
Optimo Financial is continuing to work on the implementation of SMSFs, and in the production release, we plan to implement an improved methodology to overcome the current modelling limitations.
During BETA phase, we appreciate your patience and welcome your feedback.
Limitations of SMSF modelling in the BETA release
If your SMSF fits the above criteria and only has one member who does not simultaneously have funds in the accumulation and pension phases, the model is already quite robust.
However, if the SMSF has two members and/or a member with funds simultaneously in the accumulation and pension phases, Pathfinder should give reasonable projected results, but please note that there are some structures that are not strictly correct. These are listed in the following table.
|Distribution of fees and expenses between members||
Applies to the following cases: If the the share of the SMSF members varies a lot over the analysis, then members may not pay fees that are proportional to their share of the SMSF. e.g. an individual with a lower balance may be paying a higher portion of the fees than another member with a higher balance.
Background: Pathfinder proportions all general fees and expenses (e.g. admin, audit and adviser fees) to each member according to their SMSF balance compared to the total SMSF balance at the start of the analysis. This is not strictly correct as the share should vary as the respective balances vary. It is a reasonable approximation if the variation in the member shares are not large. For most cases, the fees should be relatively small compared to the total SMSF balance, so even if the fees are not allocated as strictly as required, the impact on the final outcome is expected to be minimal.
|Fee and expense allocations between accumulation and pension phases||
Applies to the following cases: If, in any year, a member has funds in both the accumulation and pension phases.
Background: If an individual only has funds in the pension or accumulation phase, then fees are taken from that phase. However, if the individual has both an accumulation and pension phase, then fees are allocated to the pension phase. We do this for two reasons. Firstly, once a person has both accounts operating they are likely to have the majority of funds in the tax free pension account using the accumulation account to temporarily accept contributions. With recent changes to superannuation allowing a maximum of $1,600,000 to be transferred to the pension account, this assumption may no longer be applicable for funds with large balances. Secondly, if expenses are allocated incorrectly to the accumulation account they could be used to offset contributions tax so we take a conservative view in not allowing this. For most cases, the fees should be relatively small compared to the total SMSF balance, so even if the fees are not allocated as strictly as required, the impact on the final outcome is expected to be minimal.
|Asset allocations between members and pension/accumulation phases||
Applies to the following cases: If all assets have the 'control by %' option chosen, it should work as expected however, if one or more assets have a different option chosen (e.g. control by $, leave alone), then the case is more likely to be affected. We encourage you, where possible, to choose the 'Control by %' option.
Background: The asset balances for the whole SMSF will follow your instructions, but each member's asset balance may not be held in a similar proportion to the total. Furthermore, proportions may not be consistent between the pension and accumulation phases. For example, if cash has set to have a minimum balance of $20,000, and there are Australian and international shares held in a 50-50 ratio, a particular member's asset balances may not be in the same ratio.
|Solve times may be slower||
Applies to the following cases: Any case with an SMSF may be affected, although cases with fewer assets in the SMSF are less likely to be affected.
|Payment of fees when the SMSF balance goes to zero||
Applies to the following cases: If the SMSF goes to zero because the members withdraw all funds.
Background: If an SMSF balance goes to zero, fees and expenses will continue to be paid if it remains open. The workaround is to set an exact year to close the SMSF and then solve the case again.
How to add an SMSF
Items which should be entered under an SMSF:
- The following information should be added under an SMSF:
- SMSF details (name, annual administration fee)
- SMSF Member details (accumulation phase and pension phase balances)
- SMSF assets and liabilities
To add an existing SMSF:
- Go to the Current situation step (top menu) and then the Super & Trusts sub-step, then click the Add SMSF (BETA) button (on the left menu)
- Fill in the Member details, including each member's accumulation and pension phase balances, can be entered on the main form of the SMSF
- Add existing Assets and loans held in the SMSF with the Add investment to SMSF button on the left menu
- To then add new assets:
- Go to the Cash flows & Goals > Review super funds step
- Find your SMSF in the Existing SMSF section, and click the Add new investment to SMSF button
To add a new SMSF:
Go to the Cash flows & Goals step (top menu), then the Review super funds sub-step, then scroll to the end of the page and click the +Start a new SMSF (BETA) button
You can then fill in Member details
You can then add assets and loans with the Add new investment to SMSF button
You can set a year to close the SMSF if the balance is too low or there is another reason to close it.
When you choose to close an SMSF:
|SMSF fees and expenses||
The following fees can be entered on the main SMSF form:
If any other fees are being paid from the SMSF (e.g. financial adviser fees):
For more information, see the Expense in the help documentation.
|General tips for setting options for assets inside super||
|Keep assets in a ratio||
'Shares/managed funds' and 'Cash' held in super have a Control by % field option, that allows you to fill in a % of total unallocated funds field. When you fill in this field, Pathfinder will keep the investment in the set ratio relative to all other assets that also have the % of total unallocated funds field filled in.
For example, if you set instructions as follows:
The Pathfinder will keep the International shares and Australian shares in a ratio of 60:40, regardless of what the balances are for the cash account and 'Existing balanced fund' because neither of these options have the 'Control by %' option chosen).
|Work out when to set up an SMSF once a minimum super balance has been reached||
If you would like to set up an SMSF once a minimum super balance has been reached:
|Start a TRIS||See How to start a TRIS pension (Transition to retirement income stream).|
|Start an account based pension||See How to include an account based pension (ABP).|
|Voluntary super contributions||See Retirement planning goal (super contributions and pensions)|
Results for SMSF
Strategy Development Service (SDS) options
If the case includes complex analysis, it cannot be done with the websolve and the case needs to be submitted to the Optimo Financial SDS. Complexities include, but are not limited to:
In our strategy development service, we offer many options:
- SMSFs with three or four members
- SMSFs with properties (including loans)
- SMSFs with other loans
- More advanced modelling as required
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