SMSF Glossary

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ABN (Australian Business Number): A unique identifier issued to every SMSF during setup. It is required for opening a bank account and for administrative purposes.
Accrued Benefits: The total value of contributions and investment earnings held in an SMSF for members, owed to them as benefits.
Accumulation Phase: The stage where contributions are made and investment earnings grow within an SMSF, before benefits are accessed.
Act (SIS Act / Superannuation Industry (Supervision) Act 1993): The legislation governing SMSFs. Compliance with the SIS Act is necessary for the fund to receive concessional tax treatment.
Allocated Pension: A pension where members withdraw funds at regular intervals within legislated minimum and maximum limits, usually after retirement.
Annual Return: A mandatory report SMSFs lodge with the ATO each year, covering income, contributions, compliance, and member information.
APRA (Australian Prudential Regulation Authority): The regulator for most large superannuation funds and financial institutions. SMSFs were transferred from APRA regulation to the ATO in 1999.
Arm’s Length Transaction: A transaction conducted on commercial terms, ensuring SMSF dealings with related parties are at true market value.
ASIC (Australian Securities and Investments Commission): The corporate regulator overseeing companies, directors, and financial services licensing. Corporate trustees must comply with ASIC requirements.
Asset Class: A category of investments such as shares, property, cash, or fixed interest. Diversification across asset classes is essential for SMSF investment strategies.
ATO (Australian Taxation Office): The regulator of SMSFs, responsible for ensuring compliance with superannuation and tax laws.
Audit: An annual independent review of an SMSF’s financial and compliance obligations, required by law.

Bare Trust: A trust used in conjunction with an SMSF borrowing arrangement (LRBA) where the legal title of a property is held for the benefit of the SMSF trustee.
Beneficiary: A person who is entitled to receive contributions or benefits from an SMSF. Members are also beneficiaries.
Benefits: The accrued entitlements members hold within an SMSF, including contributions and earnings.
Binding Death Benefit Nomination (BDBN): A legally binding direction from a member to trustees on how death benefits must be paid.
Borrowing (SMSF): Permitted only under strict rules through a Limited Recourse Borrowing Arrangement (LRBA).
Broker: A licensed financial or mortgage professional who may assist SMSFs in acquiring investments such as property.

Capital Gains Tax (CGT): Tax payable when an SMSF sells an asset for a profit. The standard SMSF rate is 15%, reduced to 10% if the asset is held longer than 12 months.
Carry-Forward Contributions: Unused concessional contribution caps that can be rolled forward for up to five years, if eligibility conditions are met.
Complying Superannuation Fund: An SMSF that elects to be regulated under the SIS Act and meets all compliance rules. Only complying funds receive concessional tax treatment.
Concessional Contributions: Pre-tax contributions, including employer superannuation guarantee and salary sacrifice amounts, which are taxed at 15% inside the SMSF.
Contribution: Money added to an SMSF, either by a member, an employer, or via rollovers from other funds.
Corporate Trustee: A company appointed as trustee of an SMSF. Each member must be a director of the company.
Custodian Trustee: The legal entity holding the asset in trust for an SMSF under a bare trust arrangement.

Deed (Trust Deed): The legal document that establishes and governs the rules of an SMSF, including trustee powers and member rights.
Diversification: The practice of spreading investments across different asset classes to manage risk.
Dividend: Company profits distributed to shareholders. SMSFs commonly invest in shares for dividend income.

Eligibility Age: The age at which members can access preserved benefits, generally 55 to 60 depending on date of birth.
Employer Contributions: Superannuation guarantee contributions made by an employer into a member’s SMSF account.
Excess Contributions: Contributions made above the concessional or non-concessional caps, which may incur extra tax.
Exempt Current Pension Income (ECPI): The tax exemption applied to SMSF income when members are in retirement phase pensions.

Franked Dividend: A dividend from a company that includes a tax credit for company tax already paid, which SMSFs can use to offset their own tax liabilities.

Investment Strategy: The formal plan trustees prepare to outline how SMSF assets will be invested in line with member objectives and legal requirements.

Limited Leasing (SMSF Property): The rental of SMSF-owned property. Leases must be on arm’s length terms, and residential property generally cannot be leased to related parties.
Limited Recourse Borrowing Arrangement (LRBA): A structure allowing SMSFs to borrow for property, where the lender’s rights are limited to the asset purchased.
Liquidity: The ease with which SMSF assets can be converted to cash to pay expenses, tax, and benefits.
Lump Sum Payment: A one-off withdrawal of SMSF benefits, usually upon retirement or meeting a condition of release.

Member: An individual who has joined an SMSF, made contributions, and is entitled to receive benefits.
Member Balance: The total of contributions and earnings attributed to a member within an SMSF.
Member Contribution: Payments made directly by members to boost their super balance, either concessional or non-concessional.
Minimum Pension Payment: The minimum amount that must be withdrawn annually from an SMSF pension, based on age and account balance.

Non-Concessional Contributions: After-tax contributions to an SMSF, subject to annual caps.
Non-Complying Fund: An SMSF that has breached the SIS Act and lost its complying status. It is then taxed at 45%.

Pension Phase: The stage where members draw income streams from their SMSF benefits, often tax-free for members over 60.
Preservation Age: The minimum age at which SMSF members can generally access their super benefits, depending on their date of birth.
Property (SMSF Investment): SMSFs can invest in property under strict compliance rules, often requiring an LRBA for loans.

Rollover: The transfer of superannuation savings from one fund into an SMSF.
Related Party Transaction: A dealing between an SMSF and members, relatives, or associated entities. Strict limits apply to ensure arm’s length terms.
Rental Income: Income earned from leasing SMSF-owned property. Must be charged at market rates.
Reportable Contributions: Certain contributions, such as salary sacrifice, that must be reported to the ATO.
Reserve: An account held within an SMSF to manage allocations, expenses, or smoothing of returns.
Restricted Non-Preserved Benefits: Superannuation entitlements that can only be accessed when a specific condition, such as ceasing employment, is met.

Sole Purpose Test: A key SMSF compliance requirement ensuring the fund exists only to provide retirement benefits or death benefits to members’ dependants.
SMSF (Self-Managed Superannuation Fund): A private superannuation fund with up to six members, where trustees manage their own retirement savings.
SMSF Annual Return (SAR): The combined tax return, regulatory return, and member contributions report submitted by an SMSF each year.
Statement of Advice (SOA): A document provided by licensed financial advisers to SMSF members, outlining personalised advice and compliance with the law.
SuperStream: An electronic data standard for employers to make contributions to superannuation funds, including SMSFs.

Tax File Number (TFN): A unique identifier required for SMSFs and members to lodge returns and manage contributions.
Transfer Balance Cap: A lifetime limit on the amount of super that can be transferred into the retirement (pension) phase.
Trust Deed: The legal document that sets out the rules of an SMSF, including trustee powers, member entitlements, and investment guidelines.
Trustee: An individual or company responsible for managing the SMSF in accordance with the SIS Act and trust deed.
Valuation: The process of determining the market value of SMSF assets, required annually for reporting and compliance.
Voluntary Contributions: Extra contributions made by members to increase their super savings, either concessional or non-concessional.

Valuation: The process of determining the market value of SMSF assets, required annually for reporting and compliance.
Voluntary Contributions: Extra contributions made by members to increase their super savings, either concessional or non-concessional.

SMSF Glossary

A | B | C | D | E | F | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V

​A

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ABN (Australian Business Number): A unique identifier issued to every SMSF during setup. It is required for opening a bank account and for administrative purposes.

Accrued Benefits: The total value of contributions and investment earnings held in an SMSF for members, owed to them as benefits.

Accumulation Phase: The stage where contributions are made and investment earnings grow within an SMSF, before benefits are accessed.

Act (SIS Act / Superannuation Industry (Supervision) Act 1993): The legislation governing SMSFs. Compliance with the SIS Act is necessary for the fund to receive concessional tax treatment.

Allocated Pension: A pension where members withdraw funds at regular intervals within legislated minimum and maximum limits, usually after retirement.

Annual Return: A mandatory report SMSFs lodge with the ATO each year, covering income, contributions, compliance, and member information.

APRA (Australian Prudential Regulation Authority): The regulator for most large superannuation funds and financial institutions. SMSFs were transferred from APRA regulation to the ATO in 1999.

Arm’s Length Transaction: A transaction conducted on commercial terms, ensuring SMSF dealings with related parties are at true market value.

ASIC (Australian Securities and Investments Commission): The corporate regulator overseeing companies, directors, and financial services licensing. Corporate trustees must comply with ASIC requirements.

Asset Class: A category of investments such as shares, property, cash, or fixed interest. Diversification across asset classes is essential for SMSF investment strategies.

ATO (Australian Taxation Office): The regulator of SMSFs, responsible for ensuring compliance with superannuation and tax laws.

Audit: An annual independent review of an SMSF’s financial and compliance obligations, required by law.​​

Bare Trust: A trust used in conjunction with an SMSF borrowing arrangement (LRBA) where the legal title of a property is held for the benefit of the SMSF trustee.

Beneficiary: A person who is entitled to receive contributions or benefits from an SMSF. Members are also beneficiaries.​

Benefits: The accrued entitlements members hold within an SMSF, including contributions and earnings.

Binding Death Benefit Nomination (BDBN): A legally binding direction from a member to trustees on how death benefits must be paid.

Borrowing (SMSF): Permitted only under strict rules through a Limited Recourse Borrowing Arrangement (LRBA).

Broker: A licensed financial or mortgage professional who may assist SMSFs in acquiring investments such as property.

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Capital Gains Tax (CGT): Tax payable when an SMSF sells an asset for a profit. The standard SMSF rate is 15%, reduced to 10% if the asset is held longer than 12 months.

Carry-Forward Contributions: Unused concessional contribution caps that can be rolled forward for up to five years, if eligibility conditions are met.

Complying Superannuation Fund: An SMSF that elects to be regulated under the SIS Act and meets all compliance rules. Only complying funds receive concessional tax treatment.

Concessional Contributions: Pre-tax contributions, including employer superannuation guarantee and salary sacrifice amounts, which are taxed at 15% inside the SMSF.

Contribution: Money added to an SMSF, either by a member, an employer, or via rollovers from other funds.

Corporate Trustee: A company appointed as trustee of an SMSF. Each member must be a director of the company.

Custodian Trustee: The legal entity holding the asset in trust for an SMSF under a bare trust arrangement.

Deed (Trust Deed): The legal document that establishes and governs the rules of an SMSF, including trustee powers and member rights.

Diversification: The practice of spreading investments across different asset classes to manage risk.

Dividend: Company profits distributed to shareholders. SMSFs commonly invest in shares for dividend income.

Eligibility Age: The age at which members can access preserved benefits, generally 55 to 60 depending on date of birth.

Employer Contributions: Superannuation guarantee contributions made by an employer into a member’s SMSF account.

Excess Contributions: Contributions made above the concessional or non-concessional caps, which may incur extra tax.

Exempt Current Pension Income (ECPI): The tax exemption applied to SMSF income when members are in retirement phase pensions.

​

Limited Leasing (SMSF Property): The rental of SMSF-owned property. Leases must be on arm’s length terms, and residential property generally cannot be leased to related parties.

Limited Recourse Borrowing Arrangement (LRBA): A structure allowing SMSFs to borrow for property, where the lender’s rights are limited to the asset purchased.

Liquidity: The ease with which SMSF assets can be converted to cash to pay expenses, tax, and benefits.

Lump Sum Payment: A one-off withdrawal of SMSF benefits, usually upon retirement or meeting a condition of release.

Member: An individual who has joined an SMSF, made contributions, and is entitled to receive benefits.

Member Balance: The total of contributions and earnings attributed to a member within an SMSF.

Member Contribution: Payments made directly by members to boost their super balance, either concessional or non-concessional.

Minimum Pension Payment: The minimum amount that must be withdrawn annually from an SMSF pension, based on age and account balance.​

Non-Concessional Contributions: After-tax contributions to an SMSF, subject to annual caps.

Non-Complying Fund: An SMSF that has breached the SIS Act and lost its complying status. It is then taxed at 45%.

​Pension Phase: The stage where members draw income streams from their SMSF benefits, often tax-free for members over 60.

Preservation Age: The minimum age at which SMSF members can generally access their super benefits, depending on their date of birth.

Property (SMSF Investment): SMSFs can invest in property under strict compliance rules, often requiring an LRBA for loans.​​

Rollover: The transfer of superannuation savings from one fund into an SMSF.​

Related Party Transaction: A dealing between an SMSF and members, relatives, or associated entities. Strict limits apply to ensure arm’s length terms.

Rental Income: Income earned from leasing SMSF-owned property. Must be charged at market rates.

Reportable Contributions: Certain contributions, such as salary sacrifice, that must be reported to the ATO.

Reserve: An account held within an SMSF to manage allocations, expenses, or smoothing of returns.

Restricted Non-Preserved Benefits: Superannuation entitlements that can only be accessed when a specific condition, such as ceasing employment, is met.

Sole Purpose Test: A key SMSF compliance requirement ensuring the fund exists only to provide retirement benefits or death benefits to members’ dependants.

SMSF (Self-Managed Superannuation Fund): A private superannuation fund with up to six members, where trustees manage their own retirement savings.

SMSF Annual Return (SAR): The combined tax return, regulatory return, and member contributions report submitted by an SMSF each year.

Statement of Advice (SOA): A document provided by licensed financial advisers to SMSF members, outlining personalised advice and compliance with the law.

SuperStream: An electronic data standard for employers to make contributions to superannuation funds, including SMSFs.​

Tax File Number (TFN): A unique identifier required for SMSFs and members to lodge returns and manage contributions.

Transfer Balance Cap: A lifetime limit on the amount of super that can be transferred into the retirement (pension) phase.

Trust Deed: The legal document that sets out the rules of an SMSF, including trustee powers, member entitlements, and investment guidelines.

Trustee: An individual or company responsible for managing the SMSF in accordance with the SIS Act and trust deed.​

Valuation: The process of determining the market value of SMSF assets, required annually for reporting and compliance.

Voluntary Contributions: Extra contributions made by members to increase their super savings, either concessional or non-concessional.

​Valuation: The process of determining the market value of SMSF assets, required annually for reporting and compliance.

Voluntary Contributions: Extra contributions made by members to increase their super savings, either concessional or non-concessional.

A

Audit: An annual independent review of an SMSF’s financial and compliance obligations, required by law.

Beneficiary: A person who is entitled to receive contributions or benefits from an SMSF. Members are also beneficiaries.

Minimum Pension Payment: The minimum amount that must be withdrawn annually from an SMSF pension, based on age and account balance.

Pension Phase: The stage where members draw income streams from their SMSF benefits, often tax-free for members over 60.

Property (SMSF Investment): SMSFs can invest in property under strict compliance rules, often requiring an LRBA for loans.

Rollover: The transfer of superannuation savings from one fund into an SMSF.

SuperStream: An electronic data standard for employers to make contributions to superannuation funds, including SMSFs.

Trustee: An individual or company responsible for managing the SMSF in accordance with the SIS Act and trust deed.

Valuation: The process of determining the market value of SMSF assets, required annually for reporting and compliance.