Super Informed

SMSF Glossary: 80 Key Terms Explained in Plain English

Every term you'll encounter as an SMSF trustee, defined clearly. Use the A–Z bar to jump to a term, or scroll through at your own pace. Where a term is covered in depth in a Super Informed issue, we've linked to it.

80 terms | Last updated April 2026 | Figures verified against current ATO guidance

Quick Reference

Key Rules Every Trustee Must Know

The 15 rules and concepts with the greatest compliance and financial impact. Click any term to jump to its full definition.

Arm's length rule Binding death benefit nomination (BDBN) Bring-forward rule Condition of release Concessional contributions Exempt current pension income (ECPI) In-house assets Investment strategy Minimum pension drawdown Non-concessional contributions (NCCs) Preservation age Sole purpose test Total superannuation balance (TSB) Transfer balance cap (TBC) Trust deed

A

Account-based pension

A type of retirement income stream paid from a superannuation fund. In pension phase, earnings on assets supporting the pension are generally tax-free. Members must withdraw a minimum percentage of their account balance each year based on their age - ranging from 4% under age 65 to 14% at age 95 and over. There is no maximum withdrawal limit unless the pension is a transition to retirement pension.

Accumulation phase

The phase of superannuation in which a member is building retirement savings. Contributions are made and investment returns are earned. Fund income and gains are taxed at up to 15%. A member remains in accumulation phase until they meet a condition of release and commence a pension or withdraw their benefits.

Actuarial certificate

A certificate issued by a qualified actuary, required when an SMSF uses the proportionate method to calculate exempt current pension income (ECPI). The certificate is needed when the fund has both accumulation and pension interests and assets are not segregated between the two phases. It confirms the proportion of the fund's income and gains that are exempt from tax for the financial year.

Annual return (SMSF)

The SMSF annual return (SAR) is the combined tax and regulatory return lodged with the ATO each year. It covers the fund's financial position, contributions received, income, deductions, and member balances. Standard lodgment due date is 31 October each year; funds lodging through a registered tax agent typically receive an extended deadline. Failure to lodge on time may result in penalties and the fund losing its good standing.

APRA (Australian Prudential Regulation Authority)

The federal regulator responsible for supervising banks, insurance companies, and most superannuation funds - including industry, retail, and corporate funds. APRA does not regulate SMSFs. That role belongs to the ATO. Understanding the distinction matters because APRA-regulated funds operate under different rules and member protections than SMSFs.

Approved SMSF auditor

A registered auditor approved by ASIC to conduct annual audits of self-managed superannuation funds. Every SMSF must have its financial statements and compliance with superannuation law independently audited each year before lodging its annual return. The auditor must be independent of the fund - trustees cannot audit their own fund. SMSF auditors must hold a registration number issued by ASIC.

Arm's length rule Key rule

A fundamental SMSF compliance requirement that all transactions involving the fund must be conducted on the same terms as if the parties were completely unrelated, dealing at fair market value. This applies to rent, loans, purchases, sales, and any other transaction - particularly those involving related parties such as members, their family members, or associated businesses. Breaches can trigger non-arm's length income (NALI) tax consequences or loss of the fund's complying status.

ASIC (Australian Securities and Investments Commission)

Australia's corporate and financial services regulator. ASIC is responsible for registering and approving SMSF auditors and for regulating the professionals who provide services to SMSF trustees - including financial advisers, accountants operating under an AFS licence, and SMSF administrators. ASIC does not directly regulate individual SMSFs.

ATO (Australian Taxation Office)

The federal government agency responsible for regulating self-managed superannuation funds in Australia. The ATO administers the superannuation and tax laws that apply to SMSFs, processes SMSF annual returns, maintains members' transfer balance accounts, monitors compliance, and takes enforcement action against funds or trustees that breach the law. The ATO also publishes guidance for trustees at ato.gov.au.

B

Bare trust

A simple trust arrangement (also called a holding trust or custodian trust) required when an SMSF borrows money to purchase an asset under a limited recourse borrowing arrangement (LRBA). The bare trustee holds legal title to the asset on behalf of the SMSF while the loan is outstanding - but the SMSF has the beneficial ownership. Once the loan is fully repaid, legal title transfers from the bare trustee to the SMSF.

Binding death benefit nomination (BDBN) Key rule

A legally binding instruction from an SMSF member directing the trustee how to pay the member's superannuation death benefit on their death. Unlike a non-binding nomination, the trustee must follow a valid BDBN. The nomination must comply with the fund's trust deed and superannuation law. Nominees must be dependants or the member's legal personal representative. BDBNs may be lapsing (typically expire after 3 years) or non-lapsing, depending on the trust deed. A BDBN must be reviewed regularly to ensure it remains current and valid.

Bring-forward rule Key rule

A rule that allows eligible members to contribute up to 3 years of non-concessional contributions (NCCs) in a single financial year, rather than being limited to the annual cap. The annual NCC cap is $120,000 in FY2025-26, so the maximum bring-forward amount is $360,000 in a single year. Eligibility depends on age (under 75 at the time of contribution) and total superannuation balance (TSB) at 30 June of the prior financial year. For FY2025-26: full 3-year bring-forward ($360,000) if TSB < $1.76M; 2-year bring-forward ($240,000) if TSB is $1.76M to < $1.88M; no bring-forward (current-year cap only) if TSB is $1.88M to < $2.0M; nil if TSB is $2.0M or above. These thresholds move with the general transfer balance cap and NCC cap and should be verified each year.

Business real property (BRP)

Real property used wholly and exclusively in a business. SMSFs are specifically permitted to acquire business real property from a related party and to lease it back to a related party - subject to the arrangement being on arm's length commercial terms. This is one of the key exceptions to the general prohibition on acquiring assets from related parties. Residential property does not qualify as BRP, regardless of whether a business is conducted from it.

C

Capital gains tax (CGT) discount - SMSF

A discount that reduces the capital gain recognised when an SMSF sells an asset it has held for more than 12 months. SMSFs in accumulation phase receive a one-third CGT discount, reducing the effective tax rate on a capital gain from 15% to 10%. In pension phase, capital gains on assets supporting the pension are fully exempt from tax, provided the fund's transfer balance account requirements are met.

Carry-forward contributions (catch-up contributions)

A strategy that allows eligible individuals to make concessional contributions above the standard annual cap by using unused cap amounts from up to the 5 prior financial years (available since 1 July 2019). To be eligible, a member's total superannuation balance must be below $500,000 on 30 June of the prior financial year. Unused cap amounts expire after 5 years. This strategy can be particularly useful for individuals who took time out of work or had lower incomes in earlier years.

Collectables and personal use assets

A category of assets that SMSFs may hold but are subject to strict rules. Collectables include artwork, jewellery, antiques, coins, stamps, wine, cars, and boats. The rules require that: the asset must not be used by a related party of the fund; it must not be stored in a related party's private residence; it must be insured in the SMSF's name within 7 days of acquisition; any lease to a third party must be on arm's length terms; and any decision about storage must be documented in writing.

Commutation

The conversion of a superannuation pension (income stream) into a lump sum. A full commutation ends the pension entirely, resulting in a full debit to the member's transfer balance account. A partial commutation reduces the pension balance without ending it. Commutations may be used to manage excess transfer balance amounts, to restructure pension interests, or to redirect funds back to accumulation phase. The tax consequences depend on the type of pension and the member's age.

Condition of release Key rule

A specific event that must occur before a superannuation fund member can legally access their preserved superannuation benefits. Common conditions of release include: reaching age 65; reaching preservation age and retiring; reaching preservation age and commencing a transition to retirement pension; total and permanent disablement; terminal illness (with a medical certificate); and death. Until a condition of release is met, preserved benefits must remain in the superannuation system.

Concessional contributions Key rule

Contributions made with pre-tax money, or personal contributions for which a tax deduction is claimed. These are taxed at 15% inside the fund instead of the member's personal marginal tax rate - a significant advantage for higher income earners. Examples include employer contributions (including the superannuation guarantee), salary sacrifice contributions, and deductible personal contributions. The annual cap is $30,000 in FY2025-26, rising to $32,500 from 1 July 2026. Contributions in excess of the cap are taxed at the individual's marginal rate.

Concessional tax treatment

The favourable tax rates that apply to a complying superannuation fund. In the accumulation phase, fund income is taxed at a maximum of 15% and capital gains on assets held more than 12 months are taxed at an effective 10%. In the retirement (pension) phase, earnings on assets supporting the pension are generally tax-free. A fund that loses its complying status may have its taxable income assessed at 45%. Maintaining compliance with superannuation law is essential to retaining these benefits.

Contravention

A breach of the superannuation or tax laws that govern SMSFs. Contraventions range from minor administrative failures (such as a trustee signing documents late) to serious breaches (such as lending fund money to a member or the fund failing the sole purpose test). Significant contraventions must be reported to the ATO by the fund's auditor. The ATO may respond with education directions, administrative penalties, enforceable undertakings, or in serious cases, trustee disqualification. Read our ATO compliance update →

Contribution caps

The annual limits on how much can be contributed to superannuation before additional tax applies. There are two caps: the concessional contributions cap (for pre-tax contributions) and the non-concessional contributions cap (for after-tax contributions). For FY2025-26: the concessional cap is $30,000 (rising to $32,500 from 1 July 2026) and the non-concessional cap is $120,000 (rising to $130,000 from 1 July 2026). Contributions exceeding either cap trigger excess contributions tax. Read our EOFY contribution strategies guide →

Contribution reserving

A strategy where an SMSF's trust deed allows the fund to accept a contribution in one financial year but allocate it to a member's account in the following year. The contribution counts toward the member's contributions cap in the year it is allocated, not the year it is received. This can be used to manage contributions cap timing at the end of the financial year. Not all trust deeds permit contribution reserving - trustees should confirm their deed allows it before attempting to use this strategy.

Corporate trustee

A company that acts as the trustee of an SMSF, rather than individual members acting as trustees in their personal capacity. All members of the SMSF must be directors of the corporate trustee. A corporate trustee simplifies administration when membership changes (the company remains trustee regardless of who joins or leaves), provides cleaner separation of fund assets from personal assets, and simplifies asset titling. The corporate trustee itself must be registered with ASIC and all directors must be eligible to act.

Crypto assets (SMSF)

Cryptocurrencies and other digital tokens held as investments inside an SMSF. The ATO treats crypto assets as property for CGT purposes - gains and losses are subject to capital gains tax. SMSFs holding crypto must demonstrate that the investment is consistent with the fund's written investment strategy, maintain detailed transaction records, apply appropriate valuations, hold the assets in the fund's name (not commingled with members' personal holdings), and ensure the investment satisfies the sole purpose test.

D

Death benefit

The superannuation benefit paid from a fund upon the death of a member. A death benefit may be paid as a lump sum or as an income stream to eligible beneficiaries (dependants or the legal personal representative). The tax treatment depends on: the relationship between the beneficiary and the deceased, the components of the benefit (tax-free vs taxable), and the ages of both parties. Trustees must pay out death benefits promptly after a member's death and in accordance with any valid binding death benefit nomination.

Dependant (superannuation definition)

Under superannuation law, a dependant is a person to whom an SMSF trustee can pay a death benefit directly from the fund (rather than through the estate). Dependants include: the member's spouse or de facto partner; the member's children of any age (though tax treatment differs for adult children); any person in an interdependency relationship with the member; and any person who was financially dependent on the member at the date of death. Only dependants can receive a death benefit as a superannuation income stream - non-dependants must receive a lump sum.

Disqualified person

An individual who is legally prohibited from acting as an SMSF trustee, or as a director of an SMSF's corporate trustee. A person is a disqualified person if they have been convicted of an offence involving dishonesty, are an insolvent under administration (such as an undischarged bankrupt), or have been disqualified by the ATO or a court. Operating an SMSF while a disqualified person is a criminal offence. Trustees should check their status if their personal financial circumstances change significantly.

Division 296 tax From July 2026

An additional 15% tax applied to the proportion of superannuation earnings attributable to balances above $3 million, bringing the effective tax rate on those earnings to approximately 30%. Takes effect from 1 July 2026 (FY2026-27 onward). The tax is assessed on realised earnings attributable to the excess balance. The $3 million threshold is not indexed to inflation. Read the Super Informed issue on Division 296 →

Downsizer contribution

A one-off after-tax contribution that allows eligible individuals aged 55 or over to contribute up to $300,000 each (up to $600,000 per couple) into superannuation from the proceeds of selling their home. The property must have been owned by the individual or their spouse for at least 10 years. Downsizer contributions do not count toward the non-concessional contributions cap and can be made regardless of the member's total superannuation balance. Only one downsizer contribution can be made per person per eligible property.

E

Electronic service address (ESA)

An identifier used by SMSFs to receive employer contributions and rollovers electronically via the SuperStream system. An ESA is provided by a SuperStream messaging provider (such as an SMSF administration platform or specialist provider) and must be registered with the ATO. Without a valid ESA, an SMSF cannot receive employer SG contributions via SuperStream and cannot receive incoming rollovers from other superannuation funds.

ETF (exchange-traded fund)

A managed investment fund that is listed and traded on a recognised stock exchange such as the ASX. ETFs allow SMSF trustees to invest in a diversified basket of assets - including Australian shares, international shares, bonds, or property - through a single investment. Popular in SMSFs due to low management costs, intraday liquidity, and price transparency. ETFs are straightforward to value (at market price) and are not subject to the in-house asset restrictions.

Event-based reporting

The ATO's reporting system requiring SMSFs to notify the ATO of events that affect a member's transfer balance account. Reportable events include: commencing a retirement phase pension, fully or partially commuting a pension, and certain structured settlement contributions. From 1 July 2023, all SMSFs must report transfer balance account events within 28 days after the end of the quarter in which the event occurred. Timely reporting is important to avoid excess transfer balance tax.

Exempt current pension income (ECPI) Key rule

The portion of an SMSF's income and capital gains that is exempt from income tax because it is attributable to assets supporting retirement phase pension interests. Under the segregated method, all income from assets set aside to support pensions is fully exempt - no actuarial certificate needed. Under the proportionate method, the exempt proportion is calculated using an actuarial certificate based on the ratio of pension interests to total fund assets. Correctly claiming ECPI is one of the most significant tax benefits available to SMSFs in pension phase.

G

Government co-contribution

A government incentive for low-to-middle income earners who make personal after-tax contributions to superannuation. The government contributes $0.50 for every $1 of personal contribution, up to a maximum co-contribution of $500. Eligibility and the amount received are income-tested - the full benefit applies below the lower income threshold and phases out completely at the upper threshold. Both thresholds are indexed annually; confirm current figures with the ATO or your accountant before acting.

I

In-house assets Key rule

Assets of an SMSF that are investments in, loans to, or leases to a related party of the fund. In-house assets must not exceed 5% of the fund's total assets (by market value) at any time during the financial year. Trustees who breach the 5% limit must develop and implement a plan to bring the fund back into compliance. There are important exceptions - for example, business real property leased to a related party on arm's length terms is excluded from the in-house asset rules.

Individual trustee

A structure where the members of an SMSF act directly as trustees in their personal capacity, rather than through a company. All members must be trustees and all trustees must be members. A single-member SMSF with individual trustees requires a second individual trustee who is not a member (typically a family member or associate). When membership changes, all fund assets must be retitled in the new trustee names - which can be administratively burdensome compared to a corporate trustee structure.

Interdependency relationship

A relationship between two people (who need not be a couple or related) that gives rise to dependant status under superannuation law. The relationship exists where the two people: live together; one or both provides the other with financial support; and one or both provides the other with domestic support and personal care. A person in an interdependency relationship with a deceased SMSF member can receive a death benefit directly from the fund as a dependant, including as an income stream.

Investment strategy Key rule

A written document that sets out how an SMSF's assets will be invested to meet the fund's objectives and the retirement needs of its members. Trustees are legally required to formulate, implement, and regularly review the fund's investment strategy - the ATO expects this to happen at least annually, or whenever the fund's circumstances change significantly. The strategy must consider: the risk and return of investments, diversification, liquidity, the fund's ability to pay benefits and expenses as they fall due, and the insurance needs of members. A generic or boilerplate document may not satisfy the ATO's requirements.

L

Legal personal representative (LPR)

The executor named in a deceased member's will, or the administrator of the estate if there is no will. An SMSF's death benefit can be paid to the LPR, who then distributes it in accordance with the member's will and the laws of the estate. Note that paying a death benefit to the LPR does not guarantee it reaches a specific person - the terms of the will and the rules of intestacy (if there is no will) govern how the estate is ultimately distributed.

Limited recourse borrowing arrangement (LRBA)

An arrangement that allows an SMSF to borrow money to purchase a single acquirable asset (such as a property or listed shares), held separately in a bare trust during the loan period. The lender's recourse is limited to the asset in the bare trust - the SMSF's other assets are protected in the event of default. Once the loan is fully repaid, legal title to the asset transfers from the bare trust to the SMSF. Loans from related parties must meet ATO safe harbour terms to avoid non-arm's length income issues.

Listed securities

Shares, units, or other financial instruments traded on a recognised stock exchange such as the ASX. SMSFs commonly hold Australian and international listed securities as part of a diversified investment portfolio. Listed securities are valued at their market price, making compliance reporting straightforward. They are not generally subject to the in-house asset restrictions (unless the securities are in a related party entity). Dividends and distributions received by the fund are treated as ordinary income.

M

Managed funds

Pooled investment vehicles managed by a professional fund manager on behalf of investors. SMSF trustees may invest in managed funds as part of a diversified strategy. Investors typically receive units in the fund rather than direct ownership of the underlying assets. Returns are paid as distributions or reinvested. Examples include unlisted unit trusts, listed investment companies (LICs), and infrastructure funds. Managed funds can provide access to asset classes that may be difficult for an SMSF to access directly.

Member

An individual whose superannuation benefits are held in an SMSF. In an SMSF, all members must be trustees (if individual trustees are used) or directors of the corporate trustee. An SMSF can have up to 6 members from 1 July 2021. Members contribute to and accumulate benefits in the fund, and are entitled to receive benefits upon meeting a condition of release. Each member's interest in the fund is tracked separately.

Minimum pension drawdown Key rule

The minimum amount that must be withdrawn from an account-based pension each financial year, expressed as a percentage of the pension account balance as at 1 July (or at commencement if the pension starts part-way through the year). The minimum percentages by age are: under 65: 4%; ages 65 to 74: 5%; ages 75 to 79: 6%; ages 80 to 84: 7%; ages 85 to 89: 9%; ages 90 to 94: 11%; age 95 and over: 14%. Failure to meet the minimum drawdown requirement means the pension fails to meet the standards and the fund loses the ECPI tax exemption for that year.

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N

Non-arm's length expenditure (NALE)

Expenditure incurred by an SMSF that is below the amount that would be expected in an arm's length dealing - for example, a related party providing services to the fund for free or below market rate. NALE rules can cause the fund's ordinary and statutory income to be taxed at the highest marginal rate (45%) rather than the standard 15%. These rules apply to both specific income related to the low-cost service and, in some circumstances, to the fund's general income. Trustees should be cautious about receiving any discounted services from related parties.

Non-arm's length income (NALI)

Income derived by an SMSF from a transaction or scheme where the parties are not dealing at arm's length, and the income received by the fund is greater than it would have been in an arm's length dealing. NALI is taxed at the highest marginal rate (45%) rather than the standard 15% fund tax rate. Common examples include rent received from a related party above market value, or dividends from a private company controlled by a member that are inflated above what would be paid to an unrelated shareholder.

Non-binding nomination

A nomination made by an SMSF member indicating their preferred beneficiary for their superannuation death benefit. Unlike a binding death benefit nomination, a non-binding nomination is not legally enforceable - the trustee has discretion to determine how the death benefit is actually paid, though the trustee must take the nomination into account. In an SMSF where trustees and members are often the same people, succession planning for trustee control (via a corporate trustee structure or enduring power of attorney) is equally important alongside the nomination itself.

Non-concessional contributions (NCCs) Key rule

After-tax contributions made to a superannuation fund from money on which personal income tax has already been paid. NCCs are not included in the fund's assessable income and are not taxed within the fund. The annual NCC cap is $120,000 in FY2025-26, rising to $130,000 from 1 July 2026. Members with a total superannuation balance at or above the general transfer balance cap ($2.0M in FY2025-26) are not permitted to make NCCs. Excess NCCs are subject to significant tax penalties. Subject to the bring-forward rule for eligible members.

P

Payday super From July 2026

The government's reform requiring employers to pay superannuation guarantee contributions to their employees' nominated super funds at the same time as wages are paid, rather than quarterly (as currently required). Legislated to take effect from 1 July 2026. For SMSF members who receive employer SG contributions, this will result in more frequent, smaller contribution receipts - requiring trustees to ensure their fund's bank account, ESA, and administration processes are set up to handle more regular transactions. Read the Super Informed issue on Payday Super →

Pension phase

The phase in which a member has commenced a retirement income stream (pension) from their superannuation fund. In pension phase, fund earnings and capital gains attributable to assets supporting the pension are generally exempt from income tax, subject to the transfer balance cap rules. Members in pension phase must meet the annual minimum drawdown requirements. A member can hold both accumulation and pension phase interests within the same SMSF simultaneously.

Personal deductible contribution

A personal (after-tax) contribution made to superannuation by an individual who then claims a tax deduction for that contribution, effectively converting it into a concessional contribution. To claim the deduction, the individual must lodge a notice of intent to claim a deduction with their fund before lodging their tax return and before certain other events occur. Once the deduction is claimed, the 15% contributions tax applies within the fund, and the amount counts toward the concessional contributions cap.

Preservation

The requirement that most superannuation benefits must remain within the superannuation system until a member meets a condition of release. Preserved benefits (which make up the majority of most members' super) cannot be accessed until the appropriate conditions are met. Restricted non-preserved benefits can be accessed in limited circumstances such as leaving employment. Unrestricted non-preserved benefits can be accessed at any time. Contributions made since 30 June 1999 are generally preserved.

Preservation age Key rule

The minimum age at which a superannuation fund member can access their preserved benefits, subject to meeting a condition of release. For individuals born on or after 1 July 1964, the preservation age is 60. For those born before 1 July 1964, it ranges from 55 to 59 depending on date of birth. Reaching preservation age alone does not give a member access to their superannuation - they must also meet a condition of release such as retiring from the workforce or commencing a transition to retirement pension.

Proportionate method

One of two methods available to SMSFs for calculating exempt current pension income (ECPI). Under the proportionate method, an actuarial certificate is obtained each year confirming what proportion of the fund's assets and income is exempt from tax - based on the ratio of pension-phase assets to total fund assets. This method is required when the fund has both accumulation and pension phase interests and assets are not segregated between the two phases.

R

Reversionary pension

A superannuation pension that is structured to automatically continue to a nominated beneficiary (the reversionary beneficiary) upon the death of the primary pensioner, without being commuted and recommenced. The reversionary beneficiary must be a dependant. The continued pension creates a credit in the reversionary beneficiary's transfer balance account, with a 12-month grace period before the full value of the pension is counted against their personal transfer balance cap.

Rollover

The transfer of a superannuation benefit from one superannuation fund to another (including into or out of an SMSF), without the funds being paid as a benefit to the member. Rollovers are processed electronically via the SuperStream system. An SMSF must have a valid ESA to receive incoming rollovers. Rollovers do not trigger tax and do not count as contributions. Rollovers out of an SMSF that is in pension phase may trigger a transfer balance account debit.

S

Salary sacrifice

An arrangement between an employee and their employer where the employee agrees to give up a portion of their pre-tax salary in exchange for additional superannuation contributions made on their behalf. The sacrificed amount is treated as a concessional contribution: it is taxed at 15% within the fund rather than at the individual's marginal tax rate. Salary sacrifice is most effective for individuals in higher tax brackets. The sacrificed amount counts toward the concessional contributions cap.

Segregated method

One of two methods for calculating exempt current pension income (ECPI) in an SMSF. Under the segregated method, specific fund assets are designated as segregated current pension assets used solely to support retirement phase pensions. All income and capital gains from those assets are fully exempt from tax - no actuarial certificate is required. The segregated method is not available to a fund that has any member with a total superannuation balance exceeding $1.6 million on 30 June of the prior financial year (this threshold remains at $1.6M and has not been indexed, even as the transfer balance cap has risen).

Self-managed superannuation fund (SMSF)

A private superannuation fund regulated by the Australian Taxation Office with up to 6 members, where all members are either individual trustees or directors of the corporate trustee. SMSFs give trustees direct control over the fund's investments, strategy, and administration. Trustees bear full legal responsibility for ensuring the fund complies with all superannuation and tax laws. As at late 2025, there are over 663,000 SMSFs in Australia, holding approximately $1.06 trillion in assets. Establishing and running an SMSF involves significant ongoing legal, administrative, and fiduciary obligations.

Six-member rule

From 1 July 2021, the maximum number of members permitted in an SMSF increased from 4 to 6. All members must be trustees (or directors of the corporate trustee). The expanded limit allows larger family groups to consolidate retirement savings within a single fund structure, potentially reducing administration costs and enabling more coordinated investment and estate planning strategies. A corporate trustee is strongly recommended when a fund has more than 4 members.

SMSF establishment

The process of setting up a self-managed superannuation fund. Key steps include: preparing and executing a trust deed; appointing trustees or establishing a corporate trustee; registering the fund with the ATO to obtain an ABN and TFN; opening a dedicated SMSF bank account; electing to be regulated by the ATO; and developing an investment strategy. All assets must be held in the fund's name (not the personal names of members), and the fund must be operational before it can receive contributions or rollovers.

Sole purpose test Key rule

A fundamental compliance requirement under the Superannuation Industry (Supervision) Act 1993 (SIS Act) stating that an SMSF must be maintained solely for the purpose of providing retirement benefits to its members, or to their dependants if a member dies before retirement. The test is broadly applied and looks at both the purpose and the effect of the fund's activities and investments. Failure can result in loss of tax concessions and civil or criminal penalties for trustees.

Spouse contribution

A non-concessional contribution made by one spouse into the superannuation account of their other spouse (including de facto partners). The contributing spouse may be entitled to a tax offset of up to $540 if the receiving spouse's income is below $37,000, with the offset phasing out completely once the receiving spouse's income reaches $40,000. These thresholds have not been indexed for many years - confirm current figures with the ATO before acting. The contribution counts toward the receiving spouse's non-concessional contributions cap and can be a useful strategy for splitting retirement savings more evenly.

Super Fund Lookup

The ATO's publicly available online register of all superannuation funds in Australia, including SMSFs. Employers, rollovers, and individuals can use Super Fund Lookup to verify that an SMSF is registered, regulated by the ATO, and has a status of complying before directing contributions or rollovers to it. An SMSF must appear on Super Fund Lookup as a complying fund to legally receive contributions. Trustees can also use it to confirm the fund's ABN and other registration details are current.

Superannuation guarantee (SG)

The compulsory minimum percentage of an employee's ordinary time earnings that employers are required to contribute to a complying superannuation fund on behalf of eligible employees. The SG rate is 11.5% in FY2024-25, increasing to 12% from 1 July 2025. For SMSF members who are employees, SG contributions are received by the fund via SuperStream and count toward the concessional contributions cap. Self-employed individuals are not required to make SG contributions but may choose to make personal concessional contributions.

SuperStream

The ATO's mandatory electronic system for processing superannuation contributions and rollovers. SuperStream standardises the format and delivery of contribution data and payments, requiring all transactions to be sent electronically. For SMSFs, SuperStream compliance requires a compliant bank account and a valid electronic service address (ESA). SuperStream applies to all employer SG contributions and to rollovers between superannuation funds. The system allows the ATO to monitor contribution flows in near real time.

T

Tax-free component

The portion of a superannuation benefit that is not subject to tax when paid to a member or beneficiary, regardless of the recipient's age. The tax-free component arises primarily from non-concessional (after-tax) contributions and certain other amounts. When a benefit is paid, the fund calculates the tax-free and taxable components based on the proportion of each in the member's total interest. The tax-free component is generally not subject to tax even when paid to non-dependants.

Taxable component

The portion of a superannuation benefit that may be subject to tax when paid, depending on the recipient's age and circumstances. The taxable component arises from concessional contributions, employer contributions, and fund earnings. When paid to a member or beneficiary aged 60 or over from a taxed source, the taxable component is generally tax-free. When paid to someone under 60, the taxed element is taxed at a maximum of 20% (plus Medicare levy), with a 15% tax offset applying. When paid to non-dependants as a death benefit, tax may apply regardless of age.

Total superannuation balance (TSB) Key rule

The total value of all of an individual's superannuation interests across all funds, measured on 30 June each year. The ATO calculates TSB based on annual return data. A member's TSB determines eligibility for: the bring-forward rule, carry-forward contributions, the non-concessional contributions cap, the government co-contribution, and the segregated ECPI method. TSB is available via myGov (ATO online services). For SMSFs, the TSB may not be updated by the ATO until the fund lodges its annual return.

Transfer balance account (TBA)

A personal account maintained by the ATO that records all transactions affecting an individual's transfer balance cap. Credits are recorded when a retirement phase pension commences (at the value of the pension at commencement). Debits are recorded when a pension is commuted (fully or partially). A member's TBA balance must not exceed their personal transfer balance cap. The ATO uses TBA data from SMSF event-based reporting and annual returns to monitor compliance with the cap.

Transfer balance account report (TBAR)

The reporting form used by SMSFs to notify the ATO of events that affect a member's transfer balance account. Reportable events include: commencing a retirement phase pension, partially or fully commuting a pension, and certain structured settlement contributions. From 1 July 2023, all SMSFs must submit TBAR within 28 days after the end of the quarter in which a reportable event occurred. Accurate and timely TBAR lodgment is essential to prevent excess transfer balance tax assessments.

Transfer balance cap (TBC) Key rule

The limit on the total amount of superannuation savings that can be transferred into the tax-free retirement (pension) phase. The general transfer balance cap is $2.0 million for FY2025-26, rising to $2.1 million from 1 July 2026. An individual's personal transfer balance cap may be between $1.6 million and $2.0 million (rising to up to $2.1 million from 1 July 2026), depending on when they first commenced a retirement phase pension and how much indexation applied to them. Exceeding the cap triggers excess transfer balance tax on the notional earnings attributable to the excess. The cap is indexed in $100,000 increments in line with CPI.

Transition to retirement (TTR) pension

A special type of income stream available to individuals who have reached their preservation age but have not yet permanently retired. A TTR pension allows access to superannuation while continuing to work. Annual drawdown is limited to between 4% and 10% of the account balance per year. Importantly, fund earnings attributable to a TTR pension are not tax-free - they are taxed at up to 15%, the same as the accumulation phase. Tax-free earnings only apply once the member meets a full condition of release (such as retirement at or after preservation age).

Trust deed Key rule

The legal document that establishes an SMSF as a trust and governs how the fund operates. The trust deed sets out the rules for membership, contributions, investments, benefit payments, and how the deed itself can be amended. Trustees must act in accordance with both the trust deed and superannuation legislation at all times. Where there is a conflict between the two, superannuation law prevails. The trust deed should be reviewed and updated when laws change, when membership changes, or when the fund's circumstances change significantly. An outdated trust deed can cause compliance problems.

Trustee declaration

A written declaration that must be signed by each new SMSF trustee (or director of a corporate trustee) within 21 days of becoming a trustee. The declaration confirms that the individual has read and understood their duties and responsibilities as a trustee. The ATO publishes a standard trustee declaration form. Trustees are required to retain signed copies indefinitely - failure to do so may result in administrative penalties. The declaration does not need to be lodged with the ATO but must be kept as a fund record.

Trustee minutes

Written records of decisions made by the trustees of an SMSF. Trustees are required to document all significant trustee decisions, including investment decisions, changes to the investment strategy, commencement or commutation of pensions, approval of the auditor's report, and any other material matters affecting the fund. Minutes must be kept as part of the fund's required records for at least 10 years. They may be reviewed by the ATO or the fund's auditor and serve as evidence that trustees are meeting their obligations.

U

Unlisted assets

Assets held by an SMSF that are not traded on a recognised stock exchange. Examples include: direct residential or commercial property, unlisted shares in private companies, investments in unlisted trusts, and private loans. Unlisted assets can be illiquid and may be difficult to value objectively. The ATO expects trustees to apply appropriate, market-based valuation methods for unlisted assets each year - particularly when the fund is in pension phase, preparing financial statements, or processing contributions and benefit payments.

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15% tax rate (accumulation phase)

The standard tax rate on a complying superannuation fund's investment income - such as interest, dividends, and rent - while it is in the accumulation phase. This is significantly lower than most people's personal marginal tax rates, making superannuation one of Australia's most tax-effective long-term savings structures. Capital gains on assets held for more than 12 months are taxed at an effective 10% after the one-third CGT discount applies.

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