Q: I have about $10,000 cash in my SMSF bank account and it seems that to get the higher interest rate, there is always a minimum deposit of $50,000. Can you suggest options? Alternatively, can I borrow that money and pay interest to my SMSF?
A: I’m somewhat surprised by the question as most of the targeted accounts offered by banks for SMSFs have eliminated minimum deposit requirements. Perhaps you are using an older style account, or with a bank that hasn’t yet understood the needs of SMSF trustees.
As the following table shows, there are several banks that don’t require a minimum opening deposit. Further, most of the banks pay interest on the whole balance (that is, on every dollar). If there is a ‘magic’ level at which you move from a low rate to a high rate, this appears to be $10,000 rather than $50,000. Westpac (WBC), Commonwealth (CBA) and Bank of Queensland (BOQ) have products structured on this basis, although the former operates a ‘two product account’ and technically, you could get the higher rate on a deposit of any size in their savings account. (See table on next page.)
[1]Finally, you can’t borrow money from your SMSF (and pay it interest). This would be constituted as a ‘loan from the fund to a member or relatives of members of the fund’ and this is forbidden under Section 65 of the Superannuation Industry Supervision Act. Contravention of this section would leave you liable to civil penalties – so please don’t go there.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
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