What is an approved deposit fund and how does it work?
In Plain English
An approved deposit fund (ADF) is a type of superannuation fund where you can deposit money from other super funds or eligible termination payments. The goal is to save for retirement. ADFs must follow certain rules to be considered "resident" and regulated, including being established in Australia or having assets here, having central management in Australia, and having at least 50% of its assets attributable to Australian residents.
Detailed Explanation
A resident approved deposit fund is defined in section 20A of the Superannuation Industry (Supervision) Act 1993. For a fund to be considered a resident approved deposit fund at a particular time, the following conditions must be met:
- Establishment or Asset Location: The fund must either be established in Australia or have any asset situated in Australia at that time.
- Central Management and Control: The central management and control of the fund must be in Australia at that time.
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Resident Member Threshold: At that time, the percentage worked out using the formula below must not be less than 50%:
(Accumulated entitlements of resident members / Total assets of fund) * 100- Accumulated entitlements of resident members means the sum of so much of the value of the assets of the fund at that time as is attributable to:
- deposits made to the fund before that time by or in respect of members of the fund who are residents at that time; and
- income or accretions arising from those deposits.
- Total assets of fund means the value of the assets of the fund at that time.
- Accumulated entitlements of resident members means the sum of so much of the value of the assets of the fund at that time as is attributable to:
The Superannuation Industry (Supervision) Act 1993 also stipulates rules about borrowing for approved deposit funds. Except with the approval of APRA, the trustee of an approved deposit fund must not borrow money (s95).