The technical steps on how to set up a self-managed super fund are relatively straightforward:
What is not so straightforward is making the correct decisions behind each of these steps.
That’s likely the reason the Australian Taxation Office (ATO) has added some steps:
The most significant decision is to set up an SMSF in the first place. But let’s assume that you obtained independent professional advice and have made that decision for all the right reasons.
You now have a series of decisions rather than a set of steps. Each of them will determine how you will achieve the fund’s sole purpose of providing retirement benefits.
Although self-managed super funds are often referred to as DIY funds, you will need independent advice.
But did you know that not all SMSF accountants and advisers are equal?
So you must decide when to seek personal financial advice and also who the best person will be.
One of the first reasons people give for setting up an SMSF is to control their investments.
However, unless you are a financial and investment expert, you might need financial advice to set up, implement and regularly review your investment strategy. This is critical to providing retirement benefits to fund members. You also need reviews for your annual SMSF audit.
Ensure that anyone who gives you advice on a specific financial product (e.g., particular Australian securities) or influences your investment decisions (e.g., to sell shares) has an Australian Financial Services licence – AFS licence.
Financial statements, audits, and tax lodgements must be completed every year.
Getting all of them completed is
The accountants you choose do not need an AFS licence but should have in-depth knowledge and experience of SMSFs, tax, and superannuation law.
They can show you how to set up a self-managed super fund, give you factual information and tax advice, administer your fund, and be your Tax Agent.
In a retail super fund, a board of trustees makes decisions for the fund. In an SMSF, each member is also a trustee or a director of the corporate trustee.
There are several decisions to make when you set up a trust.
You have a choice of how to structure your own SMSF:
Your decision has implications for
Speak to your financial planner about the best option for your financial situation.
You can appoint up to a maximum of six trustees.
Besides being sure that these are people you’d like to entrust with your financial future, you must also check that,
You can use a minimal amount to set up the fund. Whatever is deposited must be allocated to a member.
The date on which this first asset is paid into the SMSF is also the establishment date.
If you choose a name that has already been taken, it will delay your ATO registration.
You can check for names on the Super Fund Lookup.
What is written in the deed prescribes what trustees may and must do – provided there is nothing contrary to superannuation law.
The deed is a legal document, and a legal practitioner or someone with in-depth SMSF experience should draw it up.
For example, it will define
Equally, what is not in the deed cannot be done.
Trustees would be wise to get professional help to set up the deed.
All trustees must sign and date the trust deed and have their signatures witnessed.
Trustees or directors must keep the original hard copy of the deed, plus any updates, for the lifetime of the SMSF and five years after the final tax return has been submitted. It’s a good idea to keep digital copies too!
Each trustee and director must sign a declaration that they understand their obligations and responsibilities.
Signing the declaration means you have agreed to make yourself ultimately responsible for
All trustees and directors are equally responsible, even for decisions where they were not actively involved.
You can get a form here or from your SMSF administrator if you have appointed one.
Your only decision here is whether you will DIY or use an SMSF administrator or tax agent to help you.
The ATO has made all the other decisions about what you must do:
Trustees can use the online application form here. Tax agents will register their clients via the Tax Professional’s Services.
You can check the registration status on ABN Lookup and Super Fund Lookup.
The SMSF needs a cash account to accept contributions, rollovers, and investment earnings. It must also pay ongoing costs like tax, accounting and audit fees, and member benefits.
Trustees can decide which bank to use. Some platforms provide trading facilities.
What is essential is to have the account in the name of the SMSF and never to get funds mixed up with personal accounts.
An exit strategy for an SMSF is a bit like a pre-nuptial agreement. You hope that everything will go well forever, but recognise that it’s possible to have a relationship breakdown, death or incapacity, or a significant change in personal or financial circumstances.
Make sure a clause in the SMSF deed gives direction for these situations.
SMSF Engine has been providing SMSF administration services since 2012, and our experience with SMSFs dates back to 2004.
We provide services to trustees and SMSF accountants and advisers, lifting the administrative load and allowing them to focus on providing strategic and financial advice to their clients.
We can help to set up new SMSFs through
Book a session with one of our accountants so we can show you how to set up a self-managed super fund that will be easy to administer and correct in all the details.
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