How to Set Up a Self Managed Super Fund SMSF
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How to Set Up a Self Managed Super Fund SMSF

A self managed super fund SMSF allows you to control your investments for retirement. If you’re considering whether to set up your own SMSF, you need to ensure that it is compliant with superannuation legislation.

It’s important to get professional advice.

An SMSF needs to be set up correctly for three key reasons:

1.To be eligible for the tax concessions that the superannuation environment offers. The income of a complying self-managed super fund is taxed at just 15%. That income includes:

  • Member contributions.
  • Capital gains made on investment assets in the fund (such as investment property).
  • Interest on investments.
  • Dividends on shares.
  • Rent on investment property.

2. So that your self-managed super fund can receive member contributions.

3. So that SMSF administration is as easy as possible.

According to the latest Australian Taxation Office (ATO) statistics, more than one million Australians are members of self-managed super funds. That number is steadily growing each year.

It’s likely that you’ll need professional advice for any or all the following aspects to set up your self-managed super fund:

  • Determining your fund’s structure

Your SMSF can either have up to four individual trustees, or a corporate (company) trustee. Trustees are responsible for:

  • Preparing the fund’s investment strategy.
  • Making investments.
  • Accepting member contributions.
  • Paying member benefits.
  • Appointing an auditor who is registered with the Australian Securities and Investments Commission (ASIC) to conduct an SMSF audit.
  • Lodging the self-managed super fund’s annual tax return with the ATO.
  • Keeping the records of the SMSF to ensure compliance with superannuation legislation.
  • Establishing your self-managed super trust deed

This trust deed will be a legal document setting out the rules for establishment, operation and administration of your self-managed super fund. These rules must be compliant with superannuation legislation.

Information contained in the deed will typically include:

  • The name/s of the trustee/s
  • The objectives of the SMSF.
  • Member eligibility
  • Whether the self-managed super fund benefits will be paid as a lump sum or as an income stream.
  • An exit strategy. This should outline the circumstances where the SMSF will be wound up and how member benefits would be paid in those circumstances (e.g. the payment of death benefits).
  • Registering your self-managed super fund

Every SMSF must be registered with the ATO to be eligible for the superannuation tax concessions that are available.

  • Set up the bank account for your SMSF

Your self-managed super fund will need to have a bank account that is separate from its members’ individual accounts. Member contributions are fund income is paid in to this account. Member benefits will also be paid from this account.

  • Creating an investment strategy

An SMSF needs to have a documented investment strategy outlining how it will invest member funds. Fund investment options can include fixed interest, share and property, or related products.

The self-managed super fund investment strategy should consider:

  • The personal circumstances of members (e.g. their age, financial situation and risk profile).
  • The benefits of a diversified investment strategy to reduce risk.
  • The liquidity needs of the fund and how easily its investment assets can be converted into cash. For example, to pay for the retirement benefits of the SMSF members.
  • The insurance needs of fund members.

How we can help

There are multiple factors to consider when deciding whether an SMSF is a good option for you and how to structure it and manage it in the most tax effective way.

Our expert SMSF Accountants would be happy to speak or meet with you to discuss your situation. We’ll take the time to understand your circumstances and provide advice that maximises your financial position.

You can contact us on 1300 883 597. We have offices in Brisbane, Sydney and Melbourne and provide full SMSF services Australia wide via internet, email and phone.

This article is for general information purposes only and has not been prepared with reference to the circumstances of any particular person. You should seek your own independent financial, legal and taxation advice before making any decision in relation to the material in this article.