How to Set up a Self Managed Super Fund (SMSF)

By Jason Fittler 

If you are like me and sick of paying large coporations high fees for the perviliage of looking after your superannuation then a Self Managed Super Fund could be for you.

There are a couple of key point to consider first before rushing in.

  1. Do you have at least $150,000 in superannuation combined with spouse?
  2. Do you want more flexiability in yor investment choices?
  3. Do you want to have more control over your future?

If you have answered Yes to the above questions then a SMSF maybe for you.  Please keep in mind that running a SMSF is not for the faint hearted. There are severe penalities if you breach the requirenments set out in the legislation. So before you start it is a good idea to seek professional advice. Your Financial Planner generally his best skilled to assist you.

According to the Australian Taxation Office, there are four key steps:

  1. Establish the trust
  2. Elect to be a regulated fund, obtain a tax file number and an Australian business number
  3. Prepare an investment strategy
  4. Open a bank account

The Trust Deed

The trust deed sets out such matters as the details of the trustees, how they are appointed, their powers and the conditions for contributions and benefit payments. You must make sure the trust deed is dated and properly executed.

All SMSFs must have trustees and in turn all members of the fund must be appointed trustees. Anybody aged over 18 can be a trustee as long as they have not been convicted for an offence involving dishonesty or are un-discharged bankrupts.

As a trustee, you are legally responsible for the actions of the fund. Your responsibilities include filing an annual tax return, lodging member contributions statements and appointing an approved auditor to complete the annual audit.

Elect to be a Regulated Fund

If you wish to access the benefits of being a super fund such as the tax rate of 15% and being able to accept employer contributions then you need to elect to be regulated by the Superannuation Industry (Supervision) Act (SISA) in order to receive concessional tax treatment.

As trustees, you have 60 days to lodge your election with the Tax Office. You do this by completing an application form to register for the new tax system superannuation entity.

On submitting this form, you will be issued with a tax file number and an Australian business number. Once you have elected to be regulated, then the decision cannot be reversed without winding up the fund.

Investment Strategy

This involves formulating a strategy that takes into account risk, return, diversification, liquidity, cash flow, asset allocation and the ability to discharge existing and prospective liabilities. Your licensed financial adviser will be able to steer you in the right direction.

Open a bank account

You must keep your superannuation assets separate from your personal assets so the fund will need its own bank account.  Note that this account can only be used for superannuation investments and expenses. You cannot short-term borrow from this account. If you do happen to accidently withdraw money from this account you have 30 days to correct the mistake or you will face penalties.

We recommend that your Financial Adviser assist with every step of setting up and running the SMSF. In the long-term the rewards will speak for themselves but it is important that you get it right and stay on the right side of the ATO when running the fund.

Once the fund is step up your will also need to;

  1. Prepare Annual Statements
  2. Lodge annual tax return
  3. Have the fund audited once a year

Again by having a professional assist you with these matters will provide the assurance that no mistakes have been made. 

For more information please contact us on 07 4771 4577.

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