Self-managed Super Funds differ from regular superannuation investment funds because all members (SMSF funds can have up to 4 members) act as trustees. This means members have the authority to decide how the fund operates and make key investment decisions.
Trustees are also responsible for complying with all legal and statutory requirements. As a trustee of the fund, you are open to personal litigation if the fund is not run properly.
To protect yourself and your financial future, it is important that you do research on how to set up a SMSF and take the necessary steps to establish a thorough and well-thought out plan.
How to set up a SMSF in 9 steps
Step 1: Enlist the help of professionals
The first step is to enlist the help of professionals to guide you along the way.
You should consider getting the experts involved right from the start. Those first decisions you make on how to set up your SMSF could affect their ability to help later on.
You should be talking to professionals such as:
- lawyers, who can prepare and update your fund’s trust deed and advise you on other legal matters
- financial adviser, who can help you prepare, implement and review your fund’s investment strategy as well as advise you on insurance products.
- accountant and registered tax agent, to help set up your fund’s financial systems, provide taxation advice and prepare and lodge annual returns
- a fund administrator, who can help you look after the day-to-day running of your fund to meet your reporting and administrative obligations.
- an auditor, who must be SMSF approved, to review and sign off your fund’s activities each year
- Mortgage broker, who can advise you on SMSF borrowing and how to use your fund to buy an investment property
Step 2: Prepare an investment strategy
As a member of a SMSF, you can control how and where you invest your funds. Before you start investing, you must prepare a strategy for your fund considering all of your members’ needs.
One of the advantages of choosing an SMSF fund is that you can use it to invest in real estate. To kick-start your superannuation investment property strategy, it is a good idea to talk to a mortgage broker who can advise you on SMSF borrowing, which are the products most suitable for your needs, and the best way to structure your home loan.
You can also get a home loan report in 3 easy steps via our website, which includes a free consultation with a mortgage broker.
Are you looking for a superannuation investment property? Getting matched with personalised investment properties is easy with Property Market Investor. Simply answer a few questions and we can send you opportunities tailored to your needs.
Step 3: Choose a trustee structure
You need to decide whether you and your fellow members will each be an individual trustee or you will use a ‘corporate trustee’. The structure you choose can have several lasting implications including the rules you need to abide by, costs, and how you administer the fund. Each structure has its own pros and cons, so it’s important you consider each option carefully prior to establishing your fund.
Step 4: Obtain a trust deed
A trust deed is a legal document that sets out the rules for the operation of your fund. Along with superannuation laws, this deed will govern how your fund needs to be operated.
Step 5: Sign trustee declarations
Within 21 days of becoming a trustee in a SMSF, you must sign a trustee declaration. By signing this form you are acknowledging, amongst other things, your general duties and responsibilities as a SMSF trustee, the general rules that apply to the running of your fund, and your legal and other obligations.
The Australian Taxation Office (ATO) runs free trustee education courses that you can undertake before signing this declaration.
Step 6: Register with ATO
Your SMSF needs to be registered with the ATO within 60 days of being established.
You will need to register your fund for GST if you predict it will have an annual turnover of more than $75,000 pa. This registration must be completed within 21 days after becoming required to register for GST.
If your fund is going to make lump sum payments to members under 60 years of age, you may also need to be registered for PAYG withholding tax.
Step 7: Apply for an Australian Business Number (ABN)
You will also need to apply for an Australian Business Number (ABN) at the Australian Business Register and elect for your fund to be regulated. This way your SMSF will be eligible for the superannuation tax concessions.
When completing the ABN application you should also ask for a tax file number (TFN) for your fund.
Step 8: Open a bank account
Your SMSF will need a bank account to be set up under the name of the trustees, which needs to be fully independent from personal or business assets. This account will be used solely for SMSF related matters, such as to receive dividends from investments, pay fund related expenses, or accept cash contributions
Step 9: Appoint an auditor
The final step is to appoint an independent auditor, who must be SMSF approved, to review your fund’s activities each year.
Get the best advice with one of our trusted finance experts today.