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Setting up a self managed super fund (SMSF)

Our self managed super fund (SMSF) advisers understand the often complex rules and regulations surrounding self managed superannuation options. And make no mistake, there are lots of factors to consider – it’s important to remember that an SMSF may not be the best superannuation option for you.

Bearing this in mind, take a look at the general information and tips that our superannuation specialists have put together– a kind of SMSF factsheet – outlining what you need to know to set up a self managed super fund.

Establishing an SMSF – tips and information 

  1. SMSFs are governed by the SIS Act (Superannuation Industry Supervision Act 1993) which is administered by the Australian Tax Office (ATO).
  2. An SMSF is established by a trust deed which sets out the rules of the fund. The deed is prepared by a solicitor – an accountant or adviser can instruct the solicitor. This document is a key document and should be reviewed regularly to ensure it remains relevant and compliant with legislative changes.
The cost of establishment varies. This is one area where you should not seek to economise – downloading trust deeds from the internet is fraught with danger. It’s worth getting advice on the structure and design of the fund to ensure you get a deed that incorporates all your needs. The tax and estate planning implications can be disastrous if you get it wrong. In Perth, it is possible to obtain a competent deed and achieve full establishment including a corporate trustee for $2,200.
  1. We recommend that you appoint an enduring power of attorney at the same time as establishing a fund, as it covers the scenario of a serious accident or illness preventing a trustee from being unable to act in that capacity.
  2. Get applications for membership from every member. We recommend a corporate trustee be appointed in every case. It allows a fund to continue if a member dies. These documents are typically included in a superannuation register, along with all the necessary establishment minutes, if prepared by a competent provider.
  3. Apply for a tax file number (TFN) and ABN, and elect to be a regulated fund – notify the ATO within 60 days of establishment.  Generally the SMSF is established once the trust deed has been signed.
  4. Provide a Product Disclosure Document and ensure each member has one.
  5. Open a bank account and ensure all transactions relating to the fund go through the account. We suggest you use a cash management account rather than a non-interest bearing cheque account, as the fund will always need to keep some liquid funds available – those funds should be earning a reasonable rate of interest.
  6. Appoint an accountant to prepare financial statements, minutes, tax returns and members’ annual statements.
  7. Appoint an auditor (must be a different person to the tax agent who signs the tax return).
  8. Prepare an investment strategy – this area is generally done badly by trustees. It is not acceptable to choose an investment range of 0 – 100% in cash, fixed interest, property, Australian shares and international shares and think you have it covered.
  9. You need to consider your risk profile, time to retirement, desire to gear, diversification and liquidity. Tax issues are also very important. This is not something you should seek to formulate over a red wine at a barbeque, yet surprisingly that’s the most prevalent source of financial advice. We recommend you seek investment advice from a licensed adviser. If your accountant is also a licensed adviser there may be cost savings in getting this done at the same time as the fund is established. If not, find an adviser you trust and who has specific competence in the SMSF area.
  10. Ensure you have new insurance in place before you rollover your existing superannuation to the SMSF. You don’t want to leave your family unprotected while you are in transition. Review the adequacy of cover. Under industry and retail funds, insurance cover may be limited. In your own SMSF you can fully insure all your risks of death, disability and trauma, providing peace of mind to those with large levels of debt or vulnerable beneficiaries.
  11. Consider your estate plan and decide whether you want your superannuation benefits to be paid directly to a dependant via a Binding Death Benefit Nomination or whether you want your estate to manage the distribution of super fund benefits through your will. Binding Death Benefit Nominations can be permanent (non lapsing) or can be renewable every three years. We ask clients to review this option annually when the accounts are prepared. It’s an inexpensive way of reviewing your estate planning needs.
  12. Remember, monitor your investments, your strategy and your estate plan every year, as a minimum

For more information about self managed super funds (SMSFs), take a look at our ‘SMSF FAQs’ page, or simply contact our SMSF advisers via our online contact form or email.