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How to Set Up a Self-managed Super Fund

by Melissa Lawson
SMSF Macleod

If you’re serious about saving up for your retirement, a self-managed super fund (SMSF) may be right for you. A SMSF is a private super fund that you’re in charge of, making you the trustee. SMSFs can have up to six members and they allow you to choose your investments and insurance.

SMSFs are appealing for many reasons, but mainly for the freedom and flexibility that they allow their members. Although it’s a heavily regulated industry, SMSFs give people the chance to have complete control over their retirement funds and be in charge of their futures.

Running a SMSF comes with a lot of work and responsibilities, and you will be held accountable for all of the fund’s decisions. However, if you still think that it’s the right option for you, it’s important that you go about setting up your SMSF properly. Doing so will increase your chances of successful and profitable experience, and save you from getting on the ATOs bad side. Here are the 6 steps you must take before setting up your SMSF and taking charge of your future.

Establish a trust

The first thing you need to do when setting up your fund is to establish a trust. This is how you register with the Australian Taxation Office (ATO) and put everything in place for the rest of the process. To establish a trust, you must have the following:

  • Trustees
  • Assets
  • Identifiable beneficiaries
  • Intention to create a trust deed

Finalise the trust deed

After the trust has been established, you’ll need to finalise the trust deed. The trust deed states the terms and conditions of the fund and how it will be managed, and must be agreed to by all members. It should be prepared by someone who has extensive knowledge of superannuation law, such as a tax agent or accountant.

Tax Agent Macleod

The trust deed can contain provisions such as:

  • The income streams it can pay
  • When and how benefits can be paid
  • Investment choice availability
  • Who will receive benefits in the event of a members death
  • How to establish fund reserve accounts

Although it is possible to amend a trust deed, this can only be done in line with the rules of the original deed.

Sign a declaration

All trustees or directors of corporate trustees must sign a declaration that states they understand and accept the rules and responsibilities of the SMSF. This must be completed within 21 days of becoming a trustee and done so with an approved form from the ATO. You must hold onto this form for at least 10 years and have it ready to present to the ATO if requested.

Lodge an election with the ATO

60 days after the SMSF has been established, an election to be regulated by the ATO must be lodged by the trustees. The purpose of the election is to let the ATO know that the SMSF will be subject to the relevant superannuation legislation and be entitled to a 15% concessional taxation treatment.

Set up a cash account

Every SMSF must have its own bank account that is separate from its member’s accounts. This account will be used to receive all member contributions and pay their benefits. The ATO will need to be made aware of the details of this account and it will need to pay expenses such as accounting fees and taxation liabilities.

Work with professionals

Setting up and managing a SMSF takes a lot of work, and we recommend that you enlist the help of superannuation professionals to help you out. They will be able to help your fund stay in line with the requirements set forward by the ATO and avoid fines and other disciplinary measures. Let’s have a look at some of the benefits of self-managed super funds.

Getting your SMSF set up the right way is the key to ensuring the smooth running of your fund. Putting in the work early on will save you from having to spend time and money amending your mistakes in the future, and make your transition into a new role as a SMSF trustee as easy as possible.

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