First home buyers

Key Points to Know Before Setting Up a SMSF

A self managed super fund, also referred to as an SMSF, is a unique superannuation trust structure available in Australia. Distinguishable from standard superannuation funds, members of a SMSF enjoy benefits upon their retirement – and they also tend to be the trustees.

If you’re thinking of setting up a SMSF in Australia, make sure you’re clear on your obligations and requirements. Learn more about the SMSF set up and what’s involved in the smooth and compliant running of a SMSF.

Get Advice from a Financial Adviser

Before setting up a SMSF, it’s a good idea to chat with a financial adviser. A good financial adviser will guide you through the SMSF set up process, outline requirements, identify key benefits and also point out risks.

At Sure Worth Financial in Perth, we’re able to provide tailored advice on the set up and benefits of SMSFs. Taking into consideration your circumstances and goals, our professionals offer insight into whether a SMSF could beneficial for your financial future.

Appointing Trustees

You’re able to appoint one of two trustee structures for your super fund; up to four individuals or a corporate trustee. A SMSF professional will provide advice on the benefits of each type of structure. Responsible for managing the fund’s strategy, investments, benefits, contributions and overall administration, trustees play a vital role in the success of a SMSF.

When appointing trustees, you need to ensure that they are eligible, understand their role, consent in writing and sign the Trustee declaration within 21 days of becoming a trustee.

Creating the Trust and Trust Deed

The trust is an arrangement holding assets for the benefit of others. To create a trust, you need to establish trustees, a trust deed, assets and beneficiaries. A trust deed is a legal document that sets out the rules of your fund, from the fund objectives to member benefits. In order to be valid, the trust deed needs to be signed and dated by all trustees, properly executed according to relevant laws and reviewed and updated as required.

Checking Your Fund is Compliant

To remain compliant, your SMSF needs to be an Australian fund at all times throughout the financial year. If the fund fails to satisfy residency rules, its income and assets may be taxed at the highest marginal rate. If members go overseas for extended periods of time, the residency of the fund may come into question.

In order to be an Australian super fund, a SMSF must meet three conditions:

Established in Australia or with at least one asset located in Australia
The central management and control of the fund is primarily within Australia
The fund either has no active members or its active members are Australian residents holding at least half of the total market value of the fund’s assets or the sum of the amounts payable to active members if they decide to leave the fund

Registering Your Fund with an ABN

Once you’ve set up your fund and all trustees have been appointed, you have 60 days to register it by applying for an ABN (Australian business number).

Setting Up a Bank Account

Your SMSF needs to have its own bank account to accept contributions, rollovers of super and income from investments. It must be separate from individual accounts of trustees and an employers’ bank account.

Establishing an Electronic Service Address

If a SMSF is to receive contributions from employers, it needs to receive the contributions and SuperStream data electronically. To do so, you need to set up an electronic service address. You may be given one by your administrator or you can utilise a SuperStream message solution provider.

Preparing an Exit Strategy

When you’re setting up your SMSF, you also need to prepare for its end. An exit strategy is essential to prepare for unexpected circumstances, including relationship breakdowns, accidents and illness or the death of a trustee.

Make sure that your exit strategy ensures that all trustees can access records, includes specific rules and processes, takes into consideration the costs involved, encourages members to appoint an enduring power of attorney and encourages members to make binding death benefit nominations that are renewed every three years.

Learn More About Setting Up a SMSF

From the initial SMSF set up to refining your exit strategy, Sure Worth Financial provides tailored advice on SMSFs. Find out more about the benefits, processes and requirements of SMSFs with help from our professionals.