Having your own SMSF can be personally and financially rewarding, as it enables you to build a solid foundation for your future. But to achieve this, the fund must be set up correctly from the start. Getting the right set up now will prevent compliance penalties later and help you pass your annual SMSF audit. Additionally, SMSFs must be set up correctly to be eligible for relevant tax concessions. (In Australia, member contributions and fund earnings are taxed at 15% up to certain limits.) It is possible to set up an SMSF yourself, but there’s a lot at stake and compliance rules can be complex and strict. It’s usually safer to get professional help.
Getting Help To Set Up An SMSF
Depending on your SMSF and investment knowledge and expertise, you may need an accountant, financial adviser and possibly lawyer to help set up your fund.
There are two main types of SMSF service providers:
- specialists that provide SMSFs with advice on one specific area, such as legal, taxation, auditing, administration or investment
- one-stop shops that integrate all the above SMSF services.
Vault is here to provide that one-stop shop from start to finish, providing a full-service establishment, administration, compliance and ongoing investment advice through our financial planning team at Vault Financial Group.
The SMSF Set-Up Process
Whether you set up the fund yourself or get professional help, you should understand the set-up process. As an SMSF trustee, you’re responsible for the fund’s compliance with superannuation and taxation laws.
These are the steps to setting up your SMSF:
Step 1: Meet Eligibility Criteria For An SMSF
The fund and its members must meet three residency conditions:
- The fund must be established in Australia or have at least one Australian-based asset.
- The fund must be centrally managed and controlled in Australia.
- Active fund members must be Australian residents who hold at least 50% of its total assets.
Your SMSF must meet these conditions to qualify as an Australian super fund and be eligible for relevant tax concessions. In the May 2021 Federal Budget, the government announced plans to relax SMSF residency requirements. Members will be allowed to contribute to their super while overseas temporarily for up to five years. This is expected to start on 1 July 2022.
Step 2: Choose Your SMSF Structure
An SMSF must be set up as a trust – where trustees manage assets on behalf of beneficiaries (SMSF members). Every member must be an individual or corporate trustee. If you choose a corporate trustee structure, each member must be a director of the company, and the company must be registered with ASIC. Fees will apply to this structure, but also has advantages over the individual trustee structure. All trustees are responsible for the fund’s compliance with superannuation and taxation laws. They must submit a signed declaration to the ATO stating that they understand their obligations.
Step 3: Create Your SMSF Trust Deed
An SMSF trust deed is a legal document that outlines how the fund will be established, operated and administered.
This deed must include:
- the names of all members/trustees
- the fund’s objectives
- whether member benefits will be paid as lump sums or income streams.
All members and trustees must sign and date the trust deed.
Step 4: Apply For An ABN And Register The Fund
You must register your SMSF with the ATO within 60 days of establishing the fund. You can do this yourself or have a tax professional do it for you. If the ATO approves your application, it will provide a tax file number for the fund.
Step 5: Set Up An SMSF Bank Account
Your SMSF must have a bank account that is separate from members’ individual accounts. This account is used to receive member contributions and pay member benefits.
Want Help Setting Up Your SMSF?
To ensure your SMSF is strong and compliant from the start, get help from the best. Contact our experienced team at Vault to discuss setting up your SMSF.