How to establish a SMSF
Setting up a SMSF is not a particularly difficult or onerous task. In fact, it is quite simple if trustees are able to follow along with a few key steps and ensure they are organised.
The majority of people will use the services of either an accountant or an adviser to assist them – and that is absolutely fine – however it is not absolutely necessary. There are many online SMSF setup services that provide an ‘SMSF establishment kit’ along with instructions on how to finalise a SMSF setup.
Establishing an SMSF will generally follow these steps:
Decide who the members of the SMSF are going to be. Remember, there can be up to 4 members, and all members of a self managed super fund also need to be trustees (or directors of the corporate trustee). As such, you each person needs to be eligible to be a trustee and is not a ‘disqualified person’. See our What is a SMSF page for this list. As part of the setup kit, each member will need to sign a form providing their consent to be appointed as a trustee (and declaring they are not a disqualified person), along with applying for membership of the fund.
Each member of an SMSF will need to sign an ATO declaration, which has the intent of acknowledging that they understand their responsibilities of being a SMSF trustee. The declaration itself will contain information with regard to the fund’s reporting and ATO lodgement requirements, record keeping, investment restrictions, and duties of the trustees.
The trust deed is arguably the most important document of your SMSF, as it creates the existence of the fund, and sets out its governing rules. The Trust deed will be included in the setup kit, and needs to be executed (signed and dated).
This is very important, as this election essentially enables the fund to receive the tax concessions available to superannuation funds, and for employers (and self employed) to claim tax deductions for any contributions into the fund.
The new SMSF will need a bank account. This is where employer and personal contributions will be made into, and where expenses and benefits will be paid from, along with funding the investments that the fund will make.
The bank account will be in the name of the trustees, as trustee for the fund.
So for example:
James Sample & Jill Sample ATF Sample Super Fund
or with a corporate trustee:
James Sample Pty Ltd ATF Sample Super Fund
Funding the new SMSF bank account will generally be in the form of:
(a) a rollover of superannuation balance(s) from other super funds, such as an industry fund or a retail super fund, and/or;
(b) contributions into the fund, either as concessional (such as employer contributions) or non-concessional contributions such as a lump sum.
And finally, the creation and execution over time of an investment strategy for the new self managed super fund. This is a very important step, and one that if done correctly, can help with the actual investment process.
Once here, trustees are past the setup stage, and are into the ongoing management phase of the self managed super fund.
Now whilst these steps above are fairly straightforward, there are some other significant issues to consider when setting up a SMSF that are not covered here. You wont find them on the ATO website or in any setup list – they only come from experience.