What's involved with an SMSF in Australia?

Set up an SMSF

What’s involved with an SMSF in Australia: So you’re thinking about starting your self-managed super fund.

That’s great, but are you aware of what’s involved?

So let’s take a quick look at a typical SMSF.

When you first set up, you need to:

  • Decide on fund members and trustees
  • Establish the trust and trust deed
  • Set up a bank account
  • Register with the ATO
  • Create your investment strategy
  • and include a plan for when your SMSF ends.

There’s more to consider once set up, including:

  • Rolling over of existing super
  • Organising employer contributions
  • Accepting contributions within limits
  • Making investments without breaking rules
  • Regularly reviewing the investment strategy
  • Documenting and maintaining records for up to 10 years.

Then, each year you need to:

  • Value assets
  • Prepare accounts and financial statements
  • Appoint a registered Self-managed super fund auditor
  • Lodge the annual return
  • Pay the self-managed super fund levy
  • Any tax that’s due.

Making super payments

When you start making payments, you need to:

  • Decide if any assets need to be sold
  • Ensure minimum payments are met each year
  • And you may also need to:
  • Appoint an actuary
  • Withhold tax
  • Give payment summaries to members as well as the ATO.

When the fund is finished

Finally, when the fund is finished, you need to:

  • Get a final audit
  • Lodge your final return
  • Pay any outstanding tax
  • Payout or rollover all of the assets
  • As you can see, there is a lot involved.

Before you decide to start a Self-managed super fund, you need to consider whether you can manage everything or whether you are prepared to pay self-managed super fund professionals to help.

But remember, even if you have professionals help, SMSF trustees are ultimately responsible for their funds.

You may want to seek some professional advice to help you decide if a self-managed super fund is right for you.

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SMSF trustees – individual or corporate

When you set up your SMSF, you need to decide on the type of trustee for your fund.

Your fund can either have individual trustees or a company as the trustee of the fund.

All members must play an active role.

Whichever choice you make, each SMSF member must play an active role in managing the SMSF because:

With individual trustees, all members must be trustees, and with a corporate trustee, all members must be directors of the company.

Which type of trustee will suit you best?

Let’s have a look at some of the differences:

Single-member funds

If you are the only member of your fund, you still need individual trustees.

So you plus one other person who is willing to be a trustee and not a member.

If you have a corporate trustee, you can be the single member and the company’s sole director.

Ownership of fund assets

ownership of fund assets must be recorded in the name of all trustees on behalf of the fund.

For individual trustees, every trustee’s name must be listed.

So if a member leaves or joins the SMSF, you’ll have to change the ownership documents.

Only the company name is listed for a corporate trustee, so even if there is a change in SMSF members, you won’t have to change the ownership documents.

Costs

Whichever way you go, there are costs and fees involved in setting up an SMSF.

It may cost a bit more to set up a corporate trustee but, that might be a small price to pay compared to the cost and effort involved in changing ownership documents.

Penalties

If your SMSF breaks the super rules, each trustee can be fined thousands of dollars.

On the other hand, having individual trustees will cost more in fines because each trustee is fined the penalty.

If you have a corporate trustee, it only receives one penalty, and the directors share the cost between them.

It’s a good idea to discuss the advantages and disadvantages of both types of trustee structures with your SMSF advisor before you establish your SMSF.

For more information, you can Contact Us and seek our professional advice.

 

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