A self-managed super fund (SMSF) is a private super fund that you manage yourself. While it can be appealing to manage your own super and investments, it is crucial that it is set up correctly. This will ensure the SMSF is easy to administer, you can receive contributions and you’re eligible for tax concessions.
To help, we’ve put together a straightforward guide on setting up an SMSF for a two-person superannuation fund. However, if you have any questions, please don’t hesitate to get in touch with our business support team.
Can I set up my own SMSF?
There is no legal restriction on setting up an SMSF on your own. However, the rules and requirements are stringent, and failure to comply means that the fund itself is non-compliant, thus rendering all benefits invalid.
Setting up an SMSF is a major undertaking, so you need to make sure you’ve done your research and sought professional assistance. Owen Hodge’s team of Sydney-based superannuation lawyers can help you set up and get the most of your self-managed super fund.
How much does it cost to set up a SMSF?
Generally, a fund set up with individual trustees will cost between $300 and $1000 for the provision and submission of the trust deed and all associated documentation.
Should it be decided to have a sole-purpose corporate trustee, with fund members as directors of that company, there will be costs associated with establishing the company. This will usually be several hundred dollars, including the ASIC fee.
How long does it take to set up a self managed super fund?
SMSFs are regulated by the Australian Taxation Office (ATO). There are numerous paperwork requirements that all need to be prepared, understood, signed and submitted. Generally, this process takes between 3 and 5 weeks. Later, with TFN and ABN at hand, accounts can be opened in the name of the fund trustee. This can take an additional couple of weeks.
Setting up an SMSF: 5 steps
Step 1: Research
Before you start thinking about setting up a self-managed super fund, it’s important that you’ve considered if a SMSF is right for you. SMSFs have many benefits, but if your only aim is to have zero involvement, then you may be well advised to stay with an industry fund. You should also be aware of the following terms: trustee, member, trust deed and corporate trustee, as these will help you to understand an SMSF better.
Additionally, you must understand and know what kind of SMSF you will set up. For example, if you’re a couple, you might opt for an individual trustee structure. This requires 2 trustees minimum, so if one spouse dies, the fund can no longer exist in its current form.
However if you choose a corporate trustee structure, the fund has one trustee – a sole purpose company – and this has two members, but may also have one member. While this is a little more costly at the outset, the future benefits are well worth considering.
We also highly advise speaking to an experienced SMSF administrator or lawyer to help you better understand this.
Step 2: Trust deed & forms
Your chosen SMSF administrator will guide you through the establishment of the trust deed, forms that nominate members, applications to the ATO, and if so chosen – forms to establish your sole-purpose trustee company. This may sound overwhelming, however, proper professional guidance at this point is money well spent.
Step 3: ABN, TFN, accounts & funds
With all ATO requirements met, a Tax File Number and Australian Business Number will be provided for the fund. It is now possible to open appropriate bank accounts, share-trading accounts and so on.
Step 4: Manage your investments
With funds in your accounts, you can now begin to invest. You will have already decided upon an investment plan, and it is important that you act in accordance with it.
Step 5: Ongoing compliance
Your chosen administrator will guide you on record keeping and tax returns, but may also handle all this for you if nominated by you.
Owen Hodge is here to help
If you have any questions about setting up a self-managed super fund, or don’t understand your obligations, please don’t hesitate to contact the team at Owen Hodge. Our business lawyers are here to help. Schedule an initial consultation by calling us on 1800 770 780.
FAQs about setting up an SMSF
Can I transfer existing industry fund balances to my new SMSF?
Yes. Following setup, you apply for an electronic service address so that you can make contributions from payroll and receive rollover amounts from other funds.
Do I need a financial advisor to set up a SMSF?
Technically speaking, setting up a self-managed super fund in NSW can be done completely on your own. However, since SMSFs are regulated by the ATO and everyone’s financial situations are different, it’s highly recommended you get guidance from a financial advisor. You may also wish to involve a commercial lawyer if you are setting up an SMSF and you have a business.
Are SMSFs worth it?
This ultimately depends on your situation, as there are pros and cons of a SMSF. We’ve outline a few below to give you a better idea:
- You can own business real property in an SMSF
- More freedom to invest and better flexibility in investment choices
- Tax benefits
- You can have investments in direct property
- Duties and responsibilities of being a trustee
- Costs of running your fund
- Setting up and managing an SMSF can be complicated if you don’t have the required knowledge
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