5 Steps for an SMSF Setup in Sydney
One thing you’ll learn about us here at SMSF Australia is that we love everything related to super. And we love it, even more, when individuals approach us asking us about the process of setting up their self-managed super fund.
This guide will help you know what to expect and what you should do if you have decided that an SMSF suits you.
Before we proceed to the process of an SMSF Setup, let’s first cover a few things you need to know.
A super fund is a special type of trust that is set up and maintained solely for the purpose of providing retirement benefits to the fund’s members/beneficiaries.
To create a self-managed super fund, it must have the following:
- Trustees or Directors of a Corporate Trustee – Not everyone is eligible to be a trustee. To qualify as a trustee or director of an SMSF, the member must be 18 years old or above (and not under a legal disability) or not a disqualified person (e.g., has outstanding tax or super affairs, unpaid tax debts, etc.)
- Beneficiaries – The Directors of the Corporate Trustee are also members who become beneficiaries of the fund upon retirement.
- Governing Rules (SMSF Deed)– An SMSF deed is a legal document that outlines how the fund will be established and how it will operate and be administered.
Creating and executing the SMSF Deed will legally establish the fund.
- Assets – An SMSF must hold assets to be legally established. Members can build on the assets held by the fund through contributions, such as transferring money or assets to the fund. Trustees must ensure that the assets are held separately from any other entities or investments and that the SMSF has clear ownership of the assets.
Steps for an SMSF Setup in Sydney
Note: This general guide applies to any individual who wishes to set up their SMSF.
Step 1: Choose an SMSF Structure
The first step to setting up an SMSF is choosing how you will structure the fund. An SMSF can be structured using an individual or corporate SMSF trustee structure.
With an individual structure, each member of the SMSF acts as the trustee, while with the corporate structure, a company acts as the fund’s trustee and the members are the directors.
Here at SMSF Australia, we always recommend corporate trustees as this structure provides numerous long-term benefits for the fund’s members. If you want to know more about these advantages, you can always reach out to our SMSF Accountants.
Step 2: Create an SMSF Deed
Once the trustees/directors of the fund are appointed, the next step to setting up an SMSF is to create an SMSF deed.
As mentioned above, the SMSF deed must be created and executed for the fund to be legally established. The deed should include the names of the members or trustees, the fund’s objective, and if the benefits will be paid as lump sums or as income streams.
Since this legal document sets out the rules and conditions for how the SMSF will operate, the SMSF deed must be well-drafted. Someone competent who understands laws relating to superannuation, like an SMSF lawyer, is the best person to approach when creating an SMSF deed.
Step 3: Sign a Declaration Form
The appointed trustees of an SMSF must sign a declaration form stipulating that they understand their obligations, duties, and their responsibilities as the fund’s trustee/director. The declaration must be completed in the approved form from the ATO and should be signed within 21 days of the trustee’s appointment.
The signed declaration form should be kept at least 10 years after the SMSF has wound up.
Other roles and responsibilities of SMSF trustees include:
- To formulate and implement an investment strategy
- To responsibly manage their reserves
- To ensure that the SMSF assets are kept separate from their personal/business assets
- To act honestly in all matters related to the SMSF
- To keep the best interest of the members top priority
- To not do anything that could hinder other trustees from performing their functions
To put simply, it is the responsibility of the fund’s trustees to ensure that the SMSF complies with the SMSF deed and the rules under the Superannuation Industry (Supervision) Act 1993 (SISA).
Step 4: Register the fund with the ATO
Once the fund is legally established, it must be registered with the ATO within 60 days. To register with the Tax Office, the trustees (or an SMSF accountant) will need to apply for an Australian business number (ABN) and a tax file number (TFN) for the SMSF.
Directors of the SMSF who are not directors of other companies are required to apply for a Director’s Identification Number (DIN) through the Australia Business Registry Services.
Once submitted, the fund will then be subject to the superannuation legislation regulations and entitled to a 15% concessional taxation treatment, which applies to complying funds.
Without a lodgment, the ATO will tag the SMSF as a non-complying fund and tax its assets and income at 47%.
Step 5: Set up a bank account
Finally, the trustee must open a cash account for the SMSF. This bank account will be used to receive all member contributions and also payout all member benefits. The same account will be used to pay expenses related to operating the SMSF (e.g. accounting fees, tax liabilities, etc.)
Establishing your SMSF correctly is vital if you want to be eligible for tax concessions under the super law and to ensure that your fund is compliant. The surest way to do this is to work with professionals to guide you through the SMSF setup process. The ATO website is also a great resource to learn more about setting up an SMSF.
Need help with an SMSF Setup in Sydney?
Our SMSF Accountants in our Sydney office are happy to assist you in setting up your self-managed super fund.
When you engage with us, we can help complete and organise legal and compliance documents, as well as apply for ATO registrations. We can also assist in preparing and submitting rollover paperwork if you have existing super accounts that you would like to transfer to your new SMSF.