How to Set Up a Self Managed Super Fund? Costs, Work

If you’ve decided that an SMSF is the right choice for your retirement savings, the next step is to set it up. Here’s an overview of the key steps involved:

1. Choose your SMSF structure

Choosing the trustee structure is one of the first choices you will have to make when establishing an SMSF. Learning how to set up a self managed super fund begins with this decision. There are two primary alternatives available to you:

Individual Trustees

Families or small groups of trustees frequently choose this option. All fund members must be trustees, and each trustee bears personal responsibility for overseeing the SMSF. Although they are typically less expensive to set up, individual trustees run the danger of being held personally liable for noncompliance.

Corporate Trustee: 

An organisation that serves as the SMSF’s trustee is known as a corporate trustee. If you wish to reduce your personal liability, this structure is perfect because it provides superior asset protection. 

2. Appoint Trustees and ensure eligibility

All trustees of an SMSF must meet certain eligibility criteria:

Residency

All trustees must be Australian residents.

Trustee Declaration

Each trustee must sign a Trustee Declaration, agreeing to adhere to self managed super fund rules and obligations.

Fit and Proper Person

Trustees must have the necessary skills and experience to manage the fund effectively.

You must ensure that all members are also trustees if you choose the individual trustee structure. If you opt for a corporate trustee, the company will act as the trustee, but the company directors must be members of the SMSF.

3. Create a Trust and Trust Deed

An SMSF must operate as a trust, and setting up a trust involves two main components:

Appoint Trustees

You must formally appoint the trustees who will manage the SMSF.

Trust Deed

The trust deed describes the operational guidelines of the fund. It outlines the rights and obligations of trustees and members, as well as the investments that are allowed and the management of the fund. This document is essential to the SMSFs efficient operation and must abide by the law.

4.Create an SMSF Account.

Your SMSF must be registered after the trust deed is finalised. To do this, you have to:

Apply for an Australian Business Number (ABN)

Your SMSF will need an ABN to operate legally.

Obtain a Tax File Number (TFN)

Your fund must have a TFN to ensure that it can be taxed correctly.

Register with the Australian Taxation Office (ATO)

The ATO regulates SMSFs, and registration with them ensures your fund meets the necessary legal requirements.

5. Open a Bank Account

Your SMSF must have a separate bank account. This account will be used to manage contributions, income, and expenses related to the fund. It is important to maintain a clear separation between your personal finances and the fund’s finances.

6. Develop an Investment Strategy

Every SMSF must have a written investment strategy that guides the fund’s investment decisions. This strategy should:

• Align with the long-term goals of the fund (e.g., retirement savings).
• Reflect the risk tolerance of the fund’s members.
• Ensure that assets are varied across different investment types to reduce risk.

The investment strategy must be reviewed regularly to make sure it remains appropriate as the financial situation of the fund’s members evolves.

7. Obtain an Electronic Service Address (ESA)

To streamline the contribution process, your SMSF will need an Electronic Service Address (ESA). The ESA is used to receive contributions through SuperStream, a mandatory government initiative that requires employers to make contributions electronically.