Setting Up Self-Managed Super Funds

The self-managed superannuation funds or SMSFs are private superannuation funds that can have a maximum of six members. While super funds can be set up on your own, it is advisable to seek professional help.

Your employer will pay the mandatory superannuation into the SMSF. But the responsibility for managing the investments in the fund rests on you and there are strict rules and regulations concerning the SMSFs.

Setting up an SMSF is complex, but here are the steps you should follow diligently to get started.

A Trust needs to be established

The first step involved in the process of setting up an SMSF is to establish trust. A trust should have the following components –

  1. Trustees (including a corporate trustee)
  2. Assets
  3. Identifiable Beneficiaries and the
  4. Intention to Create a Trust

Get Hold of the Trust Deed

The Trust Deed clearly spells the rules under which the SMSF will work. So, you must arrange for a well-drafted Trust Deed which should be prepared by someone who has the professional experience to do the job. The person preparing the Trust Deed should be well-versed in superannuation law. They should provide maximum control and flexibility for the Trustees. After the completion of the Trust Deed, it should be executed by the Trustee as per the rules of the state.

Signing the Declaration

If you are the Director of the corporate trustee of a self-managed super fund, you will be required to sign a declaration form stating the duties and obligations as a Director. The declaration must be made in the prescribed format and submitted within 21 days of becoming a trustee. The completed declaration must be kept for 10, years and should be made available to the ATO, whenever requested for.

An election must be lodged with the Regulator

Within two months of setting up an SMSF, the trustees must go for an election, regulated by the ATO. The election is irrevocable and ensures that the SMSF complies with the provisions of superannuation laws. The SMSF also gets a concessional tax treatment of 15%. However, if there is no election, then the SMSF will be taxed at the highest marginal tax rate.

A cash account should be opened

The trustee of the SMSF is required to open a cash account to enable the fund to accept all contributions and earnings from investments. That account is also responsible for taking care of expenses such as accounting fees, taxation liabilities, member benefits, and supervisory fees.

How would I know if I should have an SMSF?

It is a very pertinent question but, in reality, it is difficult to know. One would need at least $200,000 to make it cost-effective. However, one should seek professional advice before starting an SMSF as there are some strict requirements for managing an SMSF.