If you have a good understanding of the mechanics of superannuation and a flair for spotting a good investment, you may be thinking about establishing your own SMSF. The initial organisation is not particularly difficult, especially as all the steps required are set out clearly by the ATO (Australian Taxation Office).
However, getting it right is important because only a compliant fund is eligible for tax concessions and it can receive contributions. You could engage SMSF professionals to help you set up the fund but if you prefer to organise the fund yourself, there are important things you must do.
The first thing you must do is choose between having individual trustees or a corporate trustee, each of which differs in terms of the member and trustee requirement, costs, ownership and separation of the fund assets, penalties and succession. These are all critical decisions, which, once made, are very difficult to change.
Next is to choose your eligible trustees or directors, depending on which fund structure you choose. All trustees and directors must consent in writing to their appointment and sign the Trustee declaration. You must keep these documents secure for the life of the SMSF and for ten years after it is wound up.
Now you must create a trust deed; this is the legal document that establishes the rules by which the trust is managed. This must be prepared by someone with the relevant legal qualifications. There must also be a nominal initial contribution of assets to give legal effect to the fund.
Within 60 days of signing the trustee declaration, you must register the SMSF with the ATO by applying for an ABN (Australian Business Number). Now you can open a bank account in the fund’s name. This account will be used to manage the fund operations.
You may also need an electronic service address, which is a special internet address that is different to an email address. Finally, even at the start of this venture, you will also need an exit strategy. Such a strategy reduces the effects of an unexpected event such as a death, a relationship breakdown between the trustees or some other occurrence.
If you still want to go ahead with the SMSF but daunted by the prospect of the day-to-detail now that you have a taste of what is involved, all that is needed is to enlist the assistance of companies such as SMSF Assure to do the administration, while you divert your energies to building a retirement nest egg.
Now think carefully before you decide to go it alone. Many important decisions are needed that can be provided by a range of professions covering accounting, administration, legal, financial and tax advice. Not using their expertise could have a huge impact over your final retirement balance.