Setting up an SMSF

The main participants

A Self Managed Super Fund must have all the following characteristics:

  • have up to four members
  • all members of the fund are trustees of the fund or directors of the corporate trustee and there are no other trustees or directors (certain exemptions are available for single member funds)
  • no member is an employee of another member unless they are related, and
  • the trustees are not paid for performing their duties as trustees.

Establish a trust deed:

Your Fund is governed by a set of rules known as the trust deed.
For new SMSFs a trust deed is sourced from legal suppliers of Deeds.
Once the trust deed is signed by the trustees and stamp duty (if applicable) has been paid, the governing rules of your Fund are in place.

In addition other paperwork is required.

  • Lodge the notice to become a regulated fund
  • Obtain a Tax File Number and Australian Business Number
  • Allow new members into the fund

Appoint fund trustees

  • The trustees are responsible for ensuring that the fund is properly managed and that it complies with legal obligations. The trustee must abide by certain minimum standards of care imposed by law. The SIS (Superannuation Industry Supervision Act) legislation codifies certain trust law duties and obligations of a trustee.

Types of trustees – determine the preferred model

1. Corporate Trustee – key differences
  • Simplify the administrative responsibilities in the event of a change in membership
  • An additional cost is associated setting up and managing the company
  • It can be a single director corporation
  • This structure is essential if you plan to borrow to invest
2. Individual Trustees – key differences
  • There is no cost setting up or acting as trustees

Members

You must operate in two capacities, one as trustee of your Fund and the other as a member. The Service helps you perform the trustee role and comply with the law. It is the responsibility for the Trustee/s to issue the Member/s a product disclosure statement (PDS) that sets out the features of the SMSF.

Open the fund’s bank account

You will need to set up a suitable cash account or working account for your Fund.
You may use any bank account or cash management trust (CMT) as the cash account for your Fund.

Investment Strategy:

The trustee/s are required to establish and give effect to an initial investment strategy for the fund which has regard for the whole of the circumstances of the fund including:

  • The risk involved in making, holding and realising (and the likely return from) the fund’s investments
  • The composition of the fund’s investments as a whole including the extent to which the investments are diverse or involve the Fund in being exposed to risks from inadequate diversification
  • The liquidity of the fund’s investments having regard to its expected cash flow requirements
  • The ability of the fund to discharge its existing and prospective liabilities

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