What is SMSF

A SMSF is a superannuation fund with 4 or less members. Each member must be a trustee of the SMSF, or a director of a corporate trustee of the SMSF. The trustees of the SMSF are ultimately responsible for managing the SMSF.

SMSFs are unique superannuation funds as the members, in their capacity as trustees of the SMSF, have direct control over the investment and management decisions of the SMSF. As a result, with a SMSF you can truly take control of your own superannuation.

To qualify as a SMSF, no member can be an employee of another member, unless they are related and no trustee, or director of the corporate trustee, can be paid for their duties or services as a trustee, or director of the corporate trustee, of the SMSF.

In addition, for your SMSF to receive tax concessions, it must be an Australian superannuation fund. Generally your SMSF will meet the Australian residency requirements if it is established in Australia and all of the trustees reside in Australia. If any trustee or member of your SMSF is planning to live or stay overseas for an extended period, we suggest you seek professional advice immediately to determine if your SMSF will remain an Australian superannuation fund.

A SMSF must at all times be maintained solely for the purpose of providing benefits to the:

  • SMSF members on or after their retirement;
  • SMSF members after their attainment of the prescribed age of 65; or
  • Member’s dependants or legal personal representative on or after the death of a member.

Setting up SMSF

  • Appoint SMSF professionals to help you set up and run your fund such as a tax agent, fund administrator, legal adviser and financial adviser to help with your investment strategy and investments. A tax agent can help prepare your fund’s accounts and its annual financial position and operating statements, complete and lodge your SMSF annual return and provide tax advice.
    A fund administrator can help you manage the day-to-day running of your fund and meet your annual reporting and administrative obligations. A legal practitioner can review and, if necessary, update your fund’s trust deed and a financial adviser can help you formulate an investment strategy.
  • Decide which trust structure to use for your fund – a SMSF can either have a company act as trustee or the members can act as the trustee. The above professionals can help you understand the advantages and disadvantages of either and what is appropriate for your fund.
  • Make sure all the members are eligible to be trustees – only people who are not disqualified are permitted to act as the trustee of an SMSF. A disqualified person includes someone who is an undischarged bankrupt, has been disqualified by a regulator (e.g. the ATO) or subject to civil penalty under the super laws, or convicted of a crime involving dishonesty. A disqualified company includes companies that are insolvent or under administration.
  • Check the residency of your fund – your fund needs to satisfy the definition of an Australian Superannuation Fund at all times during the income year. If a member moves overseas for an extended period this may change its status and the fund could be taxed at the highest marginal rate.
  • Create your trust and trust deed – A super fund is a special kind of trust. A trust is an arrangement where a person or company (the trustee) holds assets (trust property) in trust for the benefit of others (the beneficiaries). The trust deed is a legal document that sets out the rules for establishing and operating your fund – things like the fund’s objectives, which can be a member and how benefits are paid. You will need someone who is legally qualified to do this for you.
  • Appoint your trustees – All trustees and directors need to sign a declaration stating they consent to act as a trustee and that they understand their duties and responsibilities of becoming a trustee or director.
  • Record each member’s tax file number – You’ll need to request each member provide their TFN when establishing the fund.
  • Open a bank account for your fund – To be legally established, your fund needs to hold assets. You need to open a bank account in your fund’s name to manage the fund’s operations and accept contributions and any rollovers of super benefits.
  • Register with the ATO – Once your fund is legally established and the trustee declaration has been signed, you need to register your fund with the ATO. You can then choose if you want your SMSF to be regulated (in order to be eligible for tax concessions), apply for the fund’s TFN and ABN, and register for GST (if required).
  • Prepare your investment strategy – This should provide a framework for making investment decisions. It should be in writing so you can prove your investment decisions comply with it and the super laws. A professional financial adviser can help you with this.

    For further information, please read a booklet ‘Setting up a Self-managed Super Fund which is Prepared by Australian Taxation Office.