SMSF Series Part 3 - 5 Simple Steps

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5 simple steps to set up your self-managed super fund

Part 3 of a series on SMSFs

Welcome to our final blog in our SMSF series!

In Part 1 we discussed the main things you need to know if you’re thinking about having an SMSF, with 10 useful tips.

In Part 2, we outlined the top 8 mistakes we see in running an SMSF, and how to avoid them.

We close out the series by briefly outlining how you can go about setting up an SMSF.

BUT WAIT. Before we continue, an SMSF is not for everybody. I implore you to seek professional advice before you head down the path of setting up an SMSF, so you’re aware of your compliance obligations and all the setup costs.

With over $3 trillion in superannuation, it’s certainly not a lazy pot of money. Here’s what that looks like as a number $3,000,000,000,000. That’s a lot of zeros!

$800 million or so of that is invested via SMSFs. It’s certainly an area of interest for a lot of wealthy investors because of the control, flexibility and transparency SMSFs provide. And it’s very easy to set up an SMSF, if this is of interest to you.

By the time you’re at this point, hopefully, you’ve reached out to a licensed financial planner to assess if one is appropriate for your circumstances. This will ensure SMSF compliance and break down the setup costs for your specific situation.

Picture of couple

These are five simple steps you need to follow to set up your fund.

  1. Set up your fund with up to six members
    This was increased from four members in July 2021, and is a great benefit for bigger families to participate in a single fund. It also provides broader investment opportunities.

  2. Sign your trust deed
    This sets out the arrangement of your SMSF, with all the rules for operation.

  3. Sign your trustee declaration
    This is for all trustees to acknowledge they understand their obligations.

  4. Apply for an ABN and a TFN
    This happens when you register your fund with the ATO.

  5. Roll over your existing funds and start making contributions
    Now’s the time to put your SMSF to work!

Of course, if you’re interested, just drop me a line and I can do all this for you.

In addition to the above, you’ll also need a written investment strategy so the trustees and members have clarity around what you’re investing in. You need to take into account things like diversity, risk, time frames, paying pensions and liquidity. You’ll also need to give some consideration to life insurance.

Typically, SMSF setup costs cover all the compliance measures above but will vary depending on the trust structure, the complexity of the fund, and the level of professional advice you engage. Then, you’ll have ongoing administration fees to cover your annual SMSF compliance requirements, including the ATO supervisory levy, financial statement and tax return prep, and the cost of getting your fund audited. The levy is a consistent cost, but your tax and audit fees will be proportionate to your fund.

Yes, it’s a lot to stay on top of!

It’s important to always keep in mind that the sole purpose of your fund is for the retirement planning needs of members, so you can’t dip into your super for personal reasons or allow members personal benefits before they reach a condition of release.

Your trust deed is like a rule book. It will help guide you on how to run the fund !

If you’re thinking about setting up an SMSF, have questions about compliance or need some help, simply provide a few details below and we can work out if you need an accountant or financial adviser to step you through all the ways to reduce your tax and boost your super! We’d love the opportunity to help you or just answer some questions for you.

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