5 Steps to set up a Self Managed Superannuation Fund

Create a Trust

First, you will need to register your Self Managed Superannuation Fund with the Australian Tax Office.

This is a requirement which involves creating a trust, establishing your trustees, assets and beneficiaries.

Prepare a Trust Deed

Next, you will need to engage a legal practitioner familiar with superannuation law, to set out the rules and conditions required to operate your Self Managed Superannuation Fund, in accordance with the Superannuation Industry (Supervision) Act 1993.

Trust deeds outline regulations, determine the manner in which accounts are to be calculated, how earnings are to be credited and whether pensions are payable and how. Trust deeds need to be drafted in such a way as to target the objectives of the fund.

In preparing the deed, the following provisions may be included:

• Trustee identification
• When and how benefits can be paid
• Allowable income streams
• Member Investment choice
• Membership criteria
• Trustee rights to make amendments
• Binding death benefit nominations
• Administration of fund reserve account rules
• Instructions for winding up the fund

Sign a Declaration

It is a requirement of a director or trustee of your Self Managed Superannuation Fund to complete (within 21 days of taking up the position), a declaration acknowledging your responsibilities, duties and obligations. The form is available from the Australian Taxation Office and you are required to keep the form for a period of ten years.

Responsibilities outlined in the declaration include:

• Developing and implementing investment strategies
• Demonstrating skill and diligence
• Considering members’ best interests
• Responsible reserve management
• Transparency to members
• Not impeding trustees from performing their duties
• Ensuring SMSF assets are separated from personal and business assets

Lodge an Election Notice

Then, an election notice needs to be lodged within sixty days of the Self Managed Superannuation Fund being established.

The purpose of this? To inform the ATO that the Self Managed Superannuation Fund is aligned with the relevant superannuation legislation and as such, is entitled to the concessional tax rate of 15%.

Failure to lodge such a notice, will deem the Self Managed Superannuation Fund as non-compliant and the fund will be taxed at the highest marginal rate.

Open a cash bank account

Last but not least, in order for the fund to be able to accept investment earnings, rollovers and contributions a cash account is required.

The account will also be needed to administer expenses such as accounting fees, supervision levies, member benefits and tax liabilities.