Your superannuation is the cornerstone of your retirement plans, so it’s vital to follow the correct steps when setting up a self-managed super fund (SMSF).

An SMSF is a super fund where its members are also the trustees, meaning its members oversee the fund’s operations and its investments.

These funds give individuals greater control over their finances and investments, but also come with additional responsibilities and costs to keep in mind.

You may even face financial penalties for failing to comply with SMSF rules.

Here’s a brief guide to setting up a new SMSF:

1. Choose trustees

First, you will need to choose between having individual trustees or a corporate trustee.

A corporate trustee is the industry-preferred approach because the assets of the SMSF are kept separate from personal assets.

This means that if a member joins or leaves the SMSF, then the fund’s assets remain under the same name.

A corporate trustee is also advantageous for funds with only one member because the member can handle trustee responsibilities through a sole-director company.

However, a single member fund will need two individual trustees (if a corporate trustee is not appointed).

2. Complete tax and legal requirements

As part of the set-up process, you will need to prepare the SMSF’s trust deed, which is a legal document prepared by a lawyer that outlines the rules of the fund.

You will also need to apply to the Australian Taxation Office for a Tax File Number (TFN) and an Australian Business Number (ABN) on behalf of the fund so that it can receive rollovers and contributions.

3. Develop investment strategy

Australian law stipulates that every fund must have an appropriate investment strategy.

When preparing a strategy in line with the member’s needs, make sure you consider:

• Risk
• Liquidity
• Diversification
• Whether fund members should have life insurance.

4. Open bank account

You can open the SMSF’s bank account once you have received its TFN and ABN.

The bank will normally require a copy of the fund’s trust deed too.

Once the bank account is open, you can start to receive contributions from members and/or employers, as well as roll your existing superannuation funds into the account.

5. Avoid penalties

Setting up an SMSF correctly is essential, otherwise you may be hit with financial penalties for a ‘non-complying’ fund.

The penalties for this can be severe, ranging from large fines to loss of tax concessions, so it pays to get a specialist to review your fund and its paperwork.

While a fund can be a lot of work to set up and manage on an ongoing basis, the good news is that there is an easier way to enjoy the benefits of an SMSF.

Benefit from experience

At LDB, we are experts in the establishment, ongoing administration and compliance of SMSFs.

With more than 20 years’ experience in self-managed super, LDB has helped hundreds of people take control of their retirement savings by establishing their own SMSFs.

A discussion with one of our superannuation specialists can help you decide if an SMSF is right for you. Alternatively, we can offer other solutions to support your retirement savings goals.

To get started, give us a call on (03) 9875 2900 or send us details via the contact form below.