Setting up your SMSF
Before you start this journey, it’s a good idea to seek advice from your specialist SMSF A-team. For specific decisions, you may need support from a financial adviser, lawyer, accountant or SMSF administrator, estate planning adviser and insurance broker.
Here are five questions to consider during your SMSF set up.
1. What is the right structure for your SMSF?
When establishing an SMSF you will need to choose between having individual trustees (usually each member as trustee) or a corporate trustee (usually with each member as a director).
While it may seem more cost-effective to set up an individual trustee structure, you’ll need to consider other factors, like the difference in administrative penalties for each trustee structure, the ease of administration for a change of trustee/director should a member join or leave the SMSF and the need to keep the ownership of personal and SMSF assets separate.
2. What do you need from your SMSF bank account?
When you sign the trust deed, your SMSF will also need a bank account to hold a nominal amount until you transfer your super across. Kitto says choosing the right bank account is an important decision – look for secure authorisation controls, competitive rates, good app and online functionality and reporting, and seamless transfers.
Macquarie’s Cash Management Account (CMA) is one of Australia’s most popular SMSF bank accounts, with close to 1 in 3 SMSFs choosing it as their SMSF bank account.6 Olivia McArdle, Head of Payments & Deposits with Macquarie Bank, says it’s possible to open a CMA with Macquarie online, provided you’re able to supply the required information, and make that first deposit the same day.
“With an important investment like your super, you want to be confident your SMSF cash hub is secure, competitive and makes managing your fund as easy as possible,” she says.
Kitto says third party authority for adviser-initiated payments can also be valuable. “It’s good to have another set of eyes on a major transaction like a property deposit, with the account holder still in control of authorisation,” he says.
3. Should you transfer all your super into your SMSF?
You may have valuable insurance or defined benefits in your current super. In some cases, it may be worth keeping a small amount in a retail or industry fund. Seek professional advice before you act and if you want to close your current super account.
4. What should your investment strategy consider?
Legally, you must document a strategy setting out your fund’s objectives and the types of investments your fund can make. Your SMSF’s sole purpose is to provide retirement benefits, so consider risks and likely returns, diversification and liquidity.
5. Providing insurance through super to members
This is also an important consideration when planning your investment strategy. Your SMSF can make premium payments for life, total and permanent disability (TPD) and income protection insurance policies, and you can tailor these policies to meet individual member needs.
Learn more about setting up an SMSF