A self-managed superannuation (SMSF) gives you control over your retirement savings investments, along with greater flexibility and choice. But with that power comes responsibility.
It’s a significant decision which will affect your future financial security, so before you get started, you should discuss your options with SMSF professionals – including a financial adviser, lawyer, and/or accountant. They can help you make sure you set up your SMSF correctly, and have confidence you’ll meet compliance requirements.
Here are some steps you’ll need to consider.
Step 1. Choose the SMSF members and trustee structure
A super fund is a special type of trust in which a person or company holds assets in trust for the provision of retirement benefits.
Will your fund have an individual trustee structure or a corporate trustee structure? It’s an important decision, as it will impact your compliance obligations and how you manage fund assets.
All SMSFs can have one to six members. An individual trustee structure requires each member to be a trustee, and a corporate trustee requires each member to be a director – however, if you have only one member in an individual trustee structure, you still need at least two individual trustees.
There are additional ASIC reporting obligations with a corporate structure – but it does make it easier to administer asset ownership and deal with changes if a member leaves or dies and there is a change of director.
Once you’ve made this decision, make sure the people you wish to be appointed as trustees or directors are eligible for that role and understand their obligations.
Learn more about the legal obligations of SMSF structures.
Step 2. Organise and sign your documents
Now you can arrange to organise and sign the trust deed and set up the governing rules of your SMSF. Trustees or directors of corporate trustees need to consent in writing to their appointment and decide to accept the members of the fund. This may mean documenting declarations and trustee minutes and preparing a product disclosure statement (if required) with the help of a legal adviser.
As soon as you sign the trust deed, your SMSF may need an SMSF bank account to hold a nominal amount until you rollover or transfer super assets. See Step 4.
Step 3. Register your SMSF with the ATO
You must register your SMSF with the ATO by applying for an Australian Business Number (ABN), as the ATO is the regulator of your fund. If it meets all regulatory requirements, your fund will then be entitled to concessional taxation treatment as a complying superannuation fund. You can also register for GST.
Step 4. Set up your SMSF bank account
Your SMSF bank account is the lifeblood of your fund. It’s where you accept member contributions and transfer your previous super balance, where your investment income (such as dividends) is received and where you pay expenses such as tax or insurance premiums.
“Choosing the right bank account is critical,” says Kris Kitto of Grow SMSF. As an SMSF administrator and accountant, he knows the difference it can make to reporting, auditing, security and visibility.
“It needs to make life easier for the trustees and their advisers,” he says. “That means a fast online setup and good app functionality with speedy transfers.”
He also suggests looking at security measures, including multi-factor authentication and the ability to authorise adviser-initiated payments such as tax bills or a property deposit.
“When you’re dealing with such large sums of money, having another set of eyes on a transaction is essential,” says Kitto.
Olivia McArdle, Head of Payments and Deposits with Macquarie Bank, says Macquarie’s Cash Management Account (CMA) has been a popular choice for SMSFs for many decades.
“If we have all the right information, you can open a CMA for an SMSF in the same day, which is important when you’re coordinating trust deeds and ATO registration,” she says. “Macquarie’s CMA offers real-time banking and transfers and a competitive rate, as well as the opportunity to attach an Accelerator account for a higher on-call cash rate.”
She says advisers and accountants also appreciate the ease of integration and reporting, as well as third-party authority.
“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.