Considering establishing an SMSF?

Setting up a Self-Managed Superannuation Fund (SMSF) requires careful planning and adherence to regulatory requirements. Here’s a checklist to guide you through the process:

Pre-setup considerations

1. Research and education

• Understand the roles and responsibilities of SMSF trustees.
• Educate yourself about SMSF regulations, investment options, and taxation implications.
• There are various written resources available online to help with this – and to supplement these, we run regular seminars both in person at our PKF Newcastle office, as well as online, for those who are SMSF Trustees, or thinking of becoming one. If you prefer face-to-face learning rather than reading, or would like the opportunity to ask questions in a very safe space, so you can feel comfortable to ask even the ones you fear might be ‘silly’, we’d love you to join us.

2. Financial planning 

• Assess your financial situation and retirement goals to determine if an SMSF is appropriate. 
• Seek professional financial advice to evaluate the suitability of an SMSF for your circumstances.

Setup process

1. Decide on your trustee structure 

There are two trustee structures to choose from:

• Individual trustees: two to six individuals who act personally as trustees, or;
• Corporate trustees: a trustee company with one to six directors.

The number of individual trustees, or directors of the corporate trustee, will depend on whether your SMSF is a single-member or a multi-member fund.

It is generally recommended to use a corporate trustee due to the following advantages:

• Its long-term benefits, as a company continues even after the resignation or death of a director.
• A corporate trustee provides limited liability for the directors. This ensures litigation against the trustee of the SMSF is generally limited to the assets held in the name of the corporate trustee and does not extend to the directors (unless they are fraudulent in their duties).
• If an SMSF has a corporate trustee, ATO penalties for breaches of the superannuation law are imposed on the company and not each director. With individual trustees, penalties are imposed on each individual.

2. Engage an SMSF professional

Once the trustee structure has been determined, you will need to provide your SMSF professional with specific information for the setup, including:

• Proposed Name of Fund.
• Proposed name of the corporate trustee (if using a company).
• Director Identification Number for all directors (if using a company). 

Once the SMSF professional has all the required information they will prepare the establishment documentation for signing.

3. Fund establishment

The SMSF professional will apply for a Tax File Number (TFN) and an Australian Business Number (ABN) for the SMSF. This also registers the SMSF with the Australian Taxation Office
(ATO). 

Before the ATO issues a complying status for the new SMSF, they will complete their own checks. This process can take over four weeks and may include:

• Checking for any personal and associated entities outstanding ATO payments and lodgements.
• Checking the members taxation history and whether they are fit to be a trustee of an SMSF.
• Calling the members to check identification and to ensure they understand their responsibilities as a trustee.

4. Open a bank account for the SMSF 

A bank account in the name of the SMSF needs to be opened. This is for managing contributions, investments and expenses. To open a bank account the trustees will need to provide the bank with the original or certified copy of the trust deed.

5. Investment strategy

Develop an investment strategy that aligns with the fund’s objectives, risk tolerance, and members’ retirement needs. Document the investment strategy and review it regularly.

6. Initial contributions and rollovers

Once the bank account is established and the ATO has made the SMSF complying it is now time to transfer existing superannuation benefits into the SMSF bank account or make initial contributions. 

Rollovers are processed electronically via a system called ‘SuperStream’. Your SMSF professional can initiate this process but will require further information from you. 

You should consider any existing insurance policies in your superannuation account before rolling over any money to the SMSF. 

Rollovers should only take up to three days to occur, however, this could take longer due to additional information and identity checks required by the transferring fund.

7. Insurance consideration 

Review the need for insurance coverage within the SMSF. Consider insurance options such as life insurance, total and permanent disability (TPD) and income protection.

As with any major financial decision, you should get independent, unbiased advice from a financial planner or professional. A good place to start is to contact the PKF SMSF specialist division.