Self Managed Super Fund

Setting up a Self Managed Super Fund

Getting your Self Managed Super Fund started

It's important to set up your fund correctly so

• it's a complying super fund and qualifies for tax concessions
• you avoid penalties
• your fund is able to pay specific benefits
• it's as easy as possible to administer

A Self Managed Super Fund professional can help you set up your fund.
For example:

• A legal practitioner can draft your fund's trust deed
• An accountant or administrator can help you organise the paperwork and register your fund with the Australian Taxation Office
• A financial adviser can help you prepare an investment strategy.

Many Self Managed Super Fund Professionals also offer packages or kits to make the process easier. If you purchase a package or kit, it's important to make sure the trust deed complies with the latest changes to the law and is unique to the following:

• Your fund
• Its objectives
• The members' circumstances.

If you use a Self Managed Super Fund Professional to help you set up your fund, you're still responsible for making sure it's done correctly.

A Self Managed Super Fund is a Trust

As all Self Managed Super Funds are trusts, there are certain steps you need to follow under trust law to set up your fund.

A trust is an arrangement where a person or company (the trustee) holds assets (trust property) in trust for the benefit of others (the beneficiaries). A super fund is a special type of trust, set up and maintained for the sole purpose of providing retirement benefits to its members (the beneficiaries).

To create a trust, you need to have the following:

• Trustees
• Property (assets)
• Identifiable beneficiaries
• The intention to create a trust.

You also need to have a trust deed prepared for the fund.

Obtaining a Trust Deed

A trust deed is a legal document that sets out the rules for establishing and operating your fund. Together with the super laws, they form the fund's "governing rules" and detail the following:

• The powers, duties and responsibilities of the fund's trustees
• The rights of the members

A Self Managed Super Fund Professional can help you organise a trust deed for your fund, but as it's a legal document, you need to make sure it's prepared by someone qualified to do so.

The trust deed covers areas such as:

• The fund's objectives
• Who the trustees are
• Who can be a trustee
• How trustees are appointed or removed
• Who can be a member
• When contributions can be made
• How benefits can be paid (pension or lump sum) within SIS Act requirements
• When benefits can be paid
• How to appoint professional advisers (such as an auditor)
• The procedures for winding up the fund

The trust deed needs to be tailored to your fund and correctly drafted to meet its objectives and the members' needs (for example, allowing for the payment of specific benefit payments).
If your fund has individual trustees, the trust deed needs to state that the fund's sole purpose is to pay retirement benefits.
All trustees need to sign and date the trust deed and ensure it is properly executed according to state or territory laws.

All trustees are bound by the trust deed and are equally responsible if its rules are not followed, so it's important that all trustees understand the contents of the deed.

As a trustee, you need to make sure the trust deed is regularly reviewed and updated so it complies with the super laws (including changes to the law) and the members' needs.

Appointing Trustees

Once you've decided on the type of trustee(s) for your fund, the next step is to appoint them. New funds usually appoint trustees under the fund's trust deed.
Remember, for your fund to be a Self Managed Super Fund, generally all members of the fund need to be trustees or directors of the corporate trustee.
All trustees and directors need to consent in writing to being appointed and you need to keep these records for at least 10 years.

Holding Fund Assets

To be legally established, your fund needs to hold assets. The trustees hold the fund's assets in trust for the benefit of the members.
A Self Managed Super Fund is usually established by making a contribution to the fund at the same time as the trust deed is executed. A contribution can take the form of money or a transfer of certain assets, for example listed shares and securities.
You need to open a bank account for the fund before a member can make a cash contribution.

Ownership of your fund's assets
One of your trustee responsibilities is to ensure the assets of the fund are protected.

Assets should be recorded in a way that:

• Distinguishes them from your personal or business assets
• Clearly shows legal ownership by the fund

This can protect fund assets in the event of a creditor dispute and prevent costly legal action to prove who owns them.

Fund assets (other than money) should be held in the name of one of the following:

• The individual trustees as trustees for the fund
• The corporate trustee as trustee for the fund

The assets can't be held in the name of a trustee or member as an individual.

Examples
The Jones Family Superannuation Fund has two individual trustees, Bill and Penny Jones.
Where legally possible, the fund's assets need to be held in the name of Bill and Penny Jones as trustees for the Jones Family Super Fund.

In some states, where it's not possible to use the name of the fund, you need to clearly show and document your fund's ownership of the asset, for example by using one of the following:

• A caveat
• Legal instrument
• Declaration of trust

Signing a Trustee Declaration

If you're a new trustee (or director of a corporate trustee) you need to sign a declaration within 21 days of becoming a trustee or director.
By signing the declaration, you're stating you understand your duties and responsibilities as a trustee or director of the corporate trustee.
You need to keep the declaration for as long as it is relevant , or otherwise for 10 years.
The declaration needs to be available for the Australian Taxation Office to see if they request it as part of an audit or review.

Recording each member's tax file number (TFN)

When a member joins your fund, it's important you record their TFN. You'll also be asked to provide each trustee's or director's TFN when you register the fund with the Australian Taxation Office.
If a member has not quoted their TFN:

• Your fund can't accept certain contributions made on their behalf, including personal and eligible spouse contributions
• Your fund needs to pay extra tax on some contributions made to that member's account, including
  • employer and salary sacrifice contributions
  • personal contributions the member claims as an income tax deduction
• The member may not be able to receive the super co-contribution.

Registering with the Australian Taxation Office

Once your fund is legally established and all trustees have signed a trustee declaration, you need to register your fund with the Australian Taxation Office.
When registering your fund, you can:

• Elect for it to be regulated. You need to do this within 60 days of establishing your fund
• Obtain a TFN
• Obtain an Australian Business Number (ABN)
• Register for GST

Rogerson Kenny Business Accountants can assist you with this. For more information, give us a call on (03) 9802 2533.

Electing for your fund to be regulated

For your fund to be a complying fund and receive tax concessions, you need to elect for it to be regulated and comply with the super laws.
You need to make the election within 60 days of establishing your SMSF; otherwise, the Australian Taxation Office may not accept your fund as a regulated fund. Generally, your fund is established after the trust deed has been signed and the first contribution is made.

Funds that are not regulated are not entitled to tax concessions and the members' employers (and the members who are self employed) can't claim deductions for contributions they make to the fund.

If you make the election more than 60 days after you establish it, you need to tell the Australian Taxation Office your reasons for the delay in writing.

Once you have asked the Australian Taxation Office to regulate your fund, the election cannot be reversed. Your fund will continue to be regulated until it's wound up.

Obtaining a TFN and ABN

The Australian Taxation Office allocates a TFN and ABN to all funds that register. Once they give you an ABN, they place some of your fund's details on the Australian Business Register.
Funds with an ABN are also included on the Super Fund Look-up website at www.abn.business.gov.au. Other super funds can use Super Fund Look-up to check whether your fund is a complying fund for transferring super benefits.

Registering for GST

You need to register the fund for GST if its annual turnover is greater than $75,000. Annual turnover commonly includes gross income from the lease of equipment or commercial property. Your fund needs to have an ABN to register for GST.

Opening a Bank Account

You need to open a bank account in your fund's name for either of the following:

• To manage the fund's operations
• To accept cash contributions and rollovers of super benefits

All contributions and rollovers are deposited into the fund's account. The money is then:

• Invested, according to the fund's investment strategy
• Used to pay the fund's expenses and liabilities

Earnings on fund investments are also credited to the fund's account.

Although you don't have to open a separate bank account for each member, you need to still keep a separate record of their entitlement (called a "member account"). Each member account will record the following:

• Contributions made on behalf of the member
• Any fund earnings allocated to them
• Payments of any super benefits

The fund's bank account needs ot be kept separate to each of the trustees' individual bank accounts and any related employers' bank accounts.

The Australian Taxation Office recommends you use safeguards, such as joint bank account signatories, to protect the assets of the fund.

Rogerson Kenny Business Accountants Melbourne can assist you with your accounting and auditing requirements. If you would like to appoint Rogerson Kenny Business Accountants as your approved auditor, or would like to discuss this topic further, click contact us or call us on (03) 9802 2533.

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