Self Managed Super Fund

Setting up a Self Managed Super Fund

Starting to operate your Self Managed Super Fund

Once your fund is legally established,  there are a number of steps you should consider as a trustee or director.

Preparing an investment strategy

Before you start making investments, you need to prepare an investment strategy.
An investment strategy sets out the fund's investment objectives and how you plan to achieve them. It provides you and the other trustees with a framework for making investment decisions to increase member benefits for their retirement.

A financial adviser can help you prepare an investment strategy, but you and the other trustees are responsible for managing the fund's investments.

There is no prescribed format for the investment strategy, but it needs to reflect the purpose and circumstances of the fund.

When preparing your investment strategy, you need to consider the following:

• Diversification (investing in a range of assets and asset classes)
• The risk and likely return from investments, to maximise member returns
• The liquidity of the fund's assets (how easily they can be converted to cash to meet fund expenses)
• The fund's ability to pay benefits when members retire and other costs the fund incurs
• The members' needs and circumstances.

Your investment strategy should be in writing so you can show your investment decisions comply with it and the super laws.

Accepting Contributions and Rollovers

As a trustee, you need to know the rules for accepting contributions and rollovers. These rules are set out in:

• Your fund's trust deed
• The super laws

You need to also make sure any contributions and rollovers are:

• Properly documented, including the amount, type and breakdown of components
• Allocated to the fund members' accounts.

Contributions

A contribution is a payment made to your fund in the form of money or an asset other than money (called an 'in specie' contribution).
You need to accept contributions according to the following:

A contribution is a payment made to your fund in the form of money or an asset other than money (called an 'in specie' contribution).You need to accept contributions according to the following:

• Your fund's trust deed
• The "contribution standards" in the super laws
• The contribution limits that apply (called "contribution caps")
• Any investment restrictions

Whether your fund can accept contributions for a member will depend on the following:

• The type of contributions
• Whether the member has exceeded the contribution caps
• The age of the member
• Whether they've quoted their TFN

Provided the governing rules of your fund allow it, your Self Managed Super Fund can generally accept the following:

• Employer contributions
• Personal contributions
• Salary sacrifice contributions
• Super co-contributions
• Eligible spouse contributions

As a trustee, you generally can't acquire non-cash assets from related parties, such as the following:

• Fund members
• Their families and partners
• Related companies and trusts

There are some exceptions including:

• Listed shares and securities
• Business real property (land and buildings used wholly and exclusively in a business).

Example:
A member of XYZ Super Fund owns a single residential property and wants to contribute it to the fund. The trustees can't accept the contribution because it would be a breach of the investment restrictions (because the member is a related party of the fund and the trustees can't acquire an asset from a related party unless an exception applies).

You need to allocate contributions to each fund member's account within 28 days after the end of the month that you receive them.

Remember, you should also consider how CGT applies to any assets you transfer into the fund or sell to make contributions to the fund.

Rollovers and Transfers

Once your fund is established, a member can rollover or transfer some or all of their existing super benefits to it. Before they can do this, they need to provide proof to their former super fund that your Self Managed Super Fund is a regulated complying super fund.

Your fund will be included on the list of regulated complying funds on the Super Look-up website at www.abn.business.gov.au once it is registered with the Australian Taxation Office. You'll be sent a notice of compliance or your fund once you've lodged the first annual return.

Members can use a Request to transfer whole balance of superannuation benefits between funds  (NAT 71223) form to rollover the whole balance of their super benefits to your fund.

If a member only wants to rollover part of their super benefits from another fund, they will need to contact the fund directly to organise the paperwork.

Rollovers and transfers are not treated as contributions to the fund.

Record Keeping

One of your responsibilities as a trustee of an Self Managed Super Fund is to keep proper and accurate fund records.

You need to keep certain records under the super and tax laws, and others, to:

• Meet your tax and audit obligations
• Operate your fund efficiently

Keeping good records will:

• Provide you with an accurate history of your self managed super fund
• Support the decisions you (and other trustees) make on the fund's behalf
• Help the Australian Taxation Office and approved auditors work out whether you have complied with the super laws.

When setting up your fund, you should consider the following:

• How you'll manage the fund's records
• Whether you'll appoint an Self Managed Super Fund Professional to help you.

Records you need to keep include the following:

Administrative Records	Financial and Tax Records
Minutes of trustee meetings and decisions (where fund matters were discussed)	Accounting records to explain the transactions and financial position of the fund
Records of change in fund details (such as trustees)	Annual operating statement (balance sheet)
Trustee declarations	Statement of financial position (profit and loss statement)
Written consents to act as trustee	Records needed to prepare your fund's annual returns and accounts
Records needed to complete your fund's annual audit	Annual returns
Audit reports	Records that explain your fund's accessible income and deductable expenses
Trust deed	Documents showing ownership of fund assets
Investment Strategy	Bank account statements
Registration documents (ABN, TFN, and GST Notifications)	Records to show contributions, rollovers and payments to members
Notice of fund compliance (received after lodgment of first year's return)	Record of each member's account
Death benefit nominations	PAYG Payment summaries.
Letter of engagement and Management letter

Generally, records need to be kept for a minimum of five or ten years. For example, you need to keep the following:

• Financial records, such as accounts, for a minimum of five years
• Non-financial records, such as minutes of meetings and decisions, for at least ten years.

If you use a Self Managed Super Fund professional, you should discuss with them what records they will look after and which ones you'll need to keep.

Appointing Self Managed Super Fund Professionals

Under the super laws, you need to appoint an approved auditor to audit your fund's operations each year. Rogerson Kenny Business Accountants can assist you here. Contact Us

In certain circumstances, you also need to appoint an actuary and obtain an actuarial certificate if your fund starts to pay a pension to a member. An actuary works out the following:

• Whether your fund can meet its pension liabilities
• What assets are being used to fund pension payments to members, as the income from these assets is exempt from tax.

When you set up your fund, you should also consider whether to use one or more Self Managed Super Fund professionals to help you manage the fund. For example:

• A tax agent can complete and lodge your fund's annual income tax  and regulatory return, provide you with taxation advice and represent you in your dealings with the Australian Taxation Office
• An accountant can help prepare your fund's accounts and its annual financial position and operating statements
• A fund administrator can help you manage the day-to-day running of your fund and meet your annual reporting and administrative obligations
• A legal practitioner can review and update your fund's trust deed and give you advice on such things as divorce, estate planning or disputes between trustees
• A financial planner can help you prepare an investment strategy and provide you with financial and investment advice.

Sometimes, a professional can take on more than one role in helping you manage your fund. For example, Rogerson Kenny Business Accountants can be your fund's accountant as well as your fund's tax agent.

If you decide to use a Self Managed Super Fund Professional, choose one who's qualified and right for you and your circumstances. To provide financial advice, a person needs to hold an Australian Financial Services License.

Generally, only a registered tax agent can charge a fee to prepare and lodge your fund's tax return or provide you with tax advice.

Note that even if you use a professional, the responsibility for running the fund and making decisions rests with you and the other trustees.

Paying Super Benefits to Members

As a trustee, you need to know the rules for paying benefits to members, so you know when and how they can be paid. These rules are set out in:

• Your fund's trust deed
• The super laws

In some cases, Self Managed Super Funds are set up to pay a super benefit to a member almost immediately, that is, as soon as the member has either:

• Rolled over any existing entitlements
• Made contributions to the fund

A member can only access all or part of their super benefits if they satisfy one of the conditions in the super laws.

If your fund's governing rules allow it, you can generally pay a super benefit as one of the following:

• A lump sum
• An income stream (pension or annuity)
• A combination of both

You need to make sure all benefits are properly documented, and that you comply with any reporting and administrative requirements, such as:

• Registering for Pay As You Go (PAYG) withholding
• Issuing payment summaries
• Obtaining actuary certificates

It's possible for your fund to pay super benefits and still have members contributing to it.

Planning for the Future

Setting up a Self Managed Super Fund is about more than just organising the paperwork to get started - it's about planning for the future. The Australian Taxation Office recommends you, and the fund's members, consider things such as death benefit nominations and insurance.

Death benefit nominations

A death benefit is a payment made from a super fund on the death of a member. It's usually paid to either:

• One of more of the member's dependants (such as a spouse or child)
• Their estate.

In some cases, it may be paid to a non-dependant.
A member can nominate who they want their death benefit paid to, by way of a death benefit nomination.
A death benefit nomination is a notice given to the trustees setting out who to pay the death benefit to and in what proportion. It can be one of the following:

• Binding - that is, it directs the trustees to pay the member's death benefit to a legal personal representative or dependant
• on-binding - that is, it notifies the trustees of the member's preferred beneficiaries, leaving the trustees to make the final decision.

If your fund does not have a valid binding nomination for a member, their death benefit is paid according to the trust deed, with the trustees being guided, as appropriate, by any non-binding nomination.

Insurance

When your fund acquires new assets, such as real property and collectibles, it is recommended that you insure these assets to protect the fund from financial loss.

Also consider arranging insurance to protect your fund's members (or their dependants) against death, injury, ill-health or income loss.

Insurance premiums your fund pays may be tax deductible.

Check Your Progress

Preparing an investment strategy

• Your fund has a written investment strategy
• The investment strategy is unique to the fund and the member's circumstances
• All investments in the strategy comply with the super laws
• All investments in the strategy comply with the super laws

Accepting rollovers and contributions

• You have:
  • Accepted contributions and rollovers to your fund according to the super laws and the fund's trust deed
  • Kept a record of all contributions and rollovers and allocated them to each member's account

Record Keeping

• You have considered how you will manage the fund's records
• You know your record keeping responsibilities
• You have a personal copy of the following:
  • Your consent to act as trustee
  • Your signed trustee declaration
  • Your fund's trust deed
  • Your fund's investment strategy

Appointing SMSF Professionals

• You have considered whether to use one or more Self Managed Super Fund professionals to help manage your fund
• You know you need to appoint an approved auditor for each income year

Planning for the future

• The fund's member have considered whether to lodge a death benefit nomination with the trustees
• You have considered obtaining life, disability or income protection insurance on the members' behalf
• You have arranged insurance to protect the fund's assets.

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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