Self-Managed Super Fund (SMSF)

Starting a Self-Managed Super Fund

• This publication was current as of May 2022, check the website for the most current information.
• The document is from the Australian Taxation Office for the Commonwealth of Australia in 2022.
• Managing an SMSF comes with major responsibilities and financial impacts.
• When setting up an SMSF, one makes the investment decisions and is responsible for complying with all super and tax laws.
• Managing one's own super requires knowledge, time, and skills, including developing an investment strategy, administration, record keeping, and completing/lodging financial statements and tax reports.
• The ATO collects and publishes data about SMSF sector health and performance to help people decide whether to establish one.
• Financial advice from a licenced financial advisor can help review investments and determine SMSF suitability.

What an SMSF Is

• An SMSF is a trust run solely to provide retirement benefits to members.
• A trust involves a trustee holding assets for beneficiaries, requiring a trustee, trust deed, assets, and beneficiaries.
• In SMSFs, the trust is purposed to manage assets for the benefit of its members when they retire.
• Accessing funds early is often illegal.
• You cannot invest in a related business.
• There must be no misuse of the fund's assests, like using the property as a vacation home.
• You cannot be paid for duties as a trustee.
• In most SMSFs, trustees in charge of running the fund are also fund members, who become beneficiaries upon retirement.
• As a trustee, one is responsible for ensuring the fund complies with super and tax laws, which applies even when relying on SMSF professionals.
• An SMSF typically has three stages of life: starting, running, and winding up.
• People promoting early release of super schemes should be avoided, as they are often illegal with significant penalties.

Trustee Obligations

• Ensure a full understanding of your role and responsibilities under law.
• All trustees are equally responsible for fund decisions and running, even if not actively involved.
• While an SMSF professional can be appointed to help, the final responsibility and accountability lie with the trustee.
• Trustees must meet specific obligations under the Superannuation Industry (Supervision) Act 1993.

Honesty, Skill, Diligence

• As trustee, one must develop the fund's trust deed and comply with both the deed and the Superannuation Industry (Supervision) Act 1993 (SISA).
• The SISA states that a trustee must act honestly in all matters, in the best financial interest of all members, and retain control over the fund.
• Failing to comply with super and tax laws can lead to legal action, penalties, and tax consequences.

Sole Purpose Test

• The fund’s sole purpose it to provide retirement benefits to its members or their dependants; breaching this test could result in penalties and loss of concessional treatment.
• Breaching the sole purpose test is illegal, and funds can lose concessional tax treatment and trustees could face civil and criminal penalties.
• If anyone directly or indirectly gains a financial benefit from the SMSF (other than increasing the retirement fund for members) you are breaching this test.

Contributions and Rollovers

• You can accept contributions to your SMSF according to your fund's trust deed, the 'contribution standards' in super law, any contribution limits that apply ('contribution caps'), and any investment restrictions.
• Before you can accept rollovers from other funds, your fund must have up-to-date membership details in ATO systems .
• The simplest way to update your fund's details is through your registered tax agent or online at abr.gov.au, and be registered on Super Fund Lookup.
• One must make sure any contributions and rollovers are properly documented, including the amount, type and breakdown of components, and allocated to the correct member's account, and the details received within 28 days from the end of the month the contribution was received.

Investment Strategy

• It is crucial the fund has a written investment strategy detailing the fund's investment objectives, the types of investments the fund can make, the personal circumstances of all fund members, and the liquidity of assets.
• It should be regularly reviewed/updated to continuously reflect the purpose, conditions of fund, and consider whether to hold insurance cover for each asset. When making investments, one need to demonstrate how the investment decisions comply with the strategy and super laws, keep investments separate from personal/business investments, ensure they are made and kept on an arm's length basis, and keep records of all decisions..

Laws/Benefit Compliance

• Must always comply with investment restrictions under the super laws like not lending money or investing with related parties of the fund.
• Must pay benefits to members (and their beneficiaries) according to the fund's trust deed and the super laws.
• It is illegal to access super benefits any earlier than legally permitted.

Valuing Assets

• The assets of the fund need to be valued at their market value every year so the fund's accounts, statements and SMSF annual return (SAR) can be prepared.
• Some classes of assets must be valued and reported in a specific way, and evidence of valuation available to provide the SMSF auditor every year.
• Visit ato.gov.au/smsfvaluations to do this

Financial Statements

• It is a yearly requirements to prepare the fund's financial statement every year.
• SMSF must have fund audited each year by an independent approved SMSF auditor who is registered with ASIC
• Auditor will examine the fund’s financial statements, assess fund’s compliance with super laws and any contraventions of the SISA, and provide a report

Annual Returns

• Completed SAR needs to be completed and lodged by due date (see ato.gov.au/lodgingSMSFreturn) and the funds annual income tax liability and supervisory levy paid
• Lodging SAR on time keeps the Super Fund Lookup status as 'complying"
• Lodging more than two weeks overdue will change the status of SMSF and updates to it

Transfer Balance & Changes to Fund Details

• TBAR is used to report transfer balance cap events which records an individual's balance amount for both their transfer balance cap and total superannuation balance.
• Need to tell ATO and ASIC if there is a is a trustee or director change, a member, a contact detail, address, or fund status update.

Records/Residency

• One must keep proper and accurate records that are written in English, capable of verification, in an accessible format (not encrypted), and maintained for up to 10 years depending on the record type.
• Fund must meet residency rules at all times, or assets/income will be taxed at highest tax rate.

Professional Advice

• Before commencing, speak to a professional as complying with super and tax laws when running an SMSF can prove difficult
• To choose right, qualified, registered and licensed person is important

Professional Help

• Tax agents and accounts can prepare accounts and lodge SMSF annual returns. It id important to check that they are registered at tpb.gov.au
• Fund Administrator can help with operations, set up, day to day running, reporting etc.
• Legal practitioners can prepare, review, and update trust deeds, and advice on legal things like legal proceeding or trustee disputes
• Financial advisors can provide advice on investment types and strategies. Check credentials at moneysmart.gov.au/financial-advice.
• Government requires that Approved SMSF auditors can examine statements and have concerns to report to you if they find that anything in breach has happened. Check that your auditor is registered at asic.gov.au/smsf-auditor
• Actuaries provide an actuator certificate if required if fund is paying a pension

Choosing an SMSF Structure

• The structure of the SMSF needs to suit circumstances, it can impact legal requirements and whether there is a one-member fund, multiple member fund, individual trustees, or a corporate trustee.
• Single member:
  • Individual Trustees must have two trustees
    • One trustee must be the fund member
    • The member cannot be the other trustee's employee (unless they are also relatives).
  • Corportate Trustee has:
    • one or two directors
      • One director must be the fund member
      • If there are two directors, the member cannot be the other director's employee (unless they are also relatives).
• Multiple member:
  • Both Individual and Corporate trustees must have 2-6 members
    • Each fund member must be a trustee - individual, a director - corporate
    • Each trustee/director must be a fund member
    • A member cannot be the employee of another member (unless they are relatives).

How to Compare

• Individual trustee will often be cheaper to establish since you don't have to create a separate company
• Governing rule for Individual trustees is that trustees must follow the rules of the funds trust deed, super, and tax laws.
• Corporate trustee establish requires setting up a company
  • ASIC charges a fee to register the trustee and an annual one during review
• Adminstraton and reporting:
  • Individual trustee has fewer, which makes it easier
  • Trustees changing does mean more paperwork.
  • Corporate trustee means its easier yo adminster ownership of fund and keep assests spearate from personal assests.
• Trustee Succession:Individual requires someone to succeed, corporate can run on one. Need to notiffy within 28 days of changing trustee.
• Funds are made by those the trustee is in the name for with individual, and corportate title isn't changed the same with assets.

Appointing Trustees

• Understand and comply with liabilities when appointming trustees to avoid penalties you and your fund, as not everyond can.

• Members must pass to be eliagble as trustees/directors.

• It is an offence to act without being qualified.

• You must be able to answer no the the following questions:

  • Have you ever been convicted of an offence involving dishonesty?
  • Have you ever been subject to a civil penalty order under the Super Industry ( Supervision) Act 1993?
  • Are you insolvent under administration?
  • Are you an undischarged bankrupt?
  • Have you been disqualified by the ATO, ASIC or APRA?

• Corporations can be disqualified, receivers, and if a receiver, or a manager has been appointed, the actions have started to wind up the company.

• A diqualifed cannot be involved in SMSF's. Lawyers can repreesnt if you're u.

• Legal peresnatives can act for the under 18's or someone with legaly incompetent people who have poa's

Role of Trustees

• You can complete a free ATO online trustee tarining course ato.gov.au/SMSFcourses
• Consent to being appointed to trust one needs to sign to be in writting appointed to what to do, also do this if there is a rep to complete an education withing 21 days of comitting to be trustee
• You must keep the signed declaartion for for 10 tears unless you are, provide everyone's info and tax info

Create a Deed

• A legal document is a must for each state, each must understand the requirements of that document, then sign and date that document

Superfund

• Needs to be checked for the residency conditions first
  • Is the fund established in Australia, or at least one of its assets is located in Australia.
  • The central management and control of the fund is ordinarily in Australia.
  • The fund either has no active members or it has active members who consist of at least 50% Australian residents

How You Hold Assets

• It must exist, it has to follow the intial contriubtion of the member and then that lets hte Smsf registar and be bank account with steps 6-7. You have 28 dasy too alloce it.

• Ownership of the funds asstes, protect what in invested it needs to be seperate from any assets.

• If your fund has GST annual turnover of over $75,000. This does note include income generated outside Australia though.

• Superfund lookup, SFLU in registers it status then that creates a notice of compliance

Set up a bank Account

• For holding all money that comes in is importatnt. It has too be in the members name with an account shownig where evey transaction came from. Use safeguards to protect, such as using two singantories for all accounts

Get an electronic service adress

• Needed before emplyer contributions can take palce, also has to be able to rull under supersteram

Investment straegy

• Important as it set the standards for which to preapre. Have have to know how your decisions cpmply with your requirements for tax laws

Learn about Self-Managed Super Funds (SMSFs) in Australia, including responsibilities, legal compliance, and investment decisions. Understand the knowledge, time, and skills required to manage your own superannuation, including administration and reporting. Consider seeking financial advice to determine if an SMSF is suitable for you.