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Setting Up a Self-Managed Super Fund

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Setting up a SMSF a My SMSF, Guide with: FAQs, Tips, Considerations, Risks, and Benefits
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Setting up a SMSF a My SMSF Guide with: FAQs, Tips, Considerations, Risks, and Benefits

Self-Managed Super Funds (SMSFs) are a very attractive vehicle to manage your retirement savings for many Australians. Warning: It is however not suited to most Australians, given the added responsibility, time, knowledge and risks that come with SMSFs and their ongoing management. 

However, SMSFs for Australian professionals, with the time and willingness to take responsibility for their investments and administration, provide enormous,  flexibility, control, and access to assets that industry and retail super funds cannot give you access to. There is little doubt, that they are increasingly becoming the retirement investment vehicle of choice for forward-thinking individuals.

Whilst, the world of SMSFs can seem daunting for newcomers. This article, will guide you through the process of setting up an SMSF in 2024. We will discuss some of the most frequently asked questions (FAQs), highlighting tips, considerations, risks, and the benefits to ensure you make an informed decision.

Frequently Asked Questions (FAQs)

FAQ 1: What is a Self-Managed Super Fund (SMSF)?
A Self-Managed Super Fund is a private superannuation fund regulated by the Australian Taxation Office (ATO), that you manage yourself. SMSFs can have up to four members, all of whom must be trustees (or directors if the SMSF is set up as a corporate fund). This means that you’re responsible for complying with super and tax laws.

FAQ 2: Who can set up an SMSF?
Anyone over 18 can set up an SMSF, as long as they are not under any legal disability or disqualified by the ATO. Disqualifications can include previous contraventions of the Superannuation Industry Supervision Act 1993 or convictions for dishonest conduct.

FAQ 3: How do I set up an SMSF?
Setting up an SMSF involves a multi-step process:

  1. Choosing Trustees: Individual trustees or a corporate trustee.
  2. Creating the Trust and Trust Deed: Set up the trust structure.
  3. Appointing Trustees: All members must consent to be trustees.
  4. Registering with the ATO: Apply for an ABN and TFN.
  5. Opening a Bank Account: For SMSF transactions.
  6. Developing an Investment Strategy: Tailored to member goals.
  7. Appointing SMSF Administrators or Accountants: To handle tax returns and auditing.

FAQ 4: Can I transfer existing super into my SMSF?
Yes, you can roll over existing super into your SMSF via the  MyGov app. Consult with a financial advisor, accountant, or lawyer to avoid potential tax implications or loss of insurance cover.

Tips and Considerations

  1. Engage Experienced Providers:
    Engage professionals like specialist SMSF providers (e.g: My SMSF), solicitors, accountants, or financial planners.

  2. Costs and Time:
    SMSFs require significant time and financial investment. Factor in ongoing expenses like professional fees, audit fees, and insurance.

    Expense CategoryMy SMSF Cost ($AUD)Notes
    Annual Administration1,100Tax return, audit, and email support
    Setup Fee990One-time fee
    ATO Levy259Annual levy; tax-deductible
    ASIC Annual Renewal Fee63For corporate trustee structures; tax-deductible
  3. Insurance:
    If transferring super to your SMSF, check your current fund’s insurance policy first, as you might lose cover during the process.

  4. Investment Strategy:
    Align your investment strategy with the financial goals of all members. Consider risk tolerance, diversification, liquidity, and insurance.

Risks and Benefits

Benefits of SMSFs

  1. Control:
    You have full control over your super investments.

  2. Flexibility:
    Invest in a wider range of assets, including direct property and unlisted shares.

  3. Tax Strategies:
    Implement tax strategies often not possible in other types of funds.

  4. Estate Planning:
    Provides flexibility and control over the distribution of benefits upon death.

Risks of SMSFs

  1. Financial Risk:
    Super’s performance is not guaranteed, and the value of your SMSF can fluctuate.

  2. Regulatory Risks:
    Breaching laws could result in penalties from the ATO.

  3. Management Risk:
    Running an SMSF requires significant time and management.

Key Documents and Maintenance Frequency

Document Maintenance Table

DocumentPurposeReview Frequency
Trust DeedFoundation document of the SMSFEvery 2-3 years
Investment StrategyOutlines fund’s investment approachAnnually – dated 30th of June 
Minutes & RecordsTrustee decisions and fund activitiesConsistently, retain for 10 yrs
Binding NominationsInstructs distribution of SMSF benefitsReview and update regularly

My SMSF Fees Breakdown

ServiceFee ($AUD)Notes
Setup Fee990One-time fee to set up SMSF
Basic Annual Administration Fee1,100Annual fee for tax, audit, and email support
ATO Levy259Annual fee; tax-deductible
ASIC Annual Trustee Company Renewal63For corporate trustee structures; tax-deductible

SMSF Administration and Compliance Roadmap

 

By following these guidelines and engaging experienced providers, you can navigate the complexities of SMSFs to achieve your financial goals.

General Information Warning: This information is general in nature, it does not consider your personal circumstances. My SMSF has over 13 years experience with SMSF Administration and Accounting. We suggest you education yourself on SMSFs or seek advice from a licensed Financial adviser to determine the suitability of an SMSF. 

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