What you need to know to start a SMSF

Posted 14 Mar '22

Are you considering an SMSF? Here's what you need to know.

It’s always a good idea to think about your retirement. Many people in Australia use a Super Fund to manage their retirement savings. But some people opt to do something a little different, and set up a self-managed super fund (SMSF).

What is an SMSF?

At a basic level, setting up an SMSF means creating a trust which has either individual or corporate trustees. These trustees manage the fund assets, and look after legal compliance, including auditing and reporting obligations.

For people who are prepared to look after the legal and financial elements of running a fund, entering into an SMSF can mean more control over how funds are invested, over fees paid and over what insurance is taken out.

What is an SMSF for?

Any SMSF must have the same purpose. That is, to provide retirement benefits for fund members or their dependants if a member dies before retirement. Any decisions made by trustees must be in line with this aim. Using the funds of an SMSF for anything else isn’t just unethical, it is actually illegal.

An SMSF isn’t for:

• Early access to superannuation
• Investing in art or collectible for decorative purposes or personal use.
• Buying holiday homes.

Becoming a trustee

One of the main differences between an SMSF and other types of funds, is that in an SMSF the members are also the trustees and assume the compliance risk. If the SMSF is found to have breached the law, the trustees or the director, can be personally fined.

In addition, if there are disputes between the members, the ATO will not become involved. If the situation is serious enough, mediation or court may be an avenue but these routes will be at the members’ expense.

Updates to SMSF fund structures

Changes on 1 July 2021 mean that SMSFs can now have a maximum of six members, an increase from four. It’s important to note that as an SMSF is a type of trust, the number of trustees may still be restricted to less than six by existing state and territory laws. As always, it’s a good idea to seek professional advice before structuring your fund.

Learn more from the ATO

Understandably, the decision to become a trustee and set up a SMSF is a major one and needs careful consideration, however, it does not need to be as overwhelming as it may sound.

At WDF Professional we have a dedicated superannuation team that actively supports our clients in managing their SMSF’s compliance and reporting obligations. Our team can help with:

• Accounting and compliance associated with setting up and maintaining your fund
• Personalised advice and explanation of the logistics of how pensions work
• Preparation of Financial Statements, Members Statements and other annual documentation requirements such as meeting minutes
• Preparation of the fund for audit by a specialist SMSF auditor
• Preparation and lodgement of SMSF annual returns, Business Activity Statements and Instalment Activity Statements
• Advice regarding compliance issues and assistance with legislative changes
• Liaising with the Australian Taxation Office when necessary
• Assistance with planning opportunities to optimise your superannuation.

Contact your WDF Professional team member if you would like to know more about self-managed super funds and whether they might be the right fit for you and your retirement.

As accountants based in Wagga Wagga, we don't just crunch numbers and put figures in boxes, we provide a carefully researched and tailored accounting solution that suits all of our clients.