After some research, you think a self-managed super fund (SMSF) is right for you. What’s next? Your Money Magazine points you in the right direction.
1. Assemble your team
Unless you are an experienced investor, lawyer, financial planner and SMSF expert, you’ll need a few experts to your SMSF tool belt, including:
• financial planner
• investment strategist
Before joining anyone, be sure to check their fee structures and ensure that they have full accreditation. Your financial planner should have a CFP certification and also preferably some training in SMSF management. Asking them about their own SMSF and investment background also highlights their level of expertise.
2. Appoint trustees
A SMSF can have between one and four members, who are referred to as ‘trustees’, although you can remain the sole trustee if you wish. The rules stipulate that no member can be an employee of another member (unless they’re related) and that no trustee can be paid for carrying out their trustee duties.
Trustees are responsible for ensuring the fund is properly managed and that it complies with SMSF rules and broader tax and legal obligations. This includes:
• ensuring that the SMSF complies with the ‘sole purpose’ test of providing retirement benefits to members
• regularly reviewing and updating the SMSF investment strategy to ensure it takes into account members’ retirement goals
• ensuring that SMSF assets are not used for personal benefit until after retirement
They may also need to appoint parties to carry out various functions on their behalf, including:
• maintaining each member’s information and account balances
• investing of the fund’s assets
• preparing financial accounts, regulatory reports and audits of financial statements
• budgeting and paying for costs and bills (ensuring SMSF money is kept separate from private funds)
• accepting contributions and pay benefits (pension and lump sum) in accordance with super and tax laws
3. Obtain a trust deed
As a SMSF, a signed declaration and trust deed are required. The deed evidences the existence of the trust and establishes the rules of operation for the fund. The declaration must meet all legal requirements and be properly dated and signed by all trustees to ensure they are aware of their duties and responsibilities under the super laws.
The trust deed should outline many aspects, including:
• details of who the trustees are
• how trustees may be appointed (or removed)
• the powers of trustees
• eligibility for membership
• conditions relating to acceptance of contributions
• conditions for payment of benefits to members
• procedures for winding up the fund and provisions relating to valuation of assets etc
To ensure your deed meets the individual needs of your fund, call upon an independent legal professional guide you through this process.
Congratulations, you’re half-way there to starting your SMSF. Click here to Check out Your Money Magazine’s “Part Two” for the next steps or to Find out how much you can borrow, use our SMSF calculator.