In 2021, a whopping 71% of middle-aged Australians reported they wished they had more control over their retirement savings. With scammers using the COVID-19 pandemic to target superannuation accounts, it makes perfect sense to want more say in how your retirement savings are looked after.

Having control over your retirement savings helps you move into the next stage of your life with confidence and peace of mind. For some, opting in for a self-managed super fund (SMSF), rather than an industry fund, provides this peace of mind and absolute control.

What is an SMSF?

In short, SMSFs are private funds established by an individual as a means for managing their super savings. They may also be established by a family unit, in which case, all members of the SMSF are considered trustees. The individual, or trustees, of the SMSF are responsible for overseeing where their money is being invested, what insurances they have (if any), and how contributions are made. In addition to the above, they are also responsible for overseeing their funds compliance with super and tax law.

When starting a SMSF, you will need to choose from one of the following structures for your fund –

  • Individual trustees. Where members within the fund act as the fund trustees.
  • Corporate trustees. Where the members of the fund appoint a company to act as the trustee and as a Director of the company.

For a comprehensive breakdown about SMSF trustee structures, please visit the ATO website.

So, what’s the difference between a SMSF and an industry/retail fund?

While industry and retail super funds are regulated by the Australian Prudential Regulation Authority (APRA), SMSFs are regulated by the Australian Tax Office (ATO). This means they don’t benefit from the same regulatory oversight. Additionally, SMSFs fall outside of the Australian Financial Complaints Authority (AFCA), where disputes over issues such as insurance or beneficiaries can be resolved at no cost. This means the trustees will need to pursue these issues on their own and at their own expense.

Doesn’t sound too bad?

It’s not! It essentially provides you as the trustee with absolute control over your retirement savings. But, while managing your superannuation independently may seem appealing, it involves a lot of work.

Oh boy… Like what?

There’s a lot of thought that goes into making sure your super is invested wisely and delivers you the best possible returns. Successful investment decisions require financial expertise and knowledge of investment risk. At Auditax Accounts, we work with in-house investment experts providing quality investment advice, while informing you of the risks involved.

Further to this, SMSF trustees are legally obliged to have their fund audited by independent SMSF auditors annually to ensure the fund is complying with Australian Super Legislation. Annual SMSF audits are required, even if no contributions or withdrawals have been made within the financial year.

Auditax Accountants are a registered body who can conduct SMSF audits. Furthermore, we can also provide you with valuable information on how your fund is tracking, and offer advice into investments, insurance, and concessional, and non-concessional tax management.

How do I set up a SMSF?

If you have decided that a SMSF is right for you, then the following five steps will help you get started!

Step One – Choose an SMSF structure.

As mentioned earlier, you will need to establish whether your SMSF will follow an Individual Trustee Structure, or a Corporate Trustee Structure. Visit the ATO wesbite to compare and decide which structure works best for you.

Step Two – Appoint your trustees and create a trust deed.

You will need to ensure all members are above the age of 18 years, and are competent to handle financial affairs. In addition, potential trustees may be disqualified if –

  • They have been convicted of any offences
  • Have outstanding unlodged tax returns, or unpaid tax debt
  • Have been deem bankrupt
  • Have a legal disability (This is disputable)
  • Are under guardianship or conservatorship.

Once the trustees have been appointed, they must consent and sign a trustee declaration.

Once this is done, you must create a trust deed. This is a legal document that sets out the rules for operating your SMSF. Many SMSF professionals, including Auditax Accountants, offer packages to create these and streamline the process.

Step Three – Register your SMSF.

A SMSF must be registered in order to receive tax concessions and contributions. To register, you will need to apply for an Australian Business Number (ABN) and a Tax File Number (TFN). After these have been established, you can register here.

Step Four – Set up a bank account and obtain an Electronic Service Address (ESA)

You need to set up a unique bank account for your fund that is separate from any personal or business finances. The account must be opened in the funds name. Most banks will have a department that deals specifically with the managing of SMSF bank accounts, so you don’t need to shop for a new banker!

After your bank account has been activated, you will then need to set up an ESA to receive employer contributions. This is super easy to set up and manage through Super Stream, and will come in handy for the final step –

Step Five – Consolidate your superannuation!

Now you can say goodbye to your industry or retail superannuation funds and rollover your money into your safe and controlled SMSF! Ensure that your chosen ESA is able to provide rollover services, as if it doesn’t, you will not be able to roll money in or out of your SMSF. From here, you can simply call your previous superfunds and provide them the ESA to initialize the consolidation.

Okay, I’d like to chat about Super now!

Great! If you’re considering opening an SMSF, or are looking for an SMSF auditing service, the first step is solid advice and a sensible plan. For more information, talk to an Auditax Accountants SMSF expert by calling (08) 9358 5599 or e-mailing today.