The Purpose of Setting Up an SMSF

If you’re not satisfied with how your super fund is being managed or maybe you want to have a greater choice when it comes to where you invest your pension money, then the time has come to take matters in your own hands. Start building your nest egg more effectively and make sure you’ll enjoy your retirement days by setting up an SMSF (self-managed super fund). As the name implies, an SMSF allows you to mange your own super so you’re in control to choose where exactly your money will be invested. What’s more, unlike managed super funds like industry or retail ones where the investment options are limited, with your SMSF you have access to a much larger choice of investments some of which include direct mortgages, shares, direct property, bank deposits and many more.

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By running your super you benefit from lower fees and can further save money on taxes since all the contributions you make to your super are tax deductible. You only have to pay 15% tax maximum when you buy assets or make other investments. But, for your super to be eligible for tax deductions it must be set up properly and comply with the laws imposed by the Australian Taxation Office (ATO). Before setting up an SMSF, you’ll need to seek professional help from people who specialize in self-managed funds. With the guidance of an SMSF professional you’ll be able to properly set up and run your super fund. There are some important steps you should follow to ensure the whole setup process is successful.

First, it’s essential to decide how many members you want your fund to have (bear in mind though that an SMSF can’t consist of more than four members). Next, you should choose a trustee structure. Your SMSF can be made up of individual trustees where each member must also act as a trustee of the fund. Or, you can opt for a corporate trustee structure, in this case you should establish a company that will function as a trustee, while every member will be a director of the company. Once you’ve appointed the trustees and decided on a trustee structure, the next step is to obtain a trust deed which is basically a legal document that establishes the rules for your SMSF. It contains vital information about the fund such as details about who the trustees are, their responsibilities and powers, rules for operating the fund, etc.

To ensure all members understand their duties, each one of them is required to sign a trustee declaration – a legal document that contains important information they must understand. These include details about the duties of each trustee, the sole purpose test, investments restrictions and other key information. After you’ve prepared and signed the legal documents, it’s time to register your SMSF with the ATO. To do this you should get an Australian Business Number (ABN) as well as a Tax File Number (TFN) for the fund. The final step is to open up a bank account, create a smart investment strategy and start paving the road to happy retirement days.

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