Taking Control of Your Financial Future: How to Set Up an SMSF
It’s only human nature to want to protect yourself and your loved ones from every potential risk and danger. We all know that nobody can foretell the future nor prevent certain unwelcome events from happening which is precisely why today more and more people decide to take charge of their financial security. Setting up and SMSF is one of the most popular ways to do this.
SMSFs (Self Managed Super Funds) are a form of retirement planning, i.e. private superannuation funds established and run by maximum four members (who are usually relatives or friends). The only legal purpose of an SMSF is to provide its members with financial compensation in the form of pension when the time comes.
The members of an SMSF are also its trustees, meaning they have both the freedom and the responsibility to manage the fund’s assets, determine the fund’s investment strategy as well as select the best investment alternatives in accordance with it, and properly prepare several reports for the needs of ATO (the Australian Taxation Office).
When it comes to setting up a self managed superannuation Australia has a number of guidelines and regulations that must be followed. The most important rules you need to know before you decide to set up your own SMSF are the following three ones: an SMSF must be an indefinitely continuing fund; the sole purpose of any SMSF is to provide retirement benefits for its members or their dependents (setting up an SMSF for the purpose of getting early access to your super or purchasing expensive pieces of art is illegal); in order to be established, the fund must have assets until its members rollover existing benefits or make a contribution.
Signing and dating the trust deed (a legal document that creates the fund and contains information about how it should be maintained) is one of the key steps in setting up an SMSF. All trustees must do this. You shouldn’t make any important decisions about your SMSF without referring to this document.
Another significant document is the trustee declaration, a statement that you understand all your duties and responsibilities. According to ATO, this document needs to be signed by every trustee within 3 weeks of becoming a trustee and a copy must be kept.
Another item on your to-do list when establishing your SMSF is obtaining an ABN (Australian Business Number) and TFN (Tax File Number) for the fund. These are but some of the steps you will need to take in order to set up your SMSF.
Keep in mind that when it comes to establishing a self managed superannuation Australia or to be more precise ATO will not issue an ABN and TFN if you have any personal outstanding tax return or debt. ATO doesn’t tolerate financial indiscipline.