Even if some people alternatively call SMSFs as do-it-yourself or DIY super funds, you can’t do all the work yourself. Each trustee of your SMSF will be held liable for any breach in super laws and SMSF regulations even if it was an honest mistake – and such breaches can be very costly for the trust.

Before you set up an SMSF, consider the work and expertise required to manage the fund and ensure it won’t contravene existing laws and regulations.

Consider professional help

You or your co-trustees may be knowledgeable in financial and investment management and tax and super laws, but the trust may still need to tap the expertise or assistance of several professionals from creation of the SMSF until wind up.

Some of the professionals you may need are:

Legal practitioner
You need a legal practitioner to draw up the trust deed and other legal documents that the trust requires. Such legal documents must conform to super laws as well as tax and state or territory laws, so it must be drawn up by someone who is knowledgeable about all of them.

It’s also important to ensure that the trust deed and asset titles are updated when trustees join or leave the SMSF, otherwise it might become a non-complying Australian super fund.

Financial adviser
The fund may need an adviser to prepare a financial and investment strategy that can help secure the retirement benefits of its members. An adviser may also provide other financial services, such as helping the trust determine what investment, insurance and financial products best fit the trust’s investment strategy.

Any strategy or financial advice must take the trust deed terms into consideration.

Administrator
If the trustees of the fund are too busy to handle administrative tasks, such as documenting meetings and preparing documents for annual audit, the trust may consider hiring a fund administrator to help manage daily tasks.

Another option is to engage professionals or companies that offer SMSF administration services.

It’s important to understand, however, that the trustees of the fund are still solely responsible for the fund’s compliance to super, state or territory and tax laws.

Auditor
One of the requirements all SMSFs must comply with annually is for an Australian Securities and Investments Commission-approved SMSF auditor to audit the fund.

The auditor will go through the SMSF’s financial statements to determine its financial position and check whether the fund was a complying Australian super fund for the whole financial year. They will be the one to inform the trustees if the fund breached any SMSF rule. If the trust doesn’t address the breach, the auditor is required to report the contravention to the Australian Taxation Office (ATO).

Valuer
SMSF assets need to be valued annually so that financial statements reflect the SMSF’s value accurately. In this regard, the trust may require the services of a valuer if its portfolio contains assets whose market value isn’t immediately apparent, such as business properties and other in-house assets.

Tax agent
All SMSFs are required to file a tax return annually, which means you may need the services of an ATO-registered tax agent who can help the trust properly file its taxes and potentially maximise tax concessions.

Actuary
Another professional you may need is an actuary. The SMSF doesn’t need an actuary annually – only when the trust requires an actuarial certificate to claim tax concessions. Such instances include:

• When at least one member commences retirement
• When one or more members commences a transition to retirement income stream
• When a member is allowed early withdrawal due to meeting a condition of release

In such cases, an actuary must assess the fund’s portfolio to determine the proportion that the trust is allowed to claim tax benefits from.

Administration service
Some financial institutions offer SMSF packages that already include professional services that you will need in order to establish the SMSF – from creating legal documents to lodging registrations.

This is also another option trustees may take. However, note that there may be additional charges that apply to SMSF packages on top of the usual SMSF cost.

Create the trust

If you’ve already thought through all the required work and you’re sure that it’s appropriate to your circumstances, there are several things that need to be considered to set up an SMSF.

Choose the fund structure
The SMSF structure you choose can influence SMSF costs.

You may establish the SMSF as an individual or corporate structure – both have their merits.

Identify the members and appoint trustees

An SMSF may be a private super fund but that doesn’t mean you can add anyone you want as a member or trustee. To become eligible, fund members and trustees must:

• Be at least 18 years old or under 18 years but be represented by an eligible legal representative (i.e. parent, guardian, legal personal representative)
• Not have declared bankruptcy
• Not be disqualified by SMSF regulators or the court
• Willingly consent to become a member, trustee or director of the fund
• Accept their responsibilities by signing the Trustee Declaration
• Not have an employer-employee relationship with a fellow trustee/member, unless they are relatives
• Be fully responsible for the fund

All potential members and trustees must satisfy all the conditions above regardless of the SMSF trust structure.

Establish the trust
Once you’ve found eligible people who are willing to become trustees and members of your SMSF, you need to start preparing the necessary documents to establish the trust – and this is what you need a legal practitioner for.

Apart from the required minimum number of trustees and members, you need to prepare the following:

• Trust deed
  A trust deed is the SMSF’s constitution and must therefore indicate the terms and conditions that trustees need to follow. This includes limitations in ownership of properties, loaning, transfer of ownership, succession rules, handling of related-party transactions and all other actions that may affect the trust.
  
  Trust Deeds are supposed to help keep the SMSF in line with existing and updated rules and regulations so it should ideally be updated when laws change.
  
  
• Trustee declaration
  The trustee declaration outlines the objectives of the trust, the administrative and legal obligations of all trustees, and the investment restrictions for SMSFs. It is a legally binding document that a person needs to sign before becoming an SMSF trustee.
  
  
• Asset
  Your fund needs to have an asset as proof that it is a legitimate fund – but you don’t need a significant amount to do this. You or of your co-trustees may simply give $10 as a contribution in their name. 

Register your fund
As a private super fund, your SMSF is eligible for the 15 per cent tax rate that super funds enjoy – but you don’t automatically receive this privilege. The trust needs to prove that it is associated with a complying Australian super fund. To do this, the SMSF must:

• Be an Australian super fund
  Check that your SMSF is a complying super fund and ensure that it will retain this status at all times. To be a complying super fund, your SMSF must always satisfy ATO’s residency rules, which are:
  
  • The fund’s initial contribution was paid and accepted in Australia or at least one of its held assets is in Australia.
  • Management and control of the fund (i.e. strategies, decisions and high-level duties) is in Australia. 
  • The fund either has no active (i.e. currently contributing) members or has active members who owns at least 50 per cent of its assets’ total market value or the sum of payable amounts to active member should they decide to exit the fund.
    
    
• Elect to be an ATO-regulated fund
  If your SMSF is considered as a complying Australian super fund, the trust must apply for an Australian Business Number with the ATO. To correctly complete the application, the trust must also:
  • Request a Tax File Number; and,
  • Elect for the SMSF to be ATO-regulated to be eligible for tax concessions.

   You may also register for goods and services tax if it is necessary for your fund.

• Bank account
  The trust must open a bank account to receive and release contributions, benefits, withdrawals and rollovers.
• Electronic service address
  The SMSF needs to have an electronic service address if its members receive contributions from non-related-party employers because contributions will be made via SuperStream.

Prepare an exit strategy

If at some point in the future you and your co-trustees decide that an SMSF isn’t the most optimal way to secure your retirement benefits, the trust has to have its exit strategy covered. Consider including several ‘exit points’ for when the SMSF may consider winding up the fund, such as when a member dies or when the fund's investment portfolio incurs significant losses.

Explore nestegg to learn more about Superannuation and SMSF.