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How to set up an SMSF
SMSF setup process
If you’ve ever wondered how to set up an SMSF we will show you how. The SMSF setup process may seem complex at first however when you break it down into smaller steps it becomes a lot easier.
You can have your new SMSF setup, registered with the ATO, bank account open and ready to receive contributions and transfers within 24 hours.
- 1. Members & Trustees
- 2. Trust Deed & Documents
- 3. ABN & TFN
- 4. Setup Bank Account
- 5. Transfer Super
- 6. Investment Strategy
Choose the members of your SMSF
Most self-managed super funds have traditionally been set up by couples, however an SMSF can also be set up with one member or with up to 4 related or unrelated people. Typically the members and trustees of an SMSF will be the same people.
Check to ensure members are eligible to join an SMSF:
Members under 18 years old
Anyone 18 years old or over can be a trustee of an SMSF (or director of the trustee company) as long as they’re not under a legal disability (such as mental incapacity) or a disqualified person.
Minors under 18 years old can join an SMSF however their parent or guardian must act as a trustee on their behalf until they turn 18.
Disqualified persons
To knowingly act as a trustee, a trustee director or an office holder of a corporate trustee (such as secretary), while being a disqualified person, is an offence.
To be sure you are not a disqualified person you need to be able to answer no to all of the following questions:
- Have you ever been convicted of a dishonest offence, in any state, territory or a foreign country?
- Offences of a dishonest conduct are things such as fraud, theft, illegal activity or dealings. These convictions are for offences that occurred at any time, including convictions that have been ‘spent’ and those that the court has not recorded, due to age or first offender.
- Have you ever been issued with a civil penalty order?
- Civil penalty orders are imposed when an individual contravenes a civil penalty provision, this can be an order to pay a fine or serve jail time.
- Are you currently bankrupt or insolvent under administration?
- You cannot be a trustee of an SMSF while you are an undischarged bankrupt, you cannot remain a trustee if you become bankrupt or insolvent after you are appointed.
- Have you been previously disqualified by the ATO or APRA?
- The commissioner of taxation as regulator can disqualify a trustee, this disqualification is permanent and is not just specific to the SMSF you were a trustee of at the time.The Federal Court can make an order to disqualify a trustee of an APRA fund. This is permanent and this disqualification does not allow you to operate an SMSF.
Provided all potential members answer No to the above 4 questions they are eligible to be a trustee and member of an SMSF.
Decide on your SMSF trustee
When you set up an SMSF the first key decision you need to make is whether to have individual trustees or use an company as a special purpose SMSF trustee. There are advantages and disadvantages to each.
| SMSF Setup: Trustee Options | Individual Trustees | Company Trustee |
|---|---|---|
| Enables SMSF with one member only | ||
| Liability protection for trustees | ||
| Fast SMSF setup process | ||
| Good structure where only members are a couple | ||
| Suitable for simple investments (cash, shares, ETFs, managed funds) | ||
| Suitable for property investment | ||
| Suitable for SMSF borrowing | ||
| Suitable for SMSF setup with 3,4 or more members | ||
| Easy to add/remove members | ||
| Investments stay in same name when members change? | ||
| Ensures clean separation of assets between SMSF and members | ||
| ATO administrative penalties if incurred – who pays? | Each Trustee | Single Penalty |
| SMSF setup cost (via Grow SMSF) | $385 | $990 |
| Ongoing costs of trustee (ASIC annual review fee) | $0 | $55 |
Fees quoted and ASIC annual review fees subject to change.
For a more detailed comparison on choosing the right trustee for your and your SMSF, review the following article: Corporate trustee vs individual trustees SMSF
What does the ATO say in regards to selecting a trustee as part of your SMSF setup? They cover it in detail on their website – Choose individual trustees or a corporate trustee
Obtain SMSF trust deed
When you setup an SMSF you are creating a trust. A trust has assets are held by the trustee (or trustees) on behalf of the members (who are beneficiaries). An SMSF is a special type of trust where benefits must be held only to provide retirement benefits to members.
Most providers have an online application form you use to complete your SMSF setup, including Grow.
Why is an SMSF trust deed so important?
You need to select a trust deed that enables you to maximise the potential a SMSF can offer when it comes to building your wealth while protecting you and your family at the same time. Your SMSF deed is probably the most important document in your arsenal when you are trying to build wealth, save tax and protect your assets.
Many SMSF trustees and their advisers are guilty about approaching what you can and can’t do with your SMSF the wrong way. It is simply not a case of checking whether it is OK under the relevant superannuation and taxation laws. You need to ensure that your trust deed allows it – if it is not contained in the rules of the fund then you can’t do it.
Even more importantly, if you do something that is contrary to a rule contained in your SMSF trust deed, then you have also breached the the superannuation laws.
Also read: What is the best self managed super fund SMSF trust deed?
Signing an SMSF trust deed
SMSF trust deeds are typically signed by the members / trustees (or company directors where a corporate trustee is used) in physical format however it may also be possible to legally sign via electronic means as part of your SMSF setup.
Update October 2020: The Government is proposing new laws that would confirm that electronic signing of SMSF trust deeds is legally valid.
Where you have set up an SMSF using individual trustees, in most cases your are unable to sign electronically as the trust deed requires a witness and most States and Territories in Australian exclude documents that need a witness from being signed electronically.
Where a company trustee is used, although the Corporations Act has traditionally not allowed trust deeds to be signed electronically, however there is a temporarily allowance in place due to COVID-19 from 6 May 2020 through to 22 March 2021.
Regardless of the above, electronic signatures at a common law level are readily accepted by the Courts in a variety of scenarios and it’s likely the legislation enabling SMSF deeds to be signed electronically will shortly catch up with common business practice.
As a fallback option if you sign a trust deed electronically as part of your SMSF setup, also take the time to physically print and sign with a wet ink signature the SMSF trust deed document so you’re always covered for circumstances where a third-party demands a deed with an original wet ink signature.
Sign other SMSF setup documents
In addition to signing the trust deed as a key part of your SMSF setup, there are a number of other documents you also need to sign:
- Corporate trustee documents (where company trustee used):
- Member resolution to adopt the constitution of the trustee company;
- Director resolution covering all matters relating to the set up of the company;
- Director consents;
- Member consents to hold shares in the trustee company;
- Trustee company share certificates;
- Director resolution for the trustee company to act as the trustee of the SMSF;
- Applications for membership for each member of the SMSF;
- ATO self-managed super fund trustee declaration
Ensure the SMSF has assets
One quirk with an SMSF setup is that for the self managed super fund to legally come into existence, it needs to have assets. This is because an SMSF is a trust, and a trust is created by assets being held by the trustee on behalf of the beneficiaries (i.e. SMSF members).
In an SMSF context this means that to correct set up an SMSF the right way, you need to:
- Physically hold a small amount of cash with the SMSF trust deed and;
- Deposit this small amount into the SMSF bank account as a member contributions when the account open (or to open);
SMSF ABN & TFN application
Although an SMSF legally comes into existence when it has assets and the trust deed has been signed by the trustee(s) and member(s) it doesn’t exist as far as the ATO is concerned until it’s been issued with an Australian Business Number (ABN) and it’s been registered on Super Fund Lookup.
A combined SMSF registration and ABN / TFN application needs to be completed online by either the trustees of the SMSF or by an accountant. Grow takes care of this process for our clients as part of our SMSF setup service.
It’s extremely important that correct information is provided to the ATO during this process as incorrect or inaccurate information submitted can lead to lengthy delays when it comes to setting up your self-managed super fund.
ABN application – SMSF setup checklist
The following are the key items that must be provided as part of the SMSF setup process when you register the new fund for an ABN and TFN:
- ACN and name of the SMSF trustee company;
- Full legal names of all members and the directors of the company trustee;
- Date of birth of all members;
- Tax file numbers of all members;
- Addresses of all members and a nominated address of the SMSF (typically the members home address);
- Chosen name of the self-managed super fund (as per the trust deed)
- Confirmation the SMSF has assets, a governing rules (i.e. a trust deed) and will be continuing indefinitely;
- Electronic service address nominated (for all SMSFs set up by Grow, we use ‘smsfdataflow’)
- Confirmation the directors of the company trustee are NOT disqualified persons;
The online ABN and SMSF registration application form is complex therefore it’s always recommended that you don’t attempt to complete it without the assistance of a specialist SMSF accountant.
Items that can delay the registration of the SMSF
To ensure the ABN registration process is as smooth as possible, there are a number of per-requisites that should be addressed prior to completing the application (or rather having your SMSF specialist complete the application):
- Ensure that all members of the SMSF have lodged their personal income tax returns (i.e. there are no returns or activity statements late or overdue)
- All details of the members (names, tax file numbers, addresses, dates of birth) must identically match what the ATO has on file for the members (TIP: Check all details against MyGov prior to providing details as part of your SMSF establishment)
- The names and dates of birth listed with ASIC for the trustee company need to also match the ATO
- The members of the fund ideally are employed or are in receipt of business or passive income (the ATO knows when people have lost their jobs or have become redundant – they often prevent you setting up an SMSF at this time to ensure you’re not going to illegal access super early)
To ensure your SMSF ABN and TFN are issued instantly and that your SMSF is quickly registered, all details provided during the application must be accurate. If there are any items that may cause a red flag with the ATO your SMSF application may be delayed by a few days or up to a month as the ATO be required to manually review your application.
More information: SMSF registration: ATO might phone you!
Importance of your existing super balance when registering your SMSF
Although there is no mandated minimum amount needed in super for an SMSF to be setup, the ATO does consider people who set up a self managed super fund with low superannuation balances a high risk, and therefore they may elect NOT to register your SMSF.
When an application to register your SMSF is submitted to the ATO, they undertake a risk assessment to determine whether the fund should be registered and shown on Super Fund Lookup as ‘Complying’ and therefore eligible to receive rollovers / transfers from other superannuation funds as well as contributions.
One of the key items the ATO looks at as part of their risk assessment is the existing superannuation balances of the members of the SMSF.
The lower the balances, the more likely a manual review will be triggered which will delay the registration of your SMSF.
It’s unknown what the exact amount is, and it’s likely combined with other risk factors the ATO looks at when deciding whether to register your new SMSF or not.
Setup SMSF bank account
The next step in your SMSF setup once your fund has been issued with its ABN/TFN and has been activated on Super Fund Lookup is to set up a bank account.
This doesn’t necessarily mean a trip to a bank branch. Many banks will be able to set up your new SMSF bank account through an online application.
Choosing the best bank account for your SMSF
When selecting a bank account as part of your SMSF setup, don’t immediately default to your existing bank that you use for personal banking.
Although it may seem convenient to have your SMSF account(s) with the same bank, in reality its likely going to work better if there is clear separation between your SMSF and personal accounts. This is called ‘separation of assets’ and if you don’t comply with it and your personal and SMSF accounts and investments are intermingled, the auditor of your fund is required to report it to the ATO.
When selecting the best bank account for your SMSF, look for an account with the following features:
- Easy online set up
- No ongoing monthly account keeping fees
- No adviser commissions (or that any commissions are rebated back into your account)
- Account links with popular stockbrokers
- Seamless integration with SMSF accounting software
- Excellent online functionality and mobile apps
- High levels of security including multi-factor authentication
- Australia call centers and great customer support
In our opinion, the best bank account for any SMSF (new or existing) is the Macquarie Cash Management Account (CMA).
To find out more, you can read the details in the following article: Best SMSF bank account
From time to time Grow SMSF may produce information or content about specific financial products or services that enable access to specific financial products however we do not recommend, endorse or confirm as suitable any financial product or service featured on the Grow SMSF website or social media assets. This condition specifically applies to any financial product where Grow SMSF provides services at a discounted or preferential fee due to the use of those products, services or accounts. It’s not compulsory to utilise a specific account or service provider to be a client of Grow SMSF however the types of accounts, investments and service providers you use for your SMSF will determine the fees your SMSF is charged.
Setting up investment accounts
Once you’ve set up the bank account for your SMSF, you can then set up other investment and stockbroking accounts.
The new bank account, such as the Macquarie Cash Account, act as the central cash ‘hub’ for your SMSF.
Your SMSF bank account will receive the following deposits:
- Transfer / rollovers of your existing superannuation;
- Contributions from employers and members;
- Income such as interest, dividends and distributions from investments;
- Tax and GST refunds;
In addition the SMSF bank account will pay the following amounts:
- SMSF administration fees including accounting, tax and audit fees;
- Insurance premiums for life and disability insurances;
- Income tax payments;
- ASIC annual review fees for the trustee company
The account may also have investment purchase and sale transactions being deposited or withdrawn.
Selecting stockbroking and investment accounts
It’s important to carefully think about the stockbroking and investment accounts you use for your SMSF as they can directly impact the time it takes to managed your SMSF and also the fees you pay.
This is because certain accounts and providers more seamlessly integrated with SMSF administration platforms, which creates more automation, reduces paperwork and keeps the fees you pay under control.
For more information on the broker and investment platforms available and how they impact ongoing administration costs, please visit our SMSF fees page.
Electronic service address for Superstream contributions
Once your SMSF has it’s bank account open, if you want your employer contribution to be paid to your new SMSF you have to provide your ESA (electronic service address) together with relevant bank accounts and SMSF details to your employer / payroll office.
These details are mandatory for your SMSF to receive contributions via the Superstream system. Superstream is basically an electronic remittance sent to your SMSF when an employer pays you super.
The Electronic Service Address (ESA) for any SMSFs set up or looked after by Grow is: smsfdataflow
Provide the following information in writing to your employer / payroll office for their records:
- Name of your SMSF
- ABN of your SMSF
- Bank account details for contributions (BSB, Account Number, Account Name)
- ESA (smsfdataflow as above)
- Member number (typically “001”, “002” etc)
Please note than SMSF will not have an SPIN or USI as these identifiers are for larger APRA regulated industry and retail super fund not SMSFs.
You can download an editable ESA Notification Template (.docx) here to complete and give to your employer.
Alternatively, you can generate a Superannuation Standard Choice Form (.PDF) here: Super Choice Form
Transfer existing superannuation to SMSF
Once your SMSF has a bank account set up you can now request that your existing superannuation fund transfer some, or all of your superannuation monies to your SMSF.
The process of transferring your super to your SMSF typically involves:
- Obtaining the transfer or withdrawal form from your existing superannuation fund(s)
- Completing the withdrawal form with all relevant details and following the instructions on the withdrawal form
- Sending the withdrawal form to the superannuation fund with relevant supporting documentation including certified copies of identification etc
- Your existing superannuation fund(s) will typically contact you to confirm your instructions and if required request any extra documentation to enable them to process the transfer
- Your existing superannuation fund will make payment to your SMSF (typically via cheque but also sometimes via direct deposit) and send payment to the registered address of your SMSF together with a Rollover Benefits Statement
- Payment deposited into your SMSF bank account
- Your SMSF administrator (such as Grow) will process the transfer in their systems
Once the monies have been received into the SMSF bank account the investment strategy of the fund can be implemented.
Transferring all or part of your superannuation
A key decision you need to make during your SMSF setup is whether to transfer all or only part of your existing superannuation to your SMSF.
In addition, insurance cover is also a key item that must be considered by you as trustees as part of your SMSF investment strategy.
Its extremely important to understand that if you transfer 100% of an existing retail or industry super fund account to your SMSF, those existing accounts will be closed and any attached insurance cover will be lost.
This leaves two main options when dealing with insurances as part of your SMSF setup:
- Leave the required minimum balance in your existing industry or retail super fund account to keep any insurances active; or
- Obtain replacement insurance cover in the name of your SMSF prior to transferring benefits to your SMSF
The above options are not mutually exclusive. You can select option 1, then once replacement insurance is setup in your SMSF you can complete another rollover / transfer request for any final amounts to be transferred to the SMSF.
Whatever option you choose, its important you seek advice from an adviser appropriately licensed with expert knowledge in insurance. Please refer to the Grow SMSF Advice Disclaimer and also check our blog for more information on SMSF insurance.
How long does the rollover process take?
The time for a industry or retail (APRA regulated) superannuation fund to transfer your existing superannuation to your SMSF will typically vary from two to four weeks.
Once an APRA regulated superannuation fund receives a rollover request from a member, as well as all necessary supporting documentation, they have to process the transfer within 28 days.
Rollovers from APRA funds are mostly paid via cheque, although some are beginning to move towards electronic payments, which is why it’s essential to provide the SMSF bank account details on the rollover forms wherever possible.
SuperStream for SMSF rollovers
Although originally set to be up and running during 2020, the ability for SMSFs to receive rollovers via SuperStream (same electronic payment / remittance system as employer contributions) has been deferred until 31 March 2021.
Prior to this time rollovers will still be manually processed and paid, and the longer time frames apply. Once the SuperStream system is up and running for rollovers to SMSFs the process will only take a few days.
Ensuring transfers to an SMSF are not delayed
There are certain key things that you must do as part of your SMSF setup and rollover process to ensure any transfer requests are not delayed unnecessarily:
- Read and follow all instructions on the withdrawal / rollover forms from the industry / retail super fund;
- Ensure your complete all details accurately;
- Note: Your SMSF does not have a SPIN or USI – these identifiers are not issued to SMSFs. Also, in terms of member number you can use “001”, “002” etc for the members of the SMSF.
- Ensure all addresses are correct (i.e. both your addresses with the superannuation fund and your SMSFs addresses with the ATO and on Super Fund Lookup);
- Provide all supporting documents and identification documents requested by the industry or retail superannuation fund;
- Ensure all documents are certified copies and all copies are clear and legible;
In summary, most industry and retail superannuation funds treat the rollover to an SMSF the same as a cash withdrawal therefore have quite strick requirements to protect your super from identity theft as well as illegal withdrawals.
Insurances must be addressed during SMSF setup
It’s very important to understand that when you set up an SMSF and transfer 100% of your member balance from your existing industry or retail super fund, you will lose any attached insurance cover.
This means you can either leave a minimum amount (specified by the super fund) in your existing account to ensure the insurance is kept active or obtain SMSF insurance prior to transferring your existing super account(s) to your SMSF.
It is essential that you get your insurance needs assessed and have your SMSF acquire appropriate insurance policies on behalf of the members.
Although you can shop around by yourself for a policy you believe suits the needs of you and your family, you are better seeking advice from an experienced insurance adviser. It will likely cost you nothing and you are likely to get better cover at a better price compared to if you organised it yourself.
If you would like a referral to a specialist insurance adviser, please get in touch and I can put you in contact with someone who can assist you. Alternatively, if there are specialist online SMSF insurance providers such as Life Insurance Direct which are a step above the online comparison websites.
From time to time Grow SMSF may produce information or content about specific financial products or services that enable access to specific financial products however we do not recommend, endorse or confirm as suitable any financial product or service featured on the Grow SMSF website or social media assets. This condition specifically applies to any financial product where Grow SMSF provides services at a discounted or preferential fee due to the use of those products, services or accounts. It’s not compulsory to utilise a specific account or service provider to be a client of Grow SMSF however the types of accounts, investments and service providers you use for your SMSF will determine the fees your SMSF is charged.
Implement investment strategy to complete SMSF setup
The final key stage of your SMSF setup is to implement your SMSF investment strategy.
Some SMSF setup checklists include the creation of an investment strategy, however we believe the investment strategy should be created in some format prior to setting up the SMSF structure itself. It’s a minor, but important distinction.
At this stage of the set up process, your new SMSF has received rollovers of existing super and has money in the bank ready to be invested. Implementing the investment strategy is simply the process of buying the investments that will fit the strategy chosen by the members of the SMSF.
Help building your investment strategy document
An investment strategy document is the written plan that describes how your SMSF will invest on behalf of the members. It’s essentially your roadmap on what investments you will purchase in the name of the super fund.
Ideally the investment strategy should be developed as early as possible in the SMSF setup process. From a practical perspective the investment strategy document does not have to be provided to anyone until the first audit of the fund is undertaken (typically in conjunction with the first SMSF accounts and tax return being prepared).
The ATO has some great resourced on SMSF investment strategies here: https://www.ato.gov.au/Super/Self-managed-super-funds/Investing/Your-investment-strategy/
Asset Allocation
A key item that needs to be considered with an SMSF investment strategy is diversification. This means you’ve determined how your SMSF will (or will not) invest in a range of different types of assets.
A very useful process to go through to help build a customised investment strategy for your SMSF is the Stockspot personalised investment recommendation. This online advice tool takes you through a detailed questionnaire and at the end Stockspot will provide you with an investment advice document that outlines a recommended investment strategy. You can then use this document to help you document your investment strategy. Whether you go ahead and invest with Stockspot or not is up to you as trustee of your SMSF. Please note our Advice Disclaimer.
Selecting your investment accounts
When implementing your SMSF investment strategy you will likely need to select specific investment accounts and providers to invest through.
With Grow, we do not mandate any particular bank, broker or investment account provider, however we do provide lower SMSF administration fees when you use certain accounts and providers due to the efficiencies and time savings we gain, which we in turn pass onto you and your SMSF.
As per our SMSF Fees page we have a ‘Base’ pricing package that includes access to the following popular bank accounts, brokers and investment plaforms:
| Popular Bank Accounts | Popular Broker Accounts | Popular Investment Platforms |
| Macquarie CMA | SelfWealth | BT Panorama |
| Commonwealth | Commsec | BT Wrap |
| Westpac | Westpac Online Investing | Macquarie Wrap |
| NAB | NABTrade | Colonial FirstWrap |
| ANZ | ANZ Share Investing | HUB24 |
| BOQ | Macquarie Online Trading | IOOF |
| DDH Graham | Morgans | Netwealth |
| OpenMarkets | Praemium | |
| Ord Minnett | ||
| Bell Direct / Bell Potter | ||
| CMC Markets | ||
| FinEx Stockbroking |
In addition to the above, we also have special ongoing SMSF administration packages set up with the following providers:
In summary the particular bank, broker and investment accounts you select as part of your SMSF investment strategy will directly influence the ongoing fees your SMSF will pay.
Similarly, the more complex your investment strategy, the higher the likely ongoing costs in terms of both time and fees. Select wisely.
Generate your investment strategy online
Once you know your asset allocation and have made a decision on your insurances for members as part of your SMSF setup, you need to document your SMSF investment strategy.
With Grow you can simply and easily generate your SMSF investment strategy online for no cost: SMSF Investment Strategy Form
SMSF Setup Fees
$385
Individual Trustees
Suitable only in limited circumstances only. Includes high quality SMSF trust deed, ABN & TFN application and support from our specialist team. Soft-copy PDF documents.
$990
Company Trustee
Default option. Support 1-4 members with no limitations on investments. Includes ASIC company registration fee, high quality SMSF trust deed, ABN & TFN application and support from our specialist team. Soft-copy PDF documents.
Learn more about ongoing SMSF fees here.
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Frequently Asked Questions (FAQs)
What is the minimum amount to set up a SMSF?
Although the ATO as regulator doesn’t prescribe a minimum amount needed to set up a SMSF, the most common answer is $200,000
The median (mid-point) for newly established SMSFs was $268,664 for the 2018 financial year.
It’s important to understand that an SMSF can have up to 4 members (which could also increase to 6 based on pending law changes) so the minimum amount is the COMBINED amount across all individuals who will be members of the SMSF.
Another important factor when determining what is the minimum amount to set up a SMSF is the amount of fees that will be paid. The lower the annual SMSF fees, the less is needed to justify an SMSF.
For example if you’re using one of our fixed fee packages (Stake, Stockspot or SelfWealth) then total fees (SMSF accounts, tax, audit plus ATO levy and ASIC fees) would be under $1,500 per annum meaning a total amount of $150,000 would ensure total fees are around 1.00% or less – which can make an SMSF comparable with an industry or retail fund.
How much money do you need to set up a self managed super fund?
The most common method to answer this question is to look at the average SMSF costs and fees per year and compare to another type of superannuation fund such as a retail or industry super fund account.
If for example your retail or industry super fund costs you 1.00% per annum for the administration and management cost (excluding insurance premiums), then based on the average SMSF fees from the ATO an SMSF with a starting balance of $393,400 would on average be a reasonable amount of money to set up a self managed super fund.
However, it’s not quite as simple as that. If you plan to outsource the investment management of an SMSF to a financial planner or investment adviser, the SMSF costs and fees will increase, therefore to make the self-managed super fund costs similar to APRA regulated funds, you would need more.
ASIC previously reported that SMSFs with balances under $500,000 had lower returns after expenses and tax and are often uncompetitive compared to the larger APRA-regulated funds. There is an element of truth to this, however average fees and average balances often hide other variables.
Analysis by the SMSF Association shows that the average amount of money to set up an SMSF in the 2018 financial year was $408,750 with a median amount of $268,664.
How long does it take to set up a SMSF?
There are a number of different factors which influence how long it takes to set up an SMSF.
The legal creation up of an SMSF is typically quick and can normally happen within 1-2 business days.
When it comes to registering a newly created SMSF with the ATO, this can take anywhere from a few business days to more than a month if there ATO decides to manually review the SMSFs application to be registered. Until a new SMSF is registered on Super Fund Lookup, it cannot receive rollovers from other superannuation funds, accept contributions and most banks will not set up an account for the SMSF either.
Another aspect that can take a long period of time is waiting for APRA regulated funds to transfer your super monies to the SMSF. At the moment industry and retail super funds have up to 28 days to process a transfer to an SMSF once they’ve received all necessary documentation. This time period will significantly reduce when the SuperStream regime extends to rollovers to and from SMSFs (schedule to commence in March 2021).
So in terms of how long it takes to set up an SMSF, you can have a freshly setup SMSF running within a week, but it may have an additional four weeks until it receives transfers from larger super funds.
Who pays for the setup of an SMSF?
The setup of an SMSF is paid for by the members of the fund however the amount paid can be reimbursed once the newly set up self managed super fund has received monies from transfers / rollovers or contributions.
Alternatively, the amount paid by the members can be treated as a contribution to the fund on their behalf.
Is it worth setting up a SMSF?
Apart from ensuring an SMSF is cost effective, it’s worthwhile setting up an SMSF if:
- You want to be engaged with your retirement savings;
- You value choice and transparency when it comes to your super investments;
- You understand the value of professional advice from an SMSF specialist adviser;
- You’re not simply going to outsource all the investment management decisions to a financial adviser who is going to invest your super into very similar investments to what you were invested in via a retail or industry fund (unlikely an adviser would recommended this unless there were significant cost savings and it was in your best interests!)
- You want the tax advantages / controls that come with an SMSF (or rather you don’t want the tax disadvantages of pooled investments that you get with most APRA regulated funds)
- You understand your obligations as trustee and you will not intentionally breach super laws and regulations or unintentionally breach the rules by not checking with your accountant / administrator / adviser before making certain investments or transactions
The above list is not comprehensive but simply some items to consider when determining whether an SMSF is worth it for you.
What information do I need to set up an SMSF?
To complete the online SMSF set up form with us, you need to have the following information available to provide during the application process:
- Contact details (including name, email address and phone number)
- A chosen name of your SMSF (Learn more: How to choose a name for your SMSF)
- A chosen and available name for your SMSF trustee company (Check name availability)
- Electronic copies of your drivers licence or passport* (Photo can be taken via a mobile device)
- Copy of a recent statement from your existing superannuation account** (PDF)
- For each member of the SMSF: Email address, mobile phone number, tax file number
Each member of the SMSF needs to have their own unique email address and phone number to set up an SMSF with us. This enables secure authentication, identification and digital signing of SMSF documents.
*Can be provided via email after submission of the establishment form.
**Optional and can also be provided via email after submission. We can use this information to assist you with administrative aspects of setting up your new SMSF however the provision of this information doesn’t mean we are providing advice or a recommendation of an SMSF or to transfer benefits from your existing account to an SMSF. Always seek advice from a licensed adviser and refer to our advice disclaimer.
How much does it cost to set up a SMSF?
The costs to set up an SMSF with Grow are $385 where individual trustees are used and $990 where a special purpose trustee company is used. This includes all ASIC fees as well as provision of a high quality SMSF trust deed as well as the ABN/TFN registrations with the ATO but does not include advice on whether an SMSF is suitable for you.
How does this compare to the average establishment fees?
The Future of SMSF Survey undertaken by Smarter SMSF looked at average SMSF setup costs in their 2018 report.
The average SMSF setup costs were found to be $1,050 for a generalist accountant or $935 for a specialist SMSF provider.
This amount includes the documentation including SMSF trust deed but does not include the cost of the trustee company registration with ASIC which is $506 from 1 July 2020 (increases each 1 July) and associated legal document costs for the constitution.
This means the average SMSF setup cost for the establishment of a self-managed superannuation fund with a company trustee would be circa $1500.
SMSFs don’t necessarily need a special purpose trustee company for a new SMSF setup, however it’s more robust and the best choice for most new SMSFs.
According to ASIC surveys, people who were contemplating setting up an SMSF expected to pay an average of $1,000 to set up an SMSF. The actual cost of setting up an SMSF, however, has been estimated to range from $916 to $2,035.
Source: ASIC, June 2018
Free SMSF setup
Setup fees for an SMSF with individual trustees are typically lower, and can be anywhere from $0 (free setup) or up to $900 with an average around $500.
It’s important to understand what you get as many low cost providers basically provide a documentation ‘kit’ for a truly DIY SMSF set up. Most providers who charge a fee will often undertake more of the work including explaining all the relevant documentation and minutes, completing the ABN and TFN applications for the SMSF as well as ensuring the trust deed document for your new SMSF is up to date for all laws, compliant and of high quality.
If you’re looking and setting up an SMSF via a business that provides the setup for free, you need to ensure they available to support you and guide you if and when you hit any roadblocks both initially and ongoing.
How do I setup my own SMSF?
If it’s time to set up an SMSF you can follow the steps outlined on this page:
- Choose the members of your SMSF and decide on your trustee;
- Obtain and sign SMSF trust deed and other documents;
- Complete the ABN & TFN application and get your SMSF registered on Super Fund Lookup;
- Setup an SMSF bank account and notify employers of superstream details;
- Address insurance needs and organise a transfer of your existing superannuation;
- Document and implement your SMSF investment strategy
There is also another checklist you should go through BEFORE setting up your SMSF to ensure it’s suitable – which starts with contacting an SMSF specialist who can help you understand your needs.
Are SMSF setup costs tax deductible?
No. Setup costs for an SMSF are not tax deductible within the super fund itself. This includes the cost of trust deed, trustee company, ASIC company registration fees as well as the cost of any upfront financial advice.
Similarly, the costs cannot be amortised and spread out over five years. Some traditional accountants record the setup cost of an SMSF on the balance sheet of the fund and write it off over 5 years in the accounts, however as there is no tax deduction available, there is no reason to do this.
The cost of setting up a new SMSF is treated as a non-deductible expense in the first accounts and annual tax return for the fund.
Can a member claim a tax deduction personally for SMSF setup costs?
Where the costs to establish an SMSF have been paid by the member and treated as a contribution to the fund (the amount paid has NOT been re-imbursed), then yes, it’s possible for the member to claim a tax deduction for the amount paid to be claimed as a personal contribution.
Claiming a personal tax deduction requires the member to complete a notice of intent to claim form under s290-170 within the required time period. Seek taxation advice from a qualified tax accountant or us if you would like more information.
Can you rent SMSF property to family?
No. You’re not able to rent a residential property to members of the SMSF or family members. This is a clear breach of the in-house asset rules and doing so could lead to significant penalties that you as trustee if your SMSF would be personally liable for.
You cannot provide any financial assistance or accommodation to members of the SMSF or family members.
When it comes to business real property (i.e. commercial property used ENTIRELY and EXCLUSIVELY for business purposes) the rules are different and you can lease on commercial terms to a family business.
Always seek professional advice prior to making any investment decisions or entering into contracts and transactions that could impact the compliance of your SMSF.
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Copyright © 2020 by Grow SMSF Pty Ltd. All rights reserved.
General Information Warning & Disclaimer
All information contained on this website is provided as an information service only and, therefore, does not constitute, and should not be relied upon as, financial product advice. None of the information provided takes into account your personal objectives, financial situation or needs, and you will need to make your own decision about how to proceed. Alternatively, for financial product advice that takes account of your particular objectives, financial situation or needs, you should consider seeking financial advice from an Australian Financial Services licensee before making a financial decision.
Grow SMSF does not hold an Australian Financial Services Licence (AFSL) and we are not authorised representatives of a AFSL. We do not provide financial product advice or recommend any financial products either expressly or implied.
From time to time Grow SMSF may produce information or content about specific financial products or services that enable access to specific financial products however we do not recommend, endorse or confirm as suitable any financial product or service featured on the Grow SMSF website or social media assets. This condition specifically applies to any financial product where Grow SMSF provides services at a discounted or preferential fee due to the use of those products, services or accounts. It’s not compulsory to utilise a specific account or service provider to be a client of Grow SMSF however the types of accounts, investments and service providers you use for your SMSF will determine the fees your SMSF is charged.
Where Grow SMSF provides information in relation to a financial product or service supported by or integrated with Grow SMSF the information is factual information only about the operation of the account or service and how data or reporting information is made available to us. Before making a decision on any financial product for your SMSF you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the PDS before making any decision. As financial product and solution providers are frequently making changes to their products and services Grow SMSF cannot accept any responsibility for any outdated or inaccurate information provided on this website or via social media assets.
Grow SMSF Gold Coast based accountants looking after SMSF trustees from around Australia.
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