• What is self-managed superannuation fund?

    There are currently around 480,000 SMSFs in Australia (with over 900,000 members) controlling around a third of the total $1.5 billion of superannuation savings; with approx. $460 billion in investments.

    Like other superannuation, self-managed super funds (SMSFs) are a way of saving for your retirement. The difference between an SMSF and other types of funds is that members of an SMSF are the trustees and actively participate in the fund's management, administration and investment decision-making. SMSFs are complex structures, with strict regulations on what you can or cannot do.

    Starting an SMSF is an important decision, so it is recommended that you see a qualified and licensed professional to help you decide if it is suitable for you. Once the decision is made to set up an SMSF, you will then be responsible for correctly establishing the fund and ensuring it complies with the law.

    A complying SMSF must satisfy the following conditions, unless an exception applies:

    Its sole purpose is to provide retirement and related benefits to members

    It must have at least one but no more than four members

    Each member is a trustee (or a director of the corporate trustee) of the SMSF

    No member is an employee of another member, unless they are related, and

    No trustee (or a director of the corporate trustee) may receive remuneration for their services as a trustee (or director of the corporate trustee).

  • Why use SMSF?

    SMSFs can be time consuming to properly administer and may not be appropriate for everyone.

    The benefits of an SMSF include:

    Greater control over the management of retirement savings

    Greater flexibility in investments

    Potential cost savings on external fund management fees, and

    Enhanced tax efficiency.

    SMSFs are attractive for:

    retirees wanting to manage their own pensions and retain control of the underlying investments

    self-employed workers or small business operators wanting a more cost-effective superannuation structure or who want to hold real business property in their SMSF

    high income earners wanting to utilize concessional tax arrangements and flexibility around their estate planning, and

    employees wanting greater input and control over their investment decision and superannuation savings, to suit their particular circumstances.

    Effective management of a SMSF requires the trustees to have a certain level of knowledge and technical expertise in understanding and implementing the legal, tax and compliance requirements of SMSFs. If not administered properly, adverse tax implications could arise.

  • Guidelines to set-up a SMSF

    MYOB has worked with Sparke Helmore to make sure your fund is set-up correctly and that the deed complies with current legislation, so that your fund is eligible for tax concessions, can pay benefits and is as easy as possible to administer.

    The steps involved in setting-up a self-managed superannuation fund include:

    Determine the structure of the fund

    You can choose one of the following structures for your fund:

    Up to and including four individual trustees

    A corporate trustee (i.e. a company acts as trustee for the fund).

    If the fund has individual trustees, the following must apply:

    It must have at least one but no more than four members

    Each member is a trustee

    No member is an employee of another member, unless they are related

    No trustee is paid for their duties or services as a trustee.

    If the fund as a corporate trustee, the following must apply:

    It has four or less members

    Each member of the fund is a director of the company

    Each director of the corporate trustee is a member of the fund

    No member is an employee of another member, unless they're related

    The corporate trustee is not paid for its services as a trustee

    No director of the corporate trustee is paid for their duties or services as director in relation to the fund.

    It is possible to set up a single member fund, with only one member.

    If you have a corporate trustee for a single member fund:

    The member needs to be either:
       - the sole director of the trustee company
       - one of only two directors who is either related to the other director or not an employee of the other director

    No director of the corporate trustee is paid for their duties or services as director in relation to the fund.

    You can also have two individuals as trustees, of which one trustee needs to be the member and the other needs to be either:

    A person related to the member

    Any other person who does not employ them

    No trustee is paid for their duties or services as a trustee.

    Make sure members are eligible to be a trustee

    In most cases, all members of the fund need to be trustees, so it's important to make sure all members are eligible to be a trustee.

    Generally, anyone 18 years or over can be a trustee of a super fund, as long as they are not under a legal disability (such as someone who is bankrupt or mentally impaired) or are a disqualified person.

    A person is disqualified if they:

    have ever been convicted of an offence involving dishonesty

    have ever been subject to a civil penalty order under the super laws

    are considered insolvent under administration

    are an undischarged bankrupt

    have been disqualified by a regulator (such as the ATO or APRA).

    A company cannot be a trustee if:

    a responsible officer of the company (such as a director, secretary or executive officer) is a disqualified person

    a receiver, official manager or provisional liquidator has been appointed to the company

    action has started to wind up the company.

    All trustees are bound by the trust deed and are equally responsible if its rules are not followed.

    Establish a trust deed

    A SMSF is a trust arrangement, with a trust deed which outlines the rules of the fund.

    A trust is an arrangement is where a person or company (the trustee) holds assets (trust property) in trust for the benefit of others (the beneficiaries). A super fund is a special type of trust, set up and maintained for the sole purpose of providing retirement benefits to its members (the beneficiaries).

    A trust deed is a legal document that sets out the rules for establishing and operating your fund - such as the fund's objectives, who can be a member and how benefits are paid. The trust deed and superannuation laws together form the fund's 'governing rules'. A trust deed is a legal document, so it needs to have been prepared by someone qualified to do so; MYOB's SMSF trust deed has been prepared by the law firm Sparke Helmore.

    The trust deed is to be executed by the trustees within 21 days after the establishment of the deed.

    Register with the ATO

    Once your fund is legally established you need to register your fund with the ATO. When registering your fund, you can:

    elect for it to be regulated

    get a tax file number (TFN) and Australian business number (ABN)

    register for GST

    Elect for the fund to be regulated:

    For a fund to be a complying fund and receive tax concessions, you need to elect for it to be regulated and comply with the super laws. Non-regulated funds are not entitled to tax concessions and the members' employers (and the members who are self-employed) cannot claim a deduction for contributions they make to the fund. You need to make this election within 60 days of establishing your fund (i.e. when the trust deed has been signed and the first contribution is made).

    TFN and ABN:

    The ATO allocates a tax file number (TFN) and Australian business number (ABN) to all funds registered with them. Once an ABN has been issued the fund’s details are placed on the Australian Business Register; other super funds can then lookup and check whether your fund is a complying fund for transferring superannuation benefits.

    Register for GST:

    You need to register the fund for goods and services tax (GST) if its annual GST income is more than $75,000. The fund needs to have an ABN to register for GST. Most SMSFs don't have to register for GST because SMSFs mainly make input-taxed income, which do not count towards your GST income.

    Prepare an investment strategy.

    Before you start making investments, you need to have a written investment strategy.

    Your investment strategy provides you and the other trustees with a framework for making investment decisions to increase members' benefits for their retirement. It should be in writing so you can show your investment decisions comply with it and the super laws.

    A financial adviser can help you prepare an investment strategy, but you and the other trustees are responsible for managing the fund's investments.

  • Responsibilities of a trustee

    When you set up an SMSF you become a trustee (or the director of a company that is a trustee).

    As trustee you will be responsible for managing your SMSF according to its trust deed and the laws and rules that apply to SMSFs, with the key principle that you run your SMSF for the sole purpose of providing retirement benefits to fund members; acting in the best interests of the members. As a trustee you need to manage the fund and its investments separately from your own affairs.

    When you set up an SMSF, you take on the role of either a:

      an individual trustee, or

      a director of a company that is a trustee (called a corporate trustee).

    A trustee is a person or company that holds and invests a fund's assets for the benefit of the members' retirement.

    A corporate trustee is a company incorporated under the law that acts as a trustee for the fund. Generally, to be an SMSF, all directors of the company need to be members and all members need to be directors of the company. If you already have a company you can use it as trustee.

    As a trustee or director, you're responsible for running the fund and making decisions that affect the retirement interests of each fund member, including yourself. You need to comply with the super and tax laws so your fund is entitled to tax concessions and members' interests are protected.

    As trustee you are expected to:

      act in the best interests of all fund members when you make decisions

      manage the fund separately from your own affairs

      ensure the money in the fund is only accessed where the law allows it

      know, understand and complete your responsibilities and obligations

      ensure your SMSF is independently audited every year

      lodge your SMSF annual return every financial year and pay the supervisory levy to the ATO.

    As an SMSF trustee, you must act according to your fund's trust deed and the super and tax laws. If there's a conflict between the super laws and the trust deed, the law overrides the trust deed.

    SMSF trustees are subject to extensive duties found in the trust deed or governing rules of the SMSF, general trust law and statute (for example, the SIS Act and the Corporations Act 2001 (Cth)). The duties cover four main areas:

      Acceptance of contributions

      Investment of funds

      Paying benefits in accordance with the rules or statute, and

      Administrative obligations, such as reporting and maintenance of records and accounts.

    It is important to consider and understand all the duties of a trustee as penalties for a breach can be severe. A person who becomes a trustee of a SMSF is required to sign a declaration stating that they understand their duties as trustee.

  • Benefits of a corporate trustee

    The advantages of using a sole purpose corporate trustee include:

    Separation of assets: having a corporate trustee helps to distinguish the SMSF's assets from the members' personal assets

    Limited liability for individuals: a corporate trustee's directors or shareholders will not be liable personally (except in limited circumstances) if the trustee is sued

    No change of trustee: if a new member joins the SMSF, or a member dies, the SMSF that adopts an individual trustee structure experiences a change of trustee.

    Appointing (or removing) an individual trustee can be time consuming and expensive as, generally, all trust assets will need to be transferred to the name of the new trustee(s) upon the death or appointment of a trustee. In contrast, the assets remain in the name of the corporate trustee despite a change of directorship

    For single member SMSFs, a member may be the sole director of a corporate trustee. In the case of individual trustees, the member must be one of two individual trustees.

    Most SMSF advisers will recommend a corporate trustee structure and bank lenders (for example, involved in limited recourse borrowing arrangements) will usually prefer or request that a SMSF have a corporate trustee.

  • Managing the fund's investments

    One of your key responsibilities as a trustee is managing your fund's investments, ensuring that investment strategies and decisions are in the best interests of fund members and in accordance with the law. Your investment decisions should be designed to protect and increase your members' benefits for retirement. Your investments must be separate from the personal and business affairs of fund members, including yourself.

    Investments should be in accordance with a written investment strategy. This investment strategy should:

    set out your fund's investment objectives and plans to achieve them.

    take into account the personal circumstances of all the fund members, including their age and risk tolerance.

    help maintain the right mix of investments for the fund and its members.

    Being a trustee of an SMSF gives you the flexibility to choose the investments for your fund, but there are some restrictions on how you invest and what you can invest in. Investments should be made on a commercial, 'arm's length' basis. The fund should not buy assets from, or lend money to, fund members (or other related parties). Generally, the fund cannot borrow money.

    You need to manage your fund's investments separately from the personal or business investments of members, including yourself. This includes ensuring that the fund has clear ownership of its investment assets.

    The fund's investments are for the sole purpose of providing retirement benefits to members - there can't be any pre-retirement benefits to members or related parties (such as letting members use an investment asset).

  • Legislation

    Superannuation is meant for your retirement, so there are special rules and legislation about how it is managed and when you can get it. The superannuation system is regulated by three key government agencies:

    The Australian Taxation Office (ATO) - administers the relevant superannuation laws for self-managed superannuation funds

    The Australian Securities & Investments Commission (ASIC) - regulates financial services and company laws to protect consumers

    The Australian Prudential Regulation Authority (APRA) - regulates large super funds other than SMSFs.

    You' are responsible for running the fund according to its trust deed and the super laws. If this is not done, the tax concessions that normally apply to a SMSF may be affected and you, as a trustee of the fund, may face penalties. The ATO checks compliance to safeguard retirement income, but does not evaluate trustee's investment choices. Your fund must be run for the sole purpose of providing retirement benefits for the members.

    At the heart of the super laws is a principle called the 'sole purpose test'. This means your fund needs to be maintained for the sole purpose of providing retirement benefits to its members (or to their dependants if a member dies before retirement). As a trustee, you need to maintain your SMSF so that it complies with the sole purpose test at all times while your SMSF exists, including when investing fund assets and paying benefits upon retirement of members.

    To protect members' retirement incomes, the Tax Office regulates SMSFs to ensure they comply with superannuation legislation. Failing to comply is known as a contravention of the Superannuation Industry (Supervision) Act 1993 (SISA) or Superannuation Industry (Supervision) Regulations 1994 (SISR).

    If you fail to perform your duties according to the laws, the tax concessions that normally apply to your super may be affected and you may face penalties. Depending on the severity of the breach, the Tax Office may:

    declare your fund to be non-complying, and taxed at the top marginal rate

    prosecute the trustees for failing to obey the law.

    Furthermore, if the Tax office considers that the fund's assets are at risk, they can take action to protect them which may include:

    Disqualifying you as trustee

    Removing you as trustee

    Freezing your fund's assets

  • SMSF documentation package

    Each SMSF establishment through MYOB CompanyDocs is accompanied by a Formation Package, which consists of high quality legal documents provided by top 20 legal firms, Sparke Helmore.

    These documents consist of:

    SMSF Deed

    Product Disclosure Statement

    Member application forms


    Members Minutes

    Directors Minutes

    Register of Members

    Investment Strategy template

    To obtain sample documents relating to establishing a SMSF, click here

    Details of documents relating to a Corporate Trustee are included in the Company Formation section.