Self Managed Super Funds (SMSF)

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

• up to four individual trustees
• a corporate trustee (essentially, a company acts as trustee for the fund).

Your choice of trustee will make a difference to the way you administer your fund and the types of benefits it can pay, so you need to make sure it suits your circumstances. We recommend you discuss your trustee options with one of the SMSF professionals at ASCOT Wealth Management. If your fund has individual trustees, it's an SMSF if all of the following apply:

• it has four or less members
• each member is a trustee
• no member is an employee of another member, unless they're related
• no trustee is paid for their duties or services as a trustee.

If your fund has a corporate trustee, it's an SMSF if all of the following 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.

Single Member Funds

It's possible for you to set up your 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. 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.

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're 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 (for example, by us or APRA).

Generally, members under 18 years of age can't be trustees of a super fund. A parent or guardian can be a trustee for a member who's under 18 years of age and does not have a legal personal representative. A company can't 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.

Penalties can apply if you act as a trustee while disqualified.

In order to be a complying super fund and receive tax concessions, your fund needs to be a resident regulated super fund at all times during the income year. This means your fund needs to meet the definition of an 'Australian superannuation fund' for tax purposes.

If your fund is a non-complying fund, its assets (less certain contributions) and its income are taxed at the highest marginal tax rate.

If a member moves or travels overseas for an extended period, this may affect the residency status of the fund

A trust is an arrangement 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). To create a trust, you need to have the following:

A trust deed is a legal document that sets out the rules for establishing and operating your fund - things like the fund's objectives, who can be a member and how benefits are paid. The trust deed and super laws together form the fund's 'governing rules'.

A trust deed is a legal document, so you need to have it prepared by someone qualified to do so.

If your fund has individual trustees, the trust deed needs to state that the fund's sole purpose is to pay retirement benefits.

All trustees need to understand, sign and date the trust deed and ensure it is properly executed according to state or territory laws.

• trustees
• property (assets) (commonly an initial nominal consideration takes place to give legal effect to the trust - for example, $10 held in trust)
• identifiable beneficiaries
• the intention to create a trust.

New Funds Usually Appoint Trustees Under The Fund's Trust Deed.

All trustees and directors need to sign a declaration stating that they understand their duties and responsibilities. They need to do this within 21 days of becoming a trustee or director, and you need to keep the declaration for as long as it is relevant, or otherwise for at least 10 years.

The declaration needs to be available for us to see if we request it as part of an audit or review.

If you don't sign and retain the declaration, or make it available to the ATO when we request it, penalties may be imposed. All trustees are bound by the trust deed and are equally responsible if its rules aren't followed.

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. When preparing your investment strategy, you need to consider:

• diversification (investing in a range of assets and asset classes)
• the risk and likely return from investments, to maximise member returns
• the liquidity of fund's assets (how easily they can be converted to cash to meet fund expenses)
• the fund's ability to pay benefits when members retire and other costs the fund incurs
• the members' needs and circumstances (for example, their age and retirement needs).

When a member joins your fund, record their TFN. You'll need to provide each trustee's or director's TFN when you register the fund with us.

If a member hasn't quoted their TFN:

• your fund can't accept certain contributions made on their behalf, including personal and eligible spouse contributions
• your fund needs to pay extra tax on some contributions made to that member's account
• the member may not be able to receive super co-contributions.

Once your fund is legally established and all trustees have signed a trustee declaration, you need to register your fund with us. 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.

To be legally established, your fund needs to hold assets. The trustees hold the fund's assets in trust for the benefit of the member.

An SMSF is usually established by making a contribution to the fund at the same time as the trust deed is executed. A contribution can be money or a transfer of certain assets, such as listed shares and securities.

You need to open a bank account in your fund's name to manage the fund's operations and accept cash contributions and rollovers of super benefits. The money is then invested according to the fund's investment strategy, and used to pay the fund's expenses and liabilities.

You don't have to open a separate bank account for each member, but you do need to keep a separate record of their entitlement (called a 'member account').

The fund's bank account needs to be kept separate from each of the trustees' individual bank accounts and any related employers' bank accounts.