Once you decide to set up an SMSF, the next decision in line is choosing the members and determine whether it is better to opt for a corporate or individual trustee structure.
The most important items on your checklist for setting up an SMSF are:
- Find SMSF providers who will help you with the administration.
- Arrange fund structure.
- Give a name to your SMSF.
- Create the trust deed.
- Decide who the trustee/s will be (you may need to form a new company) and check trustee/s eligibility
- Make an appointment with your trustees
- Set up a cash management trust (CMT) or open a bank account.
- Register with the ATO. Apply for an Australian Business Number (ABN) and Tax File Number (TFN) and GST registration.
- Select the auditor.
- Record individual TFNs of fund members.
- Get prepared for arranging disability and death insurances.
When you’ll have your SMSF set up, you and all of the other members will become trustees. As I previously mentioned, you may choose between:
- individual trustee structure
- corporate trustee structure
The regulations state that all members are trustees and there can be no other trustees. However, there are three exceptions:
- Single member funds can have an additional non-member director. However, the sole member mustn’t be a sole individual trustee therefore another person will also needs to be additionally appointed.
- In a situation where death or mental incapacity of a member occurs, their legal personal representative is allowed to act as trustee on behalf of the deceased or mentally ill member.
- Children that are under the age of 18 can be members of an SMSF but until they reach 18 they cannot become trustees. Therefore, the child’s legal personal representative – a parent or a guardian can act as trustee until the permission is acquired.
Employees cannot become a member of your SMSF unless you choose a person that is also your relative.
People that cannot become trustees according to the rules of SMSF providers:
Provided a person is 18 years of age or more and not under a legal disability, they can become a trustee of a superannuation fund.
Disqualification applies for:
- people who have been convicted of an offense that involves dishonesty
- people who have received a civil penalty under the SIS Act
- people who are indebted
- people that the Regulator under the SIS Act s 120A has disqualified.
Once you are done with the set up and all trustees have signed the their declarations, your next task is fund registration with ATO. You need to do this in complete accordance with SIS. You need to register the SMSF within 60 days since the trust deed has been signed.
Each one of the SMSF members have equal rights when it comes to making decisions about the fund. Therefore you need to carefully consider who your trustees will be beforehand.