Six top tips for starting your SMSF

Setting up a self-managed super fund (SMSF) doesn't have to be complicated. These tips will help you to get up and running, and in control of your financial future.

  7 minutes

For medical professionals, setting up an SMSF can often end up in the ‘too-hard’ basket. There seems to be an enormous amount of paperwork that has to be taken care of, especially in comparison to the old ‘set-and-forget’ days. And it’s hard to even know where to start.

An SMSF is a type of trust, set up and maintained for the sole purpose of providing retirement benefits to its members. There are also great advantages having an SMSF if you’re a doctor, dentist or vet. Especially if you run or plan to run your own practice. The nature of your career means you’re likely to be in the same spot for a long time. It makes sense that all the rent your practice pays for its rooms should be going into your retirement fund - not someone else’s. And there may be tax benefits for you if you purchase business assets through the fund.

Although there are some tricky aspects to setting up an SMSF, it doesn’t have to be complicated to run one. Follow these six tips to get yourself up and running and in control of your financial future.

1. Gather your team

You are going to need professional advice before you set up your SMSF - if your SMSF is not set up properly, it may cause significant issues in the future. You’ll need the help of an accountant, possibly a lawyer and an auditor. Your accountant will be your primary contact here—he or she will have done all this before, and will have standard templates they can work with for all the necessary paperwork. 

If you don’t have an accountant, you always have the option of appointing a specialist SMSF administrator to take care of record keeping, member statements, financial accounts and the fund’s annual return. If you enjoy paperwork and doing your own taxes, you can probably do all that record keeping yourself. But it’s still a good idea to get your accountant to help set up everything.

One outside helper you will definitely need is an auditor that is registered as an approved SMSF Auditor with ASIC. You need to appoint an auditor at least 30 days before the due date of the SMSF’s annual return. You can’t lodge the annual return with the Australian Taxation Office (ATO) without completing the audit.

2. Decide who’s in and how it’s run

SMSFs can have up to four members—members receive the benefits of an SMSF while trustees manage the fund. Each member must generally also be a trustee, or if a corporate trustee is appointed, each member must generally be a director of the corporate trustee. Members need to be over the age of 18 years to be a trustee, and not under a legal disability (e.g. mentally impaired or bankrupt) or be a disqualified person.

If it’s just you in the SMSF, you will need to find another person to be a trustee. This person can be related to you, but they can’t be your employer (unless they are related to you).

Finally, you need to decide the structure of the trustee—whether you want individual trustees where generally each trustee is also a member of the SMSF; or a corporate trustee where you create a company to be the trustee, with each member of the SMSF generally as a director of that company. Talk to your accountant or financial adviser about which would be best for your circumstances.

3. Do the paperwork

Now comes some paperwork. First, you need to get a trust deed. The trust deed sets out the rules for your SMSF. The deed should be prepared by a qualified legal practitioner and be signed and dated by you and any other trustee(s). SMSF administrators and other specialist companies can also help with this step. 

By law, each trustee or director of a corporate trustee need to sign a declaration to show they understand their responsibilities. This must be done within 21 days of becoming an SMSF trustee or a director of an SMSF corporate trustee. The document must be kept for at least 10 years. You can get the form from the ATO.

Finally, you must elect for the SMSF to be ‘regulated’ within 60 days of set-up. This notice is irrevocable and advises the ATO that the SMSF will be eligible for tax benefits. This step also involves getting a Tax File Number (TFN) for your SMSF; an Australian Business Number; and if required, registered for GST. Once again, your accountant will be able to help with this step.

4. Have a meeting with yourself

Even though it seems weirdly formal, you have to nominate yourself to be a member of your own fund. The same goes for every other member—so if you and your spouse share an SMSF, he or she must also nominate themselves. You must then meet with each other and approve each other’s nominations You will need to record the minutes of this meeting along with the TFNs of each members. 

5. Go to the bank

All of your paperwork can now be taken off to the bank to open an account in the name of your SMSF. This account is to accept contributions, rollovers of super benefits and investment earnings, and also to pay the fund’s expenses. You can’t just put all this in your regular everyday savings account—it needs to be kept separate from your other assets.

6. Make some decisions

Now is the time to start making some investment decisions. You need to come up with a strategy that takes the needs of all members into account. Part of that strategy may involve purchasing your own rooms, but you may have other objectives as well. Think about how much risk you are willing to take, how much income you need, the type of assets you would like to invest in, diversification and how quickly you can sell assets if you need to. You also need to consider if members of your SMSF need insurance. Write down the strategy and keep a copy of it. 

That’s it. Now you’re ready to implement your strategy, and start running your own super fund.