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CONTENTS CONTENTS .............................................................................................................................................. 2

INTRODUCTION ...................................................................................................................................... 4

About Us............................................................................................................................................. 4

Do it Right the First Time ................................................................................................................... 4

What’s the Difference Between an SMSF and MSF? ......................................................................... 5

Before you Proceed ........................................................................................................................... 6

GETTING YOUR FUND STARTED ............................................................................................................. 7

1. Preparing to Set Up Your Fund ...................................................................................................... 7

2. Choose Trustee Structure .............................................................................................................. 8

3. Establish the Trust Deed ................................................................................................................ 8

4. Signing A Trustee Declaration ........................................................................................................ 9

5. Register With ATO ........................................................................................................................ 10

6. Open Bank Account ...................................................................................................................... 11

7. Record TFNs ................................................................................................................................. 11

8. Settle the Trust ............................................................................................................................. 12

9. Prepare Investment Strategy ....................................................................................................... 12

What do most SMSFs invest in? ................................................................................................... 13

10. Roll-Over Other Super ................................................................................................................ 14

11. Appoint On-Going Service Providers ......................................................................................... 15

INVESTMENT RESTRICTIONS ................................................................................................................ 16

Arm’s Length Rules .......................................................................................................................... 17

Loans to Members and Relatives ..................................................................................................... 17

Borrowing to Invest in SMSFs .......................................................................................................... 17

Acquisition of Assets from Related Parties Rule .............................................................................. 17

In-House Asset Rules ........................................................................................................................ 18

EXTRA INFORMATION .......................................................................................................................... 19

Keeping Records............................................................................................................................... 19

Appointing an Auditor...................................................................................................................... 20

Requirements for Being a Trustee ................................................................................................... 20

Individual Trustees ....................................................................................................................... 20

Corporate Trustee ........................................................................................................................ 20

Single Member Funds ...................................................................................................................... 21

Accepting Contributions and Rollovers ........................................................................................... 21

Meeting Preliminary Expenses ........................................................................................................ 22

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Time Critical Investment Decisions .................................................................................................. 22

Don’t Pay Too Much Tax! ................................................................................................................. 23

Leaving Australia? ............................................................................................................................ 23

Paying Super Benefits to Members ................................................................................................. 24

Planning for The Future ................................................................................................................... 24

Insurance .......................................................................................................................................... 24

Are You Protected!........................................................................................................................... 25

LRBA ................................................................................................................................................. 25

Binding Death Benefit Nomination .................................................................................................. 26

SOME HELPFUL SMSF LINKS: ............................................................................................................... 27

Australian Tax Office .................................................................................................................... 27

Superannuation Management. .................................................................................................... 27

Useful links from the Australian Securities Exchange (ASX): ....................................................... 27

Mainstream Business Media ........................................................................................................ 28

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INTRODUCTION

About Us We set up our Self Managed Super Fund (SMSF) in 2014. It wasn’t as difficult as we thought but it did take some time and effort. However, the benefits of being in control of our financial future (rather than a third party such as “Industry Super” or “MLC”) has far outweighed the alternative. Our passion now is to help Australians set up or enhance their SMSF, so others can enjoy the security and freedom we have created. We created this eBook to save you time and endless hours of confusion and frustration. It’s easier when you know how!

Do it Right the First Time This eBook is a guide to get you started and give you an overview of the SMSF process but try not to get overwhelmed by it all. You don’t need to understand it all because you don’t need to do it all. You’ll need to employ various SMSF specialists to help set up and maintain your SMSF fund anyway. These specialists will be able to answer many of your questions and do much of the work for you. You’ll probably need to hire the help of many of the following specialists:

• Accountant • Financial advisor • Independent, non-government, SMSF Auditor • SMSF administrator • Lawyer (SMSF specialist) • SMSF insurance specialist

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We have also outlined in this eBook where you need expert help and added a white box (see example below) which outlines which type of specialist you need. That white box also contains a link that directs you back to our “Specialists” directory where you can choose from a list of SMSF experts in that field, if you don’t already have one. An example of a white box is below:

What’s the Difference Between an SMSF and MSF? Superannuation funds are a way of saving for your retirement. The difference between a Self Managed Super Fund (SMSF) and a Managed Super Fund (Such as MLC, or Industry Super, etc) is that you get to control your superannuation and can run your super fund for your own benefit. You get to control the investment of the contributions you make (whatever you, or an employer pays funds into your SMSF fund) You get to control what you invest your super funds into, which then determines what returns you get back from your investments. In other words, you can use your super funds to invest in real estate, shares, collectables, etc (as long as it’s in accordance with our SMSF investment strategy and ATO rules). Ginger and I have already made an extra $75,000 on a real-estate investment this way … and that’s just the beginning. Plus, you get to setup your super the way you wish to set it up and what fees to pay to whom. In other words, you get to choose the accountant, financial advisor, as well as insurance, legal, and even who audits your super. You also get to decide who benefits from your super in the event of your death. Being in control of a super fund makes you the trustee, rather than having a third-party trustee as you would find in a Managed Super Fund.

A “trustee” is a legal term which, in its broadest sense, means anyone in a position of trust or responsibility. A Self Managed Super Fund is a self-appointed trustee.

WHITE BOX EXAMPLE

Outlines which type of specialist you need at each stage of this eBook. There is

also a link that directs you back to our “Specialists” directory where you can

choose from a list of experts in that field, if you don’t already have one.

Example of link to specialist

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Before you Proceed Managing your own super is a major financial decision and it is important to make sure it’s the best option for you. Before you proceed, you might want to consider the following:

• A SMSF is only one way to manage your superannuation (super) and save for your retirement. There are many other options you should consider before you make a final decision.

• If an SMSF appeals to you, do your due diligence - research, read, ask others who have a SMSF, and most importantly, seek expert advice from SMSF professionals to consider the advantages and disadvantages of a SMSF.

• Talk to an accountant or tax advisor to see if an SMSF is right for you. Your accountant can apply for your SMSF should you decide to proceed, and help you set it up.

• The ATO website is very helpful in understanding what a SMSF entails. Website links to that information are at the back of this eBook.

• Make sure you have the assets and money to make the SMSF fund viable. • Make sure you are setting up the SMSF fund solely to pay for your retirement.

You can find a comprehensive list of SMSF articles and information on our

website:

Click here for our SMSF blog

Click here for SMSF videos

Click here for SMSF specialists

Click her for SMSF website links

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GETTING YOUR FUND STARTED

1. Preparing to Set Up Your Fund Once you have decided to set up an SMSF, there are a few things you need to do to help you get started. It’s always better to be prepared with all the relevant documents and information such as:

• Get a release form(s) from your current superannuation fund(s) to transfer your existing super funds (rolled over) into an approved SMSF account. Talk to your accountant about this and where to find an approved SMSF account.

• Get a printout of all the supporting documents (E.g. trust deeds, legal documents, financials) before you create a SMSF. Your accountant can do this for you and there could be a fee for the paperwork.

• Read through a SMSF trust deed (see “3. Establish the Trust Deed” on page 8) to thoroughly understand your responsibilities.

• Decide what the type of trustee you prefer for your SMSF fund (either a corporate trustee or individual trustee – see “2. Choose Trustee Structure” on page 8).

• Make sure you (and the other members) are eligible to be a trustee (or the director of a corporate trustee) and ready to accept the responsibilities of the role - see “2. Choose Trustee Structure” on page 8).

• You may have more than one trustee on your SMSF account (see “2. Choose Trustee Structure” on page 8).

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2. Choose Trustee Structure The next thing you need to do is decide whether you want to be an individual trustee or a corporate trustee. This is an important decision and should be discussed with an SMSF professional such as an accountant or financial advisor.

• Individual Trustee(s) - up to four members can be a trustee of a SMSF • Corporate Trustee - essentially, a company acting as the trustee for the SMS fund

Your SMSF must meet several requirements under the superannuation laws, which can vary depending on whether your SMSF fund has individual trustees or a corporate trustee. Speak to your accountant or financial advisor about this, and you can read more about these requirements at “Requirements for Being a Trustee” on page 20) NOTE: Members who are under 18 years old or under cannot be trustees of a super fund.

3. Establish the Trust Deed SMSFs need to have a trust deed. This is a legal document that sets out the rules for establishing and running the SMSF fund and, along with the super laws, governs how the fund needs to be operated.

Your accountant and/or financial advisor should be able to help you with the

above list of requirements.

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Check with an SMSF professional such as an accountant or financial advisor

about whether to be an individual trustee(s) or a corporate trustee. Legal advice

will need to be sought when setting up a corporate trustee.

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Because the trust deed is a very important legal document, it should be prepared by a suitably experienced legal professional. Clients should use a lawyer who specialises in this area or purchase a deed from an SMSF administrator that has been 'pre-prepared' by legal experts. The trust deed must be tailored to suit your fund and correctly drafted to meet its objectives and the members’ needs. All trustees must sign and date the trust deed and make sure it is properly executed according to the relevant state or territory laws. As a trustee, you need to make sure the trust deed is regularly reviewed and updated so it complies with the super laws (including changes to the law) and the members’ needs. Each year, your auditor (an independent, non-government, SMSF auditor) will make sure the deed is up to date. Plus see your accountant and/or auditor to find out more about this.

4. Signing A Trustee Declaration Once you have established the trust deed, as a trustee (or a corporate trustee) you must sign the trust deed (otherwise known as signing a trustee declaration), in the approved form, within 21 days of becoming the trustee or director. This form requires them to acknowledge they understand:

• The fund is to be maintained for the 'sole purpose' of providing benefits to members upon their retirement or the members' beneficiaries if they die;

• The general duties that need to be met; and • The legal and other obligations.

This is effectively “signing off” and agreeing to the trust deed and it’s important you see your accountant or financial advisor and legal professional before this is done, to make sure your trust deed does not prevent the fund from doing something it may wish to do.

A trust deed should be prepared by a suitably experienced legal professional or

a pre-prepared legal deed from a SMSF administrator. See your accountant or

auditor (an independent, non-government, SMSF auditor) to make sure the trust

deed is regularly reviewed and updated so it complies with the super laws and

the members’ needs.

Click here to view SMSF legal professionals

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Click here to view SMSF auditors

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Finally, it would be good practice for the deed provider (a SMSF administration company that has pre-prepared trust deeds) to have a service that keeps deeds up to date (the deed is kept up to date after you have signed the deed).

5. Register With ATO The SMSF needs to lodge a form with the ATO electing to be regulated, to be eligible for the superannuation tax concessions. This needs to be done within 60 days of signing the trust deed but is usually done at the same time. The SMSF fund will also need to be registered for GST, if it's likely to have an annual GST turnover of more than $75,000 per annum. Once the ATO has approved the SMSF fund's registration, it will be issued with a TFN (Tax File Number) and ABN. The fund may also need to be registered for PAYG withholding tax if it is going to make lump sum or pension payments to members under age 60. Again, check with your accountant if you are unsure about this.

Once your fund is legally established and all trustees have signed a trustee declaration, you must register your fund with the ATO through the Australian Business Register (ABR). A risk assessment is conducted of all new SMSFs and every individual. At Registration:

See your accountant or financial advisor and legal professional before signing

the trust deed (trustee declaration) to make sure it does not prevent the SMSF

fund from doing something it may wish to do. See an estate lawyer if your SMSF

needs to consider binding nominations (see “Binding Death Benefit Nomination”

on page 26)

Click here to view SMSF accountants

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Click here to view SMSF legal professionals

Check with an accountant about your SMSF’s GST and PAYG requirements.

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• You will receive a TFN and Australian business number (ABN). This is a separate TFN and ABN for your SMSF fund

• You can register for goods and services tax (GST) if required • You will be asked to provide each trustee’s or director’s TFN to the ATO

6. Open Bank Account A Self Managed Super Fund needs a bank account to accept cash contributions, receive income from investments, pay fund expenses, and pay benefits to members. You need to open a bank account in your fund’s name. Contributions and rollovers are deposited into the fund’s account. Although you do not have to open a separate bank account for each member, you must keep a separate record of their entitlements. The fund’s bank account must be kept separate from each of the trustees’ individual bank accounts. To open a bank account, the SMSF will need a TFN and ABN, and will need to provide a copy of the trust deed and the registration certificate for the corporate trustee (if used). Identity checks will also need to be done for the individuals involved. The account needs to be opened in the names of the fund's trustees and the money must be kept separate from the members' personal and business assets.

7. Record TFNs The fund will need to record each member's Tax File Number (TFN). If you don’t, the fund:

• Will not be able to accept personal after-tax super contributions and contributions on behalf of a spouse; and

• Will need to deduct additional tax from employer contributions and contributions claimed as a tax deduction.

You will also be asked to provide each trustee’s or director’s TFN when you register your fund with the ATO.

Your initial risk assessment is done by the ATO and your financial advisor, and

then yearly via your auditor. These rules can change so please talk to the ATO

first.

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Click here to view SMSF auditors

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8. Settle the Trust While an SMSF is created when the fund's deed is executed, the ATO's view is that the process is not completed until the trust is settled. This step will usually be achieved by making a cash contribution into the fund's bank account.

9. Prepare Investment Strategy The fund must prepare an investment strategy that considers all the members' needs and circumstances before any investments can be made. An SMSF investment strategy document is like a mini-business plan for the fund and should be discussed with a specialist that holds a current AFSL (Australian Financial Services Licence) with the following considerations in mind:

• Fund's objectives, which should be meaningful and measurable, and outline the investments that will be made to achieve the objectives

• Degree of diversification across different asset types and markets • The risk and likely return from investments to maximise member returns • Keeping cash to meet fund expenses • The fund’s ability to pay benefits when members retire and other costs the fund incurs • Whether the fund should hold insurance cover for members (see “Insurance” on page 24) • Investment strategy should be in writing, so you can show your investment decisions

comply with the strategy and the super laws. • Ability of the fund to discharge its existing and prospective liabilities and debt • Regular review by an independent non-government auditor • Records of your decisions or ‘minutes’ must be kept so that an independent party can assess

whether your investment adhered to your SMSF fund’s investment strategy

See your accountant to discuss personal after-tax super contributions and

contributions.

Click here to view SMSF accountants

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What do most SMSFs invest in? Generally, SMSFs invest in shares (about 40%), property (bricks and mortar – about 20%), and the rest is mainly held in cash. Only a small percentage of SMSFs invest in collectables (E.g. art, precious metals, coins, etc) as they can be a challenge to manage (E.g., collectables must be kept in a vault and not at your home, plus they must be insured, etc.) Also remember, you don’t own any of this stuff, as it belongs to the SMSF fund. In other words, you can’t hang your “shiny new investment painting” on a wall in your house. It must be locked away in a security vault or rented to a suitable venue. Also see “

See a SMSF insurance company for SMSF insurance. See a SMSF financial advisor

to prepare your investment strategy. Your SMSF investment strategy needs to

be reviewed regularly by an independent non-government auditor.

Click here to view SMSF insurance companies

Click here to view SMSF financial advisors

Click here to view SMSF auditors

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INVESTMENT RESTRICTIONS” on page 16

10. Roll-Over Other Super Once your fund is established, a member can rollover or transfer some or all their existing super benefits from other super funds (managed super funds, or other SMSF) into the SMSF. Rollovers and transfers are not treated as contributions in your fund.

We recommend “Searching for Lost Super” at the ATO website to find any “lost”

super or old super accounts. You can also do this via your MyGov account (if you

have one).

You can then visit the ATO website to download a Rollover Initiation Request to

transfer the whole balance of your superannuation funds into your self-

managed super fund (see link below). You will need to fill out a copy of that

form for each super account.

ATO - Searching for Lost Super

Create/Login into a MyGov account

Download a Rollover Initiation Request - transfer super to SMSF

Make sure any contributions and rollovers are:

• Properly documented, including the amount, type and breakdown of components • Allocated to the correct member’s account.

See your financial advisor for more help in choosing the right type of investment

for your SMSF. We recommend choosing a specialist that holds a current AFSL

(Australian Financial Services Licence).

Click here to view SMSF financial advisors

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APRA (The Australian Prudential Regulation Authority) regulated funds, can only roll-over amounts to an SMSF after ensuring the SMSF is registered and the person is a member of the SMSF. But even though the SMSF may have submitted its application to the ATO, and received a TFN, the necessary status will take several days or more to appear on the ATO website. There may also be considerable time lags between submitting a rollover request and when the money is transferred. Generally, funds have 30 days to action a roll-over request, but there may be additional delays in some cases.

11. Appoint On-Going Service Providers Once the SMSF fund is established, the members of the SMSF will need to agree upon and select administration, accounting, and advice services to maintain or enhance the SMSF. It's important these providers are competent and can work together. The auditor (your fund gets audited once a year, by a private and independent auditor, not the ATO) and the ATO will want access to good records that set out the funds actions and the reasons for them, and collaboration between the various services will make this much easier. You may need to employ the services of some of these SMSF specialists to maintain or enhance your SMSF:

• Accountant • Financial advisor • Independent, non-government, SMSF Auditor • SMSF administrator • Lawyer (SMSF specialist) • SMSF insurance specialist • SMSF loan specialist

Click here to view SMSF accountants

Click here to view SMSF administrators

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Click here to view SMSF auditors

Click here to view SMSF insurance specialists

Click here to view SMSF lawyers

Click here to view SMSF loan specialists

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INVESTMENT RESTRICTIONS

The heart of any SMSF is the ability to invest your super funds into whatever you choose. Although the superannuation rules require trustees to implement an investment strategy for the fund, they do not state exactly what investments a fund can acquire. However, the legislation does impose certain restrictions on fund investments. It’s best to seek professional advice from a financial advisor for more information about this.

To ensure you work within the legislation that imposes certain restrictions on

fund investments, talk to a financial advisor.

Click here to view SMSF financial advisors

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The main investment restrictions include:

Arm’s Length Rules All SMSF investments must be made and maintained on a strictly commercial (i.e. arm’s length) basis. In other words, the purchase and sale price of all assets should be based on a fair market value regardless of who the buyers and sellers are.

Loans to Members and Relatives The trustees of a SMSF are strictly prohibited from lending any money (or providing any form of financial assistance) to a member of the fund or their relatives.

Borrowing to Invest in SMSFs SMSFs are prohibited from borrowing money. There are some limited exceptions including limited recourse loans which have a strict set of requirements, and certain short-term loans to pay benefits or settle certain security transactions. It is worth noting that an SMSF isn’t prevented from investing in assets that incorporate borrowings, such as geared managed investment funds, or certain types of instalment warrants.

Acquisition of Assets from Related Parties Rule The trustees of a SMSF must not intentionally acquire assets from a ‘related party’ of the fund. The definition of related party is very broad and includes the members and trustees of an SMSF as well as their relatives, business partners, and any associated companies and trusts. Determining which entities will be a related party of an SMSF can be complex, so you may wish to seek advice if in doubt. There are some exceptions to the above rule for acquiring related party assets, including:

• Listed securities (i.e. shares, units or bonds listed on an approved stock exchange, such as the ASX).

• Business real property (i.e. freehold or leasehold interests in real property used exclusively in one or more businesses) acquired at market value.

• An in-house asset where the acquisition would not result in the level of the fund’s in-house assets exceeding 5% (see below).

• Units (E.g., How many units you have of each asset) in a widely held unit trust, such as a retail managed fund.

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In-House Asset Rules An ‘in-house asset’ is generally defined as:

• An investment by an SMSF in a related company or trust (i.e. A fund owns shares in a related company or units in a related trust).

• An asset of an SMSF that is leased to a related party. • A loan made by an SMSF to a related company or trust.

An investment, lease or loan that is an in-house asset is not prohibited but is limited to 5% of the market value of the fund’s assets. That is, if the fund leased an asset to a related party, the value of that asset (combined with any other in-house assets) must not exceed 5% of the total value of the fund’s assets. The superannuation rules exempt certain assets, such as business real property, from being an in-house asset. (E.g., You can purchase a business premises through your SMSF fund and then rent those premises to your business).

To determine which entities will be a related party of an SMSF, see your

financial advisor.

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See your financial advisor about which superannuation rules exempt certain

assets.

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EXTRA INFORMATION

This is the end of the SMSF overview. The following contains extra sections for those seeking more detailed information about certain SMSF characteristics. Most of this will be discussed with you by the various SMSF experts you consult. However, we still suggest reading this chapter and seeking expert advice about many of the subjects below - before you set up your SMSF.

Keeping Records As an SMSF trustee, you are responsible for keeping proper and accurate fund records. Under super, tax and other laws, you must keep certain records which show you:

• Meet your tax and audit obligations • Operate your fund efficiently

Sometimes, a professional can take on more than one role in helping you

manage your fund. Your fund’s accountant will often also be your fund’s tax

agent and may offer book keeping services.

Click here to view SMSF accountants

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Appointing an Auditor You must appoint an independent auditor to audit your SMSF fund each year. An auditor will:

• Examine your fund’s financial statements • Assess your overall compliance with the super laws

Before the annual audit, you or your accounting professional must prepare statements about your accounts and transactions for the previous income year. You should also consider using one of the many accounting software programs available. Once the auditor has completed your fund’s audit, they will provide you with:

• An audit report • A management letter that summarises the findings of the audit and any action taken or

proposed by the trustees.

Note: Make sure your auditor is independent to your SMSF and your accountant.

Requirements for Being a Trustee Your SMSF must meet several requirements under the superannuation laws, which can vary depending on whether your SMSF fund has individual trustees or a corporate trustee:

Individual Trustees If your fund has individual trustees, it is an SMSF if all of the following apply:

• It has four or fewer members (also see “Single Member Funds” on page 21) • Each member is a trustee • No member is an employee of another member, unless the members are related • No trustee is paid for their duties or services as a trustee

Corporate Trustee If your fund has a corporate trustee, it is an SMSF if all of the following apply:

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• It has four or fewer members • Each member of the fund is a director of the corporate trustee (you can’t be a fund member

if you’re not a director – see your accountant for more information) • Each director of the corporate trustee is a member of the fund (you can’t be a director if

you’re not a fund member - see your accountant for more information) • No member is an employee of another member, unless the members are related • The corporate trustee is not paid for its services as the trustee • No director of the corporate trustee is paid for their duties or services as director of the

corporate trustee.

Please also consider that a corporate trustee must:

• Act in the best interests of all fund members when you make decisions. • Manage the fund separately from your own affairs. • Make sure the money in the fund is only accessed by members of the fund if the law allows

it.

NOTE: Members who are under 18 years old or under cannot be trustees of a super fund.

Single Member Funds It is possible to set up your super fund with only one member. If you choose a single member SMSF fund and you choose not to have a corporate trustee, you must have two individual trustees. One trustee must be the member and the other must be a trustee that is either:

• A person related to the member (E.g. partner) • Any other person but not an employer of the member.

Remembering that a corporate trustee is a company incorporated under the law that acts as a trustee for the fund. If you already have a company, you may choose to use it as trustee if it meets the same requirements for members and trustees. If your single member SMSF fund has a corporate trustee, the member must be one of the following:

• The sole director of the corporate trustee • One of only two directors, that is either

– Related to the other director – Any other person, but not an employer of the member.

Accepting Contributions and Rollovers Once you have established your SMSF, make sure any contributions and rollovers are:

• Properly documented, including the amount, type and breakdown of components • Allocated to the correct member’s account.

If the governing rules of your fund allow it, your SMSF can generally accept:

• Employer contributions

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• Personal contributions • Salary sacrifice contributions • Super co-contributions

As a trustee, you generally cannot acquire non-cash assets from related parties, such as:

• Fund members • Their families and partners • Related companies and trusts.

Meeting Preliminary Expenses The preliminary costs of establishing an SMSF may have to be paid before the SMSF exists or at least has funds available to pay those expenses. In this case, the members may have to pay the expenses on behalf of the fund and this can create a range of issues. Before paying expenses on behalf of the fund that won't be reimbursed immediately, it is important to check what contributions the members have already made to avoid triggering excess contributions tax.

Time Critical Investment Decisions Sometimes clients will want to purchase an investment, such as property, in an SMSF that has only just been established and doesn't have the funds necessary to enter into the contract because of a lag in receiving roll-overs. Where this is the case, the members would need to:

• Make contributions into the fund's bank account, from which the payment to acquire the asset would be made, or

• Pay for the investment out of their own pocket, where it would still be counted as a contribution in accordance with certain tax rules (ask your accountant about Tax Rule TR-2010/1.)

It's critical that when entering into the transaction to purchase the property (or any asset) by the members of the SMSF, that the SMSF has been established and is in existence. It is not possible to act on behalf of an entity that does not legally exist. Equally, if an LRBA (see “LRBA” on page 25) is to be entered into, then the security trust will need to exist at the time the asset is acquired and that the entity acting as the security trustee is a stand-alone corporate trust. The SMSF itself cannot acquire the asset. In all cases, a person acting on behalf of an SMSF in acquiring an asset must make it clear that the acquisition is on account of the SMSF and not on their own account.

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Don’t Pay Too Much Tax! Make sure you set up your SMSF correctly the first time. If your fund is a non-complying fund (E.g. if your SMSF does not comply with all the super rules), its assets (less certain contributions) and its income are taxed at the highest marginal tax rate.

Leaving Australia? Your fund must meet certain conditions to be an ‘Australian superannuation fund’. One requirement to consider is: If a member of your SMSF fund moves or travels overseas for an extended period, this may affect the residency status of the fund.

Your financial advisor can help you with most of this. See your lawyer about

setting up a 'limited recourse borrowing arrangement' (see “LRBA” on page 25).

Your accountant and/or SMSF loan specialist can also help you with setting up

an LRBA.

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Click here to view SMSF lawyers

Click here to view SMSF loan specialists

See your accountant to make sure your SMSF complies with all the super rules

and you get the best tax rates possible.

Click here to view SMSF accountants

Visit the ATO website for more information about Australian Superannuation

Fund requirements (click here)

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Paying Super Benefits to Members As a trustee, you must know the rules for paying benefits to members, so you know when and how they can be paid. These rules are set out in your fund’s governing rules. If your fund’s governing rules allow it, you can generally pay a super benefit as:

• A lump sum • An income stream (pension or annuity) • A combination of both

Planning for The Future Setting up an SMSF is about more than just organising the paperwork to get started – it is about planning for your future retirement. This is where you should seek professional advice to make sure it’s all set up properly at the beginning, to ensure good returns in the future. Your accountant or administrator, in conjunction with your financial advisor, would need to collaborate on this.

Insurance Unless the SMSF trustee specifically takes out insurance for fund members, there may be no cover and the lack of insurance cover may have significant consequences.

Your funds governing rules are set up as part of your trust deed. See your

accountant for more information about this.

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See your financial advisor, accountant, or SMSF administrator, to plan for the

future and make sure your SMSF is set up properly at the beginning.

Click here to view SMSF accountants

Click here to view SMSF administrators

Click here to view SMSF financial advisors

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When preparing your investment strategy, you may wish to consider whether the fund should hold insurance cover for members of the fund and its’ assets. Some assets require insurance plus there is also insurance on a rental property, landlords insurance, life and total and permanent disability (TPD) insurance cover, etc. Insurance premiums your SMSF fund pays may also be tax deductible.

Are You Protected! You should be aware that under existing super law, members of an SMSF are not covered by a government or industry compensation scheme for losses caused by fraud or theft. However, you do have certain rights and options available if your fund suffers a financial loss due to fraudulent conduct or theft. Legal options are available under corporations law if you received advice or services from an Australian financial services licensee who was involved in the fraudulent conduct or theft.

LRBA A LRBA (limited recourse borrowing arrangement) is a loan from a bank against an investment property, where the bank has limited security (E.g. If you have two properties as part of your SMSF investment, and one of them goes into default, the bank can’t use your other property, or any other assets you have in your SMSF, to recoup their loan. In other words, each property is secured via a separate loan).

SMSF insurance can be a complex issue and should be discussed with a SMSF

insurance specialist.

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You should seek legal advice about taking action against a person who engaged

in fraudulent conduct.

Click here to view SMSF lawyers

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According to the Australian Tax Office: “… an LRBA requires an SMSF trustee to take out a loan from a third-party lender. The trustee then uses those funds to purchase a single asset (or collection of identical assets that have the same market value) to be held in a separate trust. Any investment returns earned from the asset go to the SMSF trustee. If the loan defaults, the lender's rights are limited to the asset held in the separate trust. This means there is no recourse to the other assets held in the SMSF …”

Binding Death Benefit Nomination A binding nomination (or binding death benefit nomination) is a legally binding nomination that allows you to advise the trustee who is to receive your superannuation benefit in the event of your death.

Legal advice will need to be sought when setting up a 'limited recourse

borrowing arrangement'. Your accountant and/or bank can also help you with

setting up an LRBA

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See an estate lawyer or an SMSF legal specialist to find out more about binding

nominations. Also, ask your legal professional about “A chain of binding

nominations”.

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www.smsfcommunity.com.au | How to Start a SMSF | Page 27

SOME HELPFUL SMSF LINKS: Australian Tax Office ATO - Searching for Lost Super Create/Login into a MyGov account Download a Rollover Initiation Request - transfer super to SMSF Consider appointing an SMSF professional to help you Work out the structure of your fund Ensure all members are eligible to be trustees Check the residency of your fund Create your trust and trust deed Appoint your trustees Record each member’s tax file number Open a bank account for your fund Register with the ATO Prepare an investment strategy Setting up a self-managed super fund (NAT 71923) Running a self-managed super fund (NAT 11032)

Superannuation Management. Australian Taxation Office Money Smart Australian Cyber Crime Online reporting network iDcare Association of Superannuation Funds Australia – www.superannuation.asn.au AusFund – www.unclaimedsuper.com.au Australian Bureau of Statistics – www.abs.gov.au Australian Government Information Management Office – www.agimo.gov.au Australian Prudential Regulation Authority – www.apra.gov.au Australian Securities and Investment Commission – www.asic.gov.au Australian Shareholders Association – www.australianshareholders.com.au (an alliance partner of Cuffelinks) Australian Society of Certified Practicing Accountants (CPAs) – www.cpaaustralia.com.au Australian Securities Exchange – www.asx.com.au Australian Taxation Office – www.ato.gov.au Centrelink – www.centrelink.gov.au Commonwealth Department of Family and Community Services – www.facs.gov.au Commonwealth Government – www.australia.gov.au Financial Planning Association – www.fpa.asn.au Financial Services Institute of Australia – www.finsia.edu.au Treasury – www.treasury.gov.au Chartered Accountants www.charteredaccountants.com.au/Chartered-Accountants/ Australian Accounting Standards Board www.aasb.gov.au/

Useful links from the Australian Securities Exchange (ASX): The prices search page – www.asx.com.au/asx/markets/equityPrices.do The company information search page – www.asx.com.au/asx/research/companyInfo.do The charts search page – www.asx.com.au/research/charting/index.htm

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The floats list – www.asx.com.au/prices/upcoming.htm Useful charts of the ASX – www.au.finance.yahoo.com

Mainstream Business Media Courier Mail Daily Telegraph Fairfax NZ Financial Review Herald Sun New Zealand Herald Reuters Sydney Morning Herald The Advertiser The Age The Australian West Australian Banking Product Comparisons Canstar Cannex InfoChoice Mozo RateCity

www.smsfcommunity.com.au | How to Start a SMSF | Page 29

HOW TO START A SELF MANAGED SUPER FUND First published by SMSF Community. July 15, 2018. Based in Trinity Park, Cairns. Qld. 4879 Mobile: 0432 966 414 Written by Kevin & Ginger Connolly Edited by Matthew Corcoran Disclaimer This eBook was created as general information only and not to be considered complete or advice. Individual circumstances and financial needs vary from person to person and the intent is to provide an overview. You may want to seek advice from a professional before making any changes to your superannuation, Self Managed Super Fund, investments, or financial situation. Links to other information sources or websites does not necessarily constitute endorsement or accuracy of the information contained within the referenced source or website. Copyright © Copyright 2018 SMSF Community. All rights reserved. Apart from any fair dealing for the purposes of private study, research, criticism or review as permitted under the Copyright Act 1968, no part of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the Publisher. eVersion 30072018.

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