Whether planning for retirement, aiming for greater investment flexibility, or simply wanting to be more hands-on with your superannuation, a Self Managed Super Fund (SMSF) offers plenty of advantages. Before you dive in, however, it’s important to understand the accounting and compliance responsibilities that come with running your own fund – because there’s more to it than just choosing investments.
Here’s a breakdown of the key steps involved in setting up an SMSF, along with the accounting considerations that come with each one. Of course our SMSF accountants are always available to assist with setting up and the management of these accounts.
Choose Your SMSF Structure
One of the first decisions to make is how your SMSF will be structured. Most funds are either set up with individual trustees (usually the members themselves) or a corporate trustee (a company acting as trustee with members as directors). The structure you choose will affect how your accounts are prepared and reported, and it may also impact your compliance obligations down the line.
Create Your SMSF Trust Deed
Your trust deed is a legal document that outlines how the fund will operate, who the members and trustees are, and what the fund can and cannot do. It’s essential to get this right from the start, as all accounting, investment, and reporting decisions must align with the rules set out in this deed. You’ll also need to keep this document up to date as regulations or circumstances change.
Register Your SMSF With the ATO
Once your trust deed is in place, you’ll need to register your SMSF with the Australian Taxation Office (ATO). This involves obtaining an Australian Business Number (ABN) and a Tax File Number (TFN) for the fund. From an accounting perspective, this step kicks off your obligations to lodge annual returns and adhere to strict record-keeping requirements, including detailed financial statements.
Open a Dedicated SMSF Bank Account
To ensure clear separation between your personal finances and your SMSF, it’s critical to open a dedicated bank account in the fund’s name. This is where all contributions, rollovers, and investment income should be received, and from where expenses will be paid. Having a separate account also makes year-end accounting much easier and more transparent.
Develop an SMSF Investment Strategy
The ATO requires all SMSFs to have a written investment strategy that reflects the fund’s objectives and considers factors such as risk, diversification, liquidity, and insurance. From an accounting point of view, this strategy should guide all financial decisions and be regularly reviewed to ensure it remains appropriate for the members’ retirement goals.
Lodging Returns and Appointing an SMSF Auditor
Each year, you’ll need to lodge an SMSF annual return, which includes financial statements, investment summaries, and member balances. You’re also required to appoint an independent, ASIC-registered SMSF auditor to review your fund’s compliance and financial accuracy. Maintaining proper records and using a reliable accounting system will make this process far smoother.
Setting Up for Success
Starting an SMSF can offer greater control and potentially better outcomes for your retirement, but it also comes with a fair share of responsibility. From choosing the right structure to keeping detailed financial records, every step has accounting implications that shouldn’t be overlooked. With the right setup and support, managing your own super can be both rewarding and financially beneficial – as long as you stay on top of the rules.