Here is a handy SMSF to do list so you can manage your SMSF from start to finish. A short bucket list for your SMSF.
SMSF To Do List
Your SMSF will go through different stages that will mirror your life cycle. Every stage has different hurdles to take. So here is a step by step SMSF to do list.
Step 1 – Set Up Your SMSF
Your SMSF is not a separate legal entity, but a fiduciary relationship – governed by a deed – between trustee and members about fund assets. So to establish your SMSF you need a deed, a trustee, members and fund assets.
# 1 Get a Deed
Your SMSF is only a fiduciary relationship, which your SMSF deed will govern.
# 2 Appoint Trustees
Your SMSF needs at least one trustee. You could choose individual trustees, but don’t. Go for a corporate trustee, ie a company. Every member must be a director of this company. And every director must be a member.
# 3 Select Members
Your SMSF needs at least one member but can have up to four (soon to be six). An SMSF member must not be the employee or employer of another member, unless they are related.
Only choose fellow members you want your super to go to. So if you want your fund assets to go to your children of a previous marriage, don’t share an SMSF with your current spouse.
# 4 Set Assets Aside
You get assets into your SMSF by making a contribution and / or transferring your super from another super fund to your SMSF.
# 5 Write a Strategy
Every year, all members of your SMSF need to review and sign an investment strategy that takes each member’s risk profile into account. In this document you list your SMSF’s investment objectives, review the fund’s diversification, liquidity and solvency and decide whether to hold insurance within the fund.
# 6 Get an ABN and TFN
Once your SMSF has been willed into existence, you need to get a TFN and ABN for your SMSF. Your corporate trustee will have received an ACN upon registration.
# 7 Sign Trustee Declarations
As a new trustee or trustee director, you need to sign your SMSF trustee declaration within 21 days of joining. In this form you confirm that you understand your duties and responsibilities as trustee.
# 8 Stay in Australia
To receive concessional tax treatment as a complying super fund, your fund must to be an Australian super fund (among other conditions). To be an Australian super fund, your SMSF must have its central management and control in Australia. And central management and control includes all trustees or trustee directors.
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Step 2 – Contribute to Your Fund
So now that your fund is established, it is time to accumulate funds.
# 9 Mind the Cap
The annual caps for concessional and non-concessional contributions are $25,000 and $100,000 respectively – both subject to age and work test, and the later also subject to your total superannuation balance (TSB).
# 10 Use Current Cap Space Later
If your TSB is less than $500,000, you can carry unused concessional cap space into the next 5 years.
# 11 Use Future Cap Space Now
If your TSB is less than $1.6m and you are under 65, you can contribute 3-years’ worth of non-concessional contributions in one year. So you can use this year’s cap plus the cap of the next two years all in one hit.
# 12 Track Your TSB
Simply speaking your total superannuation balance – TSB – is the total of your accumulation and pension accounts. It plays a central role – various concessions use it as a cut-off point. So track your TSB.
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Step 3 – Invest Fund Assets
Now is the time to invest your super. And there are strict rules about what you can and can’t do.
# 13 Avoid Mates Rates
Your SMSF is not allowed to make an investment per s109 (1) (a) SIS Act where the parties to the transaction are not dealing with each other at arm’s length.
# 14 Avoid Related Party Deals
Your SMSF is not allowed to acquire any assets from a related party – not even at arm’s length – unless the asset is either a listed security or business real property or the total of your in-house assets would not exceed 5% of the fund’s total assets.
# 15 Avoid Personal Use
You can invest in collectables and personal use assets – so-called ‘s62A items’ – such as artwork, jewellery, artefacts, coins, antiques, wine, cars, books and recreational boats. But you can’t allow a related party to use, lease or store them at their private residence per s62A SIS Act and s13.18AA SIS Regs.
# 16 Avoid Loans to Members
Your SMSF is not allowed to lend money or provide other financial assistance to members or their relatives per s65 SIS Act .
# 17 Avoid Loans to SMSF
Per s67 SIS Act your SMSF is not allowed to borrow money for more than 90 days and even under 90 days only under very limited circumstances. But there is one way around. An LRBA.
# 18 Use an LRBA Instead
A limited recourse borrowing arrangements – LRBA – means that the geared asset is put into a bare trust. This way the lender only has recourse to that particular asset.
# 19 Have Sole Purpose
And above all else, maintain your SMSF solely for the purpose of providing retirement benefits to you or death benefits to your beneficiaries if you die.
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Step 4 – Access Your Super
Super is about saving for your retirement. And this means that you usually can’t access it until you do.
# 20 Meet a Condition of Release
While alive, you can only access your super upon meeting a condition of release. There are four general conditions of release linked to your age and your employment status. And then there are various special conditions of release, for example permanent disability, terminal illness or the first home buyer super scheme.
# 21 Start a Pension
Starting a pension involves a bit of paper work. You need to request the pension as a member and then approve it as a trustee.
# 22 Track Your TBA
Your transfer balance account (TBA) tracks the amounts you move in and out of pension mode. Even if you are a member in various super funds, you only ever have one TBA. Your TBA can’t exceed $1.6m, the current TBC.
# 23 Report Events
The ATO wants to track your TBA. For that purpose, you need to report any events that will result in a debit or credit to your TBA. Reportable events are the start of a new pension including a reversionary pension, LRBA payments, personal injury settlement payments as well as commutations.
# 24 Make Minimum Pension Payments
Once you start a pension, your SMSF must pay you a minimum pension amount each year. The amount is a percentage determined by your age and applied to the opening balance of your pension account.
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Step 5 – Say Good Bye
One day you have to call it a day and say good-bye. You either cash out your super and close your SMSF. Or you let it ride to the end and then let your super assets pass to your dependents or otherwise your estate.
# 25 Identify SIS Dependents
Only your SIS dependants can receive your super directly from your super fund. Everybody else can receive your super, but only through your estate.
# 26 Determine Type of Death Benefit
Your super is usually paid out as a lump sum. But some SIS dependants can choose whether they want a lump sum or a death benefit pension.
# 27 Identify Tax Dependants
Tax dependants receive all death benefits tax-free. Everybody else will pay tax on the taxable component.
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Step 6 – Keep House
And then just some housekeeping rules that apply to your SMSF at all times, no matter at what stage in the SMSF life cycle you are at.
# 28 Lodge an Annual Return
Your SMSF needs to prepare and lodge its annual return by the due date.
# 29 Get Audited
Your SMSF needs to get audited each year by an approved SMSF auditor, who is registered with ASIC.
# 30 Tell the ATO
As an SMSF trustee you need to notify the ATO of any changes to trustees or trustee directors, members or contact details within 28 days.
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So this is your SMSF to do list. We didn’t think it would be this long. It is amazing how much there is. If you have a question, please reach out. We love to help.
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Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.
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