Preparing to set up your self managed super fund: Part 2

You’ll need to choose the best way to structure your self managed super fund (SMSF) so it complies with the law and suits you and the other members’ circumstances.

Once you’ve decided to set up an SMSF, you need to:

• decide on the type of trustee for your fund (a company or up to four individuals)
• make sure you (and the other members) are eligible to be a trustee
• check the residency requirements your fund needs to meet to be a complying fund and receive tax concessions.

Structuring your self managed super fund (SMSF)

For your super fund to be an SMSF, it needs to meet several requirements under the super laws.

The requirements are different depending on whether your super fund is one of the following:

• a corporate trustee
• individual trustees
• a single member.

If your super fund has individual trustees, it’s an SMSF if all of the following applies:

• it has four or less members
• each member is a trustee
• no member is an employee of another member, unless they’re related
• no trustee is paid for their duties or services as a trustee

If your fund has a corporate trustee, it’s an SMSF if all of the following applies:

• it has four or less members
• each member of the fund is a director of the company
• each director of the corporate trustee is a member of the fund
• no member is an employee of another member, unless they’re related
• the corporate trustee is not paid for its services as a trustee
• no director of the corporate trustee is paid for their duties or services as director in relation to the fund.

Single member funds

It is possible for you to set up your super fund with only one member. If you have a corporate trustee for a single member fund, the member needs to be one of the following:

• the sole director of the trustee company
• one of only two directors, that is either
• related to the other director
• not an employee of the other director.

You can also have two individual trustees. One trustee needs to be the member and the other needs to be one
of the following:

• a person related to the member
• any other person who does not employ them.

A trustee or director can’t be paid for their services as a trustee or director in relation to the fund.

Types of Trustees

Once you understand how you can structure your self managed super fund, you need to decide on the type of trustee you’ll use.

You can choose either one of the following:

• a corporate trustee
• up to four individual trustees.

A corporate trustee is a company incorporated under the law that acts as a trustee for the fund. Generally, to
be an SMSF, all directors of the company need to be members and all members need to be directors of the
company. If you already have a company, you may choose to use it as trustee.

Your choice of trustee will make a difference to the way you administer your fund and the types of benefi ts it can pay, so you need to make sure it suits your circumstances.

When making your decision, we recommend you:

• discuss your trustee options with an SMSF professional
• consider the benefits and costs of each type of trustee (for your situation).

Trustee eligibility

In most cases, all members of the SMSF need to be trustees, so it’s important to make sure all members are eligible to be a trustee. Generally, anyone 18 years or over and not under a legal disability (such as a bankrupt, minor and people with a mental impairment) can be a trustee of a super fund unless they’re a disqualified person.

A person is disqualifi ed if one of the following applies:

• they have ever been convicted of an offence involving dishonesty
• they have ever been subject to a civil penalty order under the super laws
• they are considered insolvent under administration
• they are an undischarged bankrupt
• they have been disqualified by a regulator (for example, by us or APRA).

Penalties can apply if you act as a trustee while disqualified.

A company can’t be a trustee if one of the following applies:

• they are a responsible officer of the company (such as a director, secretary or executive officer) is a disqualified person
• they are a receiver, official manager or provisional liquidator has been appointed to the company
• action has started to wind up the company.

You’ll need to declare that you and the other trustees or directors, aren’t disqualifi ed when you register your fund with us. In certain circumstances (such as minor dishonesty offences) a disqualifi ed person can apply to us in writing for a waiver.

Minors

Generally, members under 18 years of age can’t be trustees of a super fund. A parent or guardian can be a trustee for a member who’s under 18 years of age and does not have a legal personal representative.

Having a resident fund

To be a complying super fund and receive tax concessions, your fund needs to be a resident regulated super fund at all times during the income year. This means your fund needs to meet the defi nition of an ‘Australian superannuation fund’ for tax purposes.

If your fund is a non-complying fund, its assets (less certain contributions) and its income are taxed at the highest marginal tax rate.

If a member moves or travels overseas for an extended period, this may affect the residency status of the super fund.

For more information about setting up a self managed super fund to to find out whether this is a suitable option for you, speak to one of the financial planners at Intellichoice on 1300 55 10 45.