A self-managed super fund (SMSF) is an entity where the members holding the super benefits can manage it themselves. The underlying structure of a SMSF is a trust, like a family trust, where the benefits are held and controlled by trustees for the benefit of their beneficiaries, or in this context, the members.

A SMSF is governed by general trust law with both superannuation and tax legislation overlaying it. A trust deed and trustees are required to provide the governing rules for the super fund. The members are generally the same as the trustees, which provides a better alignment of interests when investing their super benefits.

Prior to setting up a SMSF, it is important to determine if the structure is right for you. There are many requirements to ensure the super fund is compliant, and the decision should be carefully considered. Getting professional advice is recommended.

There are a few steps to setting up a SMSF. It requires trustees to be appointed, a deed prepared, membership applications made and approved, and other compliance documentation.

The trustees will need to ensure they are eligible for the position and complete a declaration acknowledging their key roles and responsibilities.

Once the trust deed has been executed, an ABN and TFN for the super fund will need to be applied for, as well as a request to be a regulated super fund with the ATO.

And after that, a bank account for the super fund will need to be established. This will be the working account for the super fund and will need to be correctly set up in the name of the SMSF trustees.

An investment strategy will also need to be drawn up to provide guidance on the key investment objectives for the super fund.

While there are a few steps to set up an SMSF, the team at NumberSuper can help you at every stage.

There is no set minimum amount of money required to set up a self-managed super fund.

However, ASIC has provided guidance on this recently. A minimum starting balance of at least $250,000 will be cost-effective to have a self-managed super fund. ASIC provides that on average, SMSFs with balances of below $500,000 have lower returns after expenses and tax when compared to other APRA-regulated funds.

Seeking professional personal advice on the suitability of a self-managed super fund is recommended.

Unfortunately, the SMSF setup costs are not considered tax-deductible. Although many of the setup processes are similar to that of starting a business, the revenue earned from access to a superannuation fund is not considered the same. For this reason, the ATO does not allow SMSF setup costs to be immediately deductible in the SMSF.

The trustees/members requesting the setup of an SMSF will need to pay the costs.

If a company is established to be the corporate trustee for the SMSF, the costs of this establishment is usually an additional cost to the setup of the SMSF.

The time frame for the process of setting up a SMSF and fully functioning and able to accept contributions or rollovers varies.

The initial establishment documents such as the trust deed, trustee declarations, member applications, and establishment of a corporate trustee if required) can be done in a few days.

Once the structure is established an application to the Australian Business Register (ABR) for an Australian Business Number (ABN), and Tax File Number (TFN) for the SMSF needs to be obtained. This can take up to 28 days, at the most.

A bank account for the SMSF will need to be established, and the time frame will vary depending on the banking institution used.

Once a bank account is opened, a contribution can be made to the SMSF. However, if there is a rollover of super benefits instead, the super fund releasing the benefits have up to 30 days to
release the money.

The team at NumberSuper can arrange the paperwork required and guide you every step of the way.

Two of the key advantages of having a self-managed super fund are flexibility and control.

The element of control relates to:

• The trustees, who make the decisions for the SMSF;
• The members within the SMSF, who is benefiting from the trustee's decisions
• The investments that are chosen, both type and amount; and
• The visibility of the SMSF as a whole.

The flexibility is surrounding:

• The types of investments;
• The ability to combine super benefits whilst maintaining individual members balances;
• The ability to have multiple member accounts running within a single entity, and
• Having up to 6 members within the SMSF

The cons for having a self-managed super fund are:

• It can be time-consuming;
• All decisions and responsibilities fall on the SMSF trustees;
• Administrative requirements are onerous; and
• Keeping up with legislative requirements

Cryptocurrency can be invested within an SMSF. However, the investment will need to be allowable under the SMSF's Trust Deed, be in accordance with the Investment Strategy for the SMSF and comply with the SISA and SISR investment requirements.

SMSF legislation requires that there be clear ownership of fund assets, and that they be held and managed separately from any non-SMSF assets. In practice, this means that the SMSF will require a separate cryptocurrency wallet or trading account that is clearly identifiable as belonging to the SMSF.

As above, this is something trustees will need to consider when selecting a cryptocurrency trading platform, as they are not all compliant with this requirement.

Following the introduction of cryptocurrency in 2013, there has been further guidance on owning such investments within a self-managed super fund. The ATO has issued two tax determinations that clarify the underlying investment type of cryptocurrencies are capital gains tax (CGT) assets rather than cash or cash equivalents.

Therefore, trustees should also be aware of the tax treatment of cryptocurrencies when they are bought and sold.

Cryptocurrency transactions and balances are required to be valued in accordance with the existing ATO valuation guidelines. This means trustees will generally need to refer to the AUD fair market value of these cryptocurrencies as quoted by a reputable cryptocurrency exchange.

Closing a SMSF or winding up' requires all assets of the super fund to be liquidated and benefits paid out or rolled over into another super fund account, depending on your personal circumstances.

A final reconciliation and set of financial statements, tax return, and independent audit are required, and the final tax return is to be lodged with the ATO and any final tax liabilities settled.

If the SMSF is not properly closed or wound up, it is possible that the fund will remain open, which may lead to additional payments for required financial statements, fund audits and lodgement of annual returns.

NumberSuper are experienced in SMSF windups and will ensure your SMSF is wound up correctly and meets all ATO requirements.