SMSFs are retirement-saving tools that are specially offered through the Australian Financial System. One difference of SMSF from other funds is that the members of an SMSF are usually trustees. This means the trustee manages the SMSF in their own way. 

In addition, these trustees are in charge of complying with all laws and regulations and must meet specific residency and management quality requirements. Here is what to consider when setting up an SMSF to buy property:

Understand that you are in charge

This is a significant step in this journey because you will be responsible for making investment decisions for the fund and complying with tax laws. This financial decision is not to be taken lightly,is not to be taken lightly, so ensure you are prepared to meet all the requirements. 

Need more clarity on setting up your SMSF? Ask our qualified and licensed commercial buyer’s agents about our mentorship program that will guide you through buying an investment commercial property so that you can be confidently in charge. 

You need to seek the advice of a commercial property professional because it is illegal in Australia to use your SMSF fund for anything other than financing your retirement.  

Comparing SMSF to other Super Funds

You need to understand that SMSFs are different from any other types of retirement funds. So, before opening an SMSF, you need to know the difference. 

SMSFs can have a maximum of four members who are trustees of the fund, but for other super funds, it is limitless. The trustees of SMSF have complete responsibility for complying with laws and regulations. With other superfunds, a professionally licensed trustee bears the compliance risk.

With an SMSF, you can choose the investments. You don’t have many choices about how the funds are invested with other funds. Insurance for SMSF trustees is optional and can be very expensive. Other super funds offer discounted insurance to their members.

SMSFs are regulated by the Australian Taxation Office (ATO). Other super funds are regulated by the Australian Prudential Regulation Authority (APRA).

Consider costs, time and skills

This is also a significant step in setting up an SMSF because you will have to spend a lot of time managing your SMSF and the cost of running it. You will also be responsible for operating the fund without passing the boundary of the law. 

So, in this case, you will have to familiarise yourself with the tax laws for SMSF because if you don’t and you go against the law, you will have to pay fees and face penalties.

In addition, as the one who is in charge of any decision about the investment, it is important to check with your financial advisor to be clear on the investment restrictions for an SMSF. Also, the fees of an SMSF can exceed that of other types of retirement funds.

Establish a Trust

The next thing for you to do is to establish trust. A trust is required to have the following;

• Trustees
• Assets
• Identifiable beneficiaries
• Intention to create trust.

Obtain The Trust Deed

You also need to obtain the trust deed. The trust deeds are the rules and conditions under which SMSF will operate. So your trust deed must be well-drafted.

This trust deed should be prepared by a professional such as a legal practitioner who understands superannuation law. It should be prepared by someone competent to do so, such as a legal practitioner or a recognised deed provider who understands superannuation law (SMSF law) and is designed to give the trustees maximum control. When the trust deed is obtained, it should be executed by the trustee(s) according to the law in Australia.

Sign A Declaration

When you are a trustee of an SMSF, you must sign a declaration form that includes your obligation, duties, and responsibilities as a trustee. This declaration form will then be legally approved, and within 21 days, you will become a trustee of an SMSF.

Lodge an election with the regulator

In setting up your SMSF, within 60 days of establishment as a trustee, you lodge an election-related to the ATO (Austrian Taxation Office). 

This election is irrevocable, and the SMSF will be subjected to the requirements of the relevant superannuation legislation and will be entitled to concessional taxation treatment at the rate of 15% as a complying fund.

If this election notice is not lodged, your SMSF will not be treated as a complying fund for taxation purposes, and the SMSF tax rate will be extremely high.

Open a cash account

Finally, as a trustee of an SMSF, you will need to open a cash account so that the funds can accept a rollover, contribution, and earnings from the investment. Also, this account will be required to pay some expenses such as members’ benefits, taxation liabilities, and accounting fees.