Understand how to set up, manage and who to include in your self-managed super fund.

Can an accountant set up my self-managed super fund?

Retirement is the end goal for most working Australians. After a long career, you're hoping to live off the money you've saved in your superannuation. The government has established policies and regulations to encourage citizens to save for their eventual retirement, with the biggest being compulsory employer contributions to super throughout your working life.

A self-managed super fund (SMSF) allows people to control how their savings are invested. This self-managed fund, however, comes with rules and regulations to stay compliant in the eyes of the law.

Let's take a look at how an accountant can help you set up an SMSF.

Your accountant could help you set up and manage your SMSF. Your accountant could help you set up and manage your SMSF.

What is an SMSF and can an accountant set one up?

An SMSF is a trust entity set up to provide benefits to its members on retirement. A trust is an arrangement where one party (the trustee) is obliged by law to hold assets for the benefit of another party (the beneficiary). An SMSF must be set up with the sole purpose of providing retirement benefits to its members (or to their dependants if any of the fund members die before retiring). To do this, a trust deed is created which reflects this goal. The deed sets out the rules for what the fund can and can't do, and trustees must manage the SMSF in accordance with its deed.

To be able to set up an SMSF an accountant must hold a financial license and ultimately produce a Statement of Advice to the client concerning the viability of establishing an SMSF.

However non-financial licensed accountants can give ongoing support such as the following:

  • Preparation of the fund's financial statements.
  • Preparation and lodgement of the SMSF annual return.
  • Preparation of trustee resolutions.
  • Help trustees formulate the fund's Investment Strategy.

In an SMSF you choose the investments and insurance you need for your fund. As you are both the trustee and the beneficiary of the fund, you have total control of what investments the fund makes. Meanwhile, your financial advisers can offer personal financial advice based on their understanding of the market and your assets.

By using an accountant with SMSF experience you reduce the possibility of unknowingly breaching superannuation and taxation legislation – they can guide you through this minefield!

An SMSF's investment strategy

An investment strategy is your blueprint consistent with your investment objectives and retirement goals. As a trustee of your SMSF, it is one of, if not your main responsibility.

You are free to choose the type of assets you may invest in, providing those investments:

  • Are permitted by your fund's trust deed.
  • Are not prohibited by the super laws.
  • Meet the sole purpose test (in other words are not used or drawn upon before retirement).

While a trustee can choose to invest all their retirement savings in one asset or asset class, certain risks such as return, volatility and liquidity can be minimised if a trustee chooses to invest in a variety of assets. This is called a diversified portfolio which helps to spread investment risk.

The superannuation laws require that you must prepare in writing and implement an investment strategy for your SMSF.

In particular, your strategy must consider:

  • The risks involved in making investment choices and the likely returns.
  • The composition of your fund's investments includes the extent of diversification (this is usually expressed as a percentage).
  • Liquidity of the fund's assets (how easily they can be converted to cash).
  • The ability to fund retirement benefits and other costs.
  • Whether to hold insurance cover such as life insurance.

If necessary, the investment strategy can at any time be amended to reflect a change in investment objectives.

Accountants can assist with preparing an investment strategy document. However, unless they hold the correct tier of financial license they are forbidden to advise on financial products.

The SMSF trustee/member arrangement

An SMSF can have up to six members/trustees. As mentioned, all members of an SMSF must also be its trustees as well. The reasoning behind this requirement is that as members and trustees are the same people, there is no possible conflict of interest that may arise between a third-party trustee and members. If a corporate trustee is preferred, all members must be directors of the trustee company.

How Wilson Porter & Associates can help

Instead of navigating this situation on your own, a Wilson Porter professional can set up and manage your SMSF — helping to prepare you for the future. If you want less of the burden and to get back to living the life you have right now, reach out to a Wilson Porter SMSF accountant for tax advice, SMSF accounting services and more.