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Manage your own retirement fund: 9 steps to set up your SMSF
Andrew Stubbs • Mar 14, 2018

Are you worried that your hard-earned money is not working hard enough for you ? That your dream of your golden years spent on the golf course or with loved ones on the beach is fading fast?

Think you can do a better job yourself - by managing your own super?

You may be right. A Self-Managed Super Fund (SMSF) may provide an excellent opportunity to better build wealth for your retirement. But only if you get the right advice and set it up correctly.

SMSFs are not for those who just want to dabble in investment. They are serious undertakings that can have serious legal and financial ramifications for the years ahead.

Consider the pros and cons first and, if you do decide it's the right move, make sure that all the I's are dotted, and the T's are crossed.

What is a self-managed super fund?

As the name suggests, an SMSF is a superannuation fund that members run for their own benefit. It is for the sole purpose of providing retirement funds and can be set up for between one and four members. These members become trustees of the fund.

Rather than contributions being paid into a fund that is managed for you (as with a traditional super fund), all contributions are managed and invested according to what you (and the other trustees, if applicable) decide.

In the past decade, the number of SMSFs has grown significantly: perhaps an indication that Australians have become more financially savvy. 

  • They continue to be a popular way of managing money for retirement:Thousands more funds are established every month
  • There are currently over half a million funds with a million members in total
  • The average size of an SMSF is around $1 million
  • The average member balance is around half a million dollars

What are the benefits?

The main benefit of a self-managed super fund is that you achieve more control over your finances and your investment decisions.

But a word of warning: this is only a benefit if you make suitably informed decisions that are able to grow your wealth.

With a standard superannuation fund, professional fund managers generally make the investment decisions on your behalf; they are trained investors.

By running the fund, yourself, you will need to invest some of your own time and expertise into it. Even then, most people will need to avail professional advice to ensure that they are making sound investment decisions.

You also probably want to have at least $100,000 in your fund to consider running an SMSF.

Many people transfer their assets into an SMSF and then use the fund buy residential or commercial property. This is with the aim of it increasing in value, thereby growing their investment.

But what happens if you make a poor decision? Like with any investment, there are no guarantees that it will grow.

Another potential advantage is that your SMSF can include up to four members or trustees. This means that you are able to pool resources to achieve more potential investment 'power'.

However, it also makes decisions more complex as the needs of all members must be taken into account with each decision.

9 steps to set up your SMSF correctly

Make sure that your SMSF complies with all legislative and regulatory frameworks, as laid down by the ATO. Failure to do so can lead to heavy penalties.

Ensuring that you set your fund up correctly will also make it eligible for applicable tax concessions, as well as making it easier to manage once it's up and running. 

  1. Decide on structure and name

You can set up an SMSF for individual trustees or with a company serving as a corporate trustee.

Each structure has its own set of requirements and fees (as well as penalties for non-compliance) that should be discussed with a professional advisor before committing.

You will also need to decide on a name for your fund and, if applicable, for the company that you register.

  1. Sign the trust deed

The trust deed is a legal document that covers how to establish and operate your SMSF. It details all the members and trustees, as well as the rules and regulations of the fund, and investment and contribution information, as well as wind-up procedures.

This is a document that you can refer to when making decisions about the fund. All trustees must sign and date the deed.  

  1. Establish the trust

To establish your trust, the fund must have assets. This can be a token amount until members are able to roll over their existing benefits from elsewhere or make contributions themselves.

All members must sign the trustee declaration, confirming that they understand their duties and responsibilities.

It must be signed within 21 days of becoming a trustee (or director of the corporate trustee); a signed copy should be kept on your files. 

  1. Register with the ATO

Your SMSF must register through the Australian Business Register – and you should elect to be regulated by the ATO.

Once registered, your SMSF will be listed on Super Fund Lookup. This will allow other funds and your employer(s) to check your fund's eligibility to receive rollovers and contributions. 

  1. Set up a bank account for your fund

Opening a bank account in the fund's name allows you to manage the fund and for members to pay in cash contributions or rollovers of super.

Note that this account should be completely separate from individual members' bank accounts.

  1. Provide member TFNs

Make sure that you provide each member's Tax File Number (TFN).

If a TFN is not provided, your fund will be unable to accept personal contributions from members; the fund will also be liable for more tax on their employer contributions. 

  1. Get an electronic service address to receive employer contributions

If you need to receive employer contributions into your SMSF, you will need an electronic service address to enable it to receive SuperStream data.

The employer will need to know your ABN and bank account details, in addition to your electronic service address. 

  1. Start rolling over funds

It usually makes sense to roll over benefits from other funds into your SMSF. This will then centralise your assets in one place and allow you to use them to carry out your fund's investment strategy – whatever that is.

  1. Prepare an exit strategy

It may sound strange to prepare an exit strategy at the beginning – but this will avoid any confusion. What will happen if and when the fund winds up and how will members be paid?

Some funds lay out this specific information in the original trust deed.

What now?

Deciding on an SMSF is a big decision - not to be taken lightly. Weigh up the pros and cons and get the advice of a professional adviser or accountant to see if it's right for you. Few people can manage everything themselves.

SMSF advisors can also help you with the initial start-up process. Get this right so that it is fully compliant and easier to manage once it's up and running.

An SMSF expert can help you avoid delays, disappointments, or penalties for non-compliance. But remember to choose your advisor wisely – as members are still responsible for all aspects of their fund.

 

Why Your Business Needs to Invoice Using the New Peppol Network

By Andrew Stubbs • 05 Jun, 2022
Here's some good news if your business sends invoices to business or government customers. Peppol* is on its way. (That's Peppol, not Peppa .) Ever had this conversation in your business? You or one of your team: "Hello, I'm calling to follow up the invoice we emailed to you last month. It hasn't been paid yet." Customer: "Really? We didn't receive that invoice?" In addition to the time and expense of following up, the cash flow delays create stress for you and they hurt your business. Thankfully, the adoption of Peppol will solve this problem. What is Peppol? Peppol is an obscure acronym for Pan-European Public Procurement On-Line. What's more important than what it stands for, is what it enables. Peppol is an international 'eProcurement' framework for the electronic exchange of information. It creates a standard approach for governments and businesses to structure and exchange information such as invoices and other documents. What Peppol means for you and your business Peppol makes electronic ordering, invoicing and shipping between governments and private companies faster, simpler and more secure. This means your business will get paid faster when dealing with government and larger businesses. In 2019, Australia and New Zealand adopted this platform for e-invoicing which, when implemented, will make 'we never received your invoice' issues virtually impossible. The new e-invoicing system is more secure than email and provides many other benefits. Which countries are adopting Peppol? There are currently 40 OpenPeppol member countries: 32 countries in Europe plus Australia, New Zealand, USA, Canada, China, Japan, Mexico and Singapore. Each country has a Peppol authority. For example, in Australia that's the Australian Tax Office (ATO). Is Peppol already in use? Yes it is. For example, the SuperStream system in Australia-which many businesses are currently using to automate the payment of employee superannuation contributions-is based on the Peppol protocol. How does e-invoicing work? The system connects the accounting systems of all businesses and government departments via the secure Peppol network.  Suppliers generate sales invoices in their accounting systems which are sent to Peppol.

Company Director? Why You Need to Apply for Your DIN

By Andrew Stubbs • 04 May, 2022
If you're a director of an Australian company-or you plan to be-take 5 minutes now to read this article. All existing directors (and intending directors) of Australian companies need to be aware that the Australian Government has announced the introduction of a new mandatory Director Identification Number (DIN) system. (You'll notice the term director ID is also used for DIN.) This system is the initial step in the Modernising Business Registry (MBR) Program which has been established under the Treasury Laws Amendment Act which was legislated by the Australian Government in 2020. More information on the MBR program can be found here . What is the DIN system trying to achieve? The DIN aims to provide accountability and traceability of a director's relationships over time, across all companies and will provide information on a director's involvement in what may be repeated unlawful activity, including illegal phoenix activity. It should also solve the problem of false or fraudulent director identities. What are the key features? It is mandatory for all directors, foreign directors and alternate directors of Australian companies to hold a DIN. The DIN is a unique 15 digit number. The first 3 digits will be 036 which is the identifier for Australia. The last digit is a check digit to help with accuracy when quoting your DIN. Like your tax file number, you will only be issued with one DIN which you will hold for life - even if you cease acting as a director for any period. To obtain a DIN, you will need to prove your identity so you will not be able to hold multiple DINs. Other office holders (e.g. company secretaries) are not required to register. The director is responsible for updating the DIN records for any changes in personal information within 7 days of the change. The director must apply personally. The process cannot be completed by your accountant, lawyer, spouse or executive assistant. There are significant penalties for non-compliance. How do you apply for a DIN? Directors have 3 options for applying. You can apply online from 1 November 2021. To use this method, you must first establish your identity via myGovID (an app you download on your smart device which is different from myGov). Once set up, your myGovID will make accessing a wide range of government services easier. (It's not just for your DIN application). For information on how to set up a myGovID please go to https://www.mygovid.gov.au/set-up During the DIN application process, you will need additional information such as your tax file number (TFN) and your residential address as per ATO records. It would also be advisable to have other personal details such as bank account details, medicare card or a recent income tax assessment available in case these are required. You can also apply by phone ( 13 62 50 ). During the call, the operator will ask for the identity documents you would have used to obtain your myGovID (passport and driver licence) as well as the additional information listed above. These details will be confirmed with the records held on existing government databases and, assuming the details agree, your DIN will be issued. Or you can apply by mail, but this is not recommended because the process for doing this seems vague ("Write to us") which means you can probably expect a lengthy process of certifying documents and coping with the vagaries of the postal system. One of the other two methods would be a better choice. When will you need to apply for a DIN? Transitional arrangements will allow directors to become familiar with the new requirement. When you need to have a director ID will depend on when you were appointed as a director.

7 Best Practices for Setting Your Small Business on the Success Track

By Andrew Stubbs • 07 Apr, 2022
If you're a small business owner, you're always on the lookout for better ways to go about routine tasks to boost growth and underpin reliability. So, yes, you have the will; now, what are the ways? What are those consistent routines you can instill that will have the most benefits? This article looks at the top 6 things you can do to help your business thrive. We're going to cover finances, goals, marketing, technology and you ! So, let's take a look… 1. Your finances are a scorecard … and a predictor Boil it all down and dollars in the bank are the report card on the health of your business operations. Surprising then that so many people don't really pay much attention to how much they've earned, nor how much they're likely to earn. As much as it might feel like a chore, reviewing your sales and financial projections and then using them to ascertain if you need business financing is a discipline worth cultivating . If you suspect that your cash flow is precarious, you should be checking out your options today. First metric to check: your credit score. If it is too low, you need to take steps to shore it up. Next, check in with your bank or finance broker about what loans are available. 2. Goal setting, goal achieving, goal celebrating So, if you're using current and future dollars in the bank to keep score, the next thing is to do something about it. This is where goal setting comes in. If thoughtfully set and persistently pursued, goals help you orientate your willpower and your energy at each moment of the business day. This is the hidden power of goals: giving you a good sense of direction and a way to channel your instincts towards wise objectives. Constantly checking in with your goals makes them a benchmarking tool to keep your business pointed in the right direction. Yes, just having goals helps. Actually achieving a goal helps too, of course! 3. Increasing the impact of your marketing Marketing is not magic. It is not a mystery. It is not an art. However, many less-than-reputable marketers will try to claim that it is. They do so to gain wiggle room to pad their invoices and cover up their lack of skill. What this means is that it is easy to waste money on ineffective marketing. The good news is that there are many low-budget marketing strategies that actually work to help grow your brand and reputation. Scout around on the internet and choose one or two new tactics. Deploy them and test them. If they work, double down. If they don't, try something else. If you can't tell if they're working, also try something else. Social media is the obvious starting place for these low-stakes experiments and the old classics of LinkedIn, Facebook and Twitter are where to trial them. 4. Bringing your business up to date technologically The ability of modern productivity and project-management tools to give small players the same capabilities as the big boys simply cannot be ignored. Harness them properly and they'll let your small businesses operate with the same productivity as the titans of your sector. And, if your business is in the services sector, the increased controls that business technologies can yield also lets you be highly agile - that's something the big boys can't do. So, ask yourself: are you taking full advantage of what's out there? Don't worry, the answer to this question is always 'no' - the field is simply moving too fast for anyone to be able to take full advantage. However, if you have a realistic view of your needs, then you have a yardstick to help assess all the solutions out there. When you know what you need the technology to do, then you can wisely choose what hardware, software, platforms and techniques to introduce. 5. SEO has changed and it is going to change again Google - indeed all platforms offering broad search functions, from Youtube to Facebook - are constantly altering and optimising their algorithms. This, in turn, means SEO practice must constantly evolve to keep pace. So, if your SEO approach hasn't been overhauled in a few years, the time has come to give it some attention. Do a review of best practice and score how you cater to SEO in your online presences. Yet, because the underlying concept of SEO has not changed, the corrective actions you need to take may not be major. Then again, they might be! It is better to know unpleasant news sooner than outright bad news later. 6. Download the right new apps The remote work trend has gone mega and this means mobile productivity apps are very much of-the-moment. See, you can get a surprising amount done with just your phone and tablet. And apps are how it all happens … plus connectivity and a full battery, of course! Usually, apps are best for keeping an eye on things, boosting effectiveness on the "busy" tasks and enabling you to give your stamp of approval to work that needs your say-so to progress. In general, these are not value-adding tasks, just the value-neutral tasks that get in the way of the value-adding tasks. Now, there is no end of apps out there. So, as always, don't bother looking until you have some idea of what you need. 7. You are the ultimate business tool Health is the single most important aspect to consider for anyone running a business. It's the non-negotiable factor that governs everything else you are capable of. To adapt a quote from Arnold Schwarzenegger, being fit and healthy is "a status symbol. It reflects you worked hard for it; no money can buy it. You cannot borrow it, you cannot inherit it, you cannot steal it". This means that you must get enough sleep every night (most people need 7 hours or more). This means a healthy diet must become your preferred way of eating. This means that you should exercise every single day (except when sick). This means you must give your mind a rest too . Meditation isn't some mystic monkish thing, it's simply the practice of letting your thoughts come and go while you - the observer - stay peaceful and undisturbed by them. Think of it like this, meditating is mediating your mind. Take stock, choose wisely, make small steps in the right direction In this article, we've talked about some improvements you can make to what you're already doing. You don't have to do all of these at once. Start with the one that seems easiest and then stick with it to see if it works. Remember, it's not always about big changes. Often, you can make major improvements in outcome by making small changes to input. Doing the little things better. So take stock, choose wisely and be sure to make those small steps in the right direction for success today, tomorrow and the next day.
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