SMSF Basics to Advanced: Who Should Set It Up, How Much You Need, and Mistakes to Avoid

Key Takeaways

• Ideal starting balance: Industry guidance suggests $200k–$300k as a practical range considering setup and ongoing costs. Lower balances (e.g., ~$100k) can work but may be inefficient unless there’s a very specific investment goal.
• Who sets it up? Financial planners advise on suitability and investments (and issue a Statement of Advice), while accountants focus on structure, registrations, and annual compliance (tax returns, financials, audit coordination).
• Contributions: Concessional cap is $30,000 p.a. (additional 15% Div 293 tax for income > $250k). Non-concessional cap is $120,000 p.a. with a 3-year bring-forward (up to ~$380,000) subject to thresholds.
• Tax inside SMSF: Accumulation phase: 15% on income and ~10% CGT if held >12 months. Pension phase (on the supported balance): income and capital gains can be tax-free.
• Common mistakes: Mixing personal and fund expenses, taking loans from the fund, and poor record-keeping. These can trigger contraventions, penalties, and even non-complying status.
• Set-up timeline: Allow roughly 4–6 weeks from structure set-up to rollover and funding (public fund processing times vary).
• Family/group SMSFs: Up to six members. Large balances (e.g., $5m+) often come from pooled family funds and may be impacted by evolving rules on high balances/unrealised gains.

Who Should Set Up Your SMSF?

Financial Planner: Best if you want advice on whether an SMSF suits your retirement goals, how it fits your total wealth plan, and portfolio/investment selection. They’re licensed to provide personal advice and issue a Statement of Advice.

Accountant: Ideal when you’ve already decided to proceed and need the nuts and bolts—trust deed, corporate trustee, ATO registrations (ABN/TFN, regulated status), annual tax returns, financial statements, and coordinating the independent audit.

How Much Do You Need to Start an SMSF?

Resh’s on-the-ground view aligns with industry guidance: $200k–$300k is a pragmatic range where the cost–benefit tends to stack up. Starting around $100k isn’t impossible, but costs can bite unless there’s a very specific asset you’re targeting. On the other end, pooled family funds can exceed $5 million (with additional complexity and potential exposure to balance-related rules).

Contributions, Caps, and Catch-Ups

• Concessional (pre-tax) contributions: Up to $30,000 p.a. (employer SG, salary sacrifice, or personal concessional). High income earners (>$250k) may pay Div 293—an extra 15% on concessional contributions.
• Non-concessional (after-tax) contributions: Up to $120,000 p.a. with a bring-forward of up to 3 years (~$380,000 total), subject to your total super balance and eligibility.

Tip: Before 30 June, sit down with your accountant to review prior years’ contributions and available caps. Business owners in particular can use this to lift retirement savings and manage tax outcomes.

Tax Inside an SMSF: Accumulation vs Pension

While you’re still building (accumulation phase), fund income is taxed at 15% and CGT is effectively ~10% on assets held longer than 12 months. When you meet a condition of release and shift a portion to pension phase, the income and gains supporting that pension can be tax-free.

Common SMSF Mistakes (and How to Avoid Them)

1. Personal vs fund use: Never use the SMSF bank account for personal expenses or loans. It’s a hard no under the sole purpose test.
2. Poor record-keeping: Keep clean documentation for every transaction—contracts, bank statements, invoices, and minutes.
3. Cap breaches: Going over caps can be costly and trigger penalties. Work off accurate contribution history.
4. Insurance blind spots: Rolling out of a public fund can affect existing life/TPD income protection. Consider retaining a partial balance or arranging replacement cover first.

Consequences for breaches can be severe: A contravention may lead to fines, forced rectification, loss of complying status, and top marginal rates on fund income. Prevention is cheaper than cure.

How to Set Up an SMSF (Macro Steps)

1. Decide suitability: With a licensed financial planner (if you need personal advice) or after your own due diligence.
2. Establish the structure: Corporate trustee + trust deed; register with the ATO (ABN/TFN, regulated status).
3. Open the fund bank account: Dedicated SMSF account only.
4. Rollover funds: Partial or full rollover from public funds (check insurance first).
5. Invest per the strategy: Execute in line with the SMSF’s investment strategy and documentation.
6. Annual compliance: Accounts, tax return, independent audit, minutes, valuations, and record-keeping.

Timeline: Expect roughly 4–6 weeks from set-up to rollover and funding (public fund processing can extend this).

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Disclaimer: This content is general in nature and not financial advice. Always consult a licensed financial planner and a qualified accountant before acting.