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  • Matt Heighway

SMSF Establishment - 5 Things that can go wrong


Man and woman looking at documents and they are confused

 

A Self-Managed Superannuation Fund (SMSF) can be a superannuation vehicle for life.  When you are buying something with a view to it lasting a lifetime and housing what will likely be your biggest financial nest egg, it pays to do your homework and make sure that you get it right.

 

Getting it right not only gives you peace of mind, but it also saves those you leave behind having to deal with any unforeseen issues.

 

As well as the long-term benefits of getting things right with your SMSF Establishment, sometimes the investments you want to make are time critical so preparing well can help you avoid unexpected delays with the operation of your SMSF.

 

Here are 5 things we’ve seen go wrong with the SMSF Establishment process and tips to help you avoid them:

 

Data in the Australian Business Number (ABN) Application will not verify

 

The ABN Application is completed online via the Australian Business Registrar (ABR). Certain required data is verified against other government departments.  If your personal details are not identical across your identification documents and government departments the verification may not be successful resulting in manual intervention being required. The Australian Taxation Office (ATO) has a service standard of 28 days and it is near impossible to have these types of matters dealt with faster.

 

The SMSF Name you select is not sufficiently unique

 

Whilst it is not a requirement to have a unique name for your SMSF, it avoids unnecessary delays with the issuing of its ABN.  The automated ABN application system flags the same named or similarly named SMSFs for manual checking.  Again, a delay of up to 28 days can be the result.  Our experience is that the more unique the name, the better.

 

The lodgement and payments of your personal tax and related entities tax and other obligations are not up to date

 

Even if your SMSF is issued with its ABN, it doesn’t become fully operational until it is listed on the Super Fund Lookup as Registered.  APRA Regulated funds are instructed not to rollover money to SMSFs that do not show as Registered and employers do not receive tax deductions for contributions made to funds that do not show as Registered.

 

Once the ABN issues, the ATO undertakes certain checks to determine if the SMSF will be shown on the Super Fund Lookup as Registered. A fundamental consideration is whether the Trustee/Members are fit and proper persons for the purposes of having an SMSF. If there is past or current outstanding payment or lodgement matters with any government department then this is flagged as an indication that the Trustee/Members may not be suitable to have an SMSF.

 

The Super Fund Lookup review process can take up to 56 days and can result in audit activity requiring further information from Trustee/Members which may result in an even longer delay. It is even possible that the ATO never adds your SMSF to Super Fund Lookup making it practically unusable.

 

The establishment documents include clerical errors or are incomplete

 

Do you know all the documents required to successfully establish your SMSF? If you don’t then how can set it up without the guidance of a trained SMSF Professional? And if you use an SMSF Professional do they use the services of a lawyer to establish their SMSFs?

 

As noted in Point 1 above, having correct data is vital to the successful establishment of your SMSF. Online document systems may not provide sufficient checks to ensure that the data being entered is accurate and they may not include all the documents required.  It is also possible to input correct data into incorrect fields, for example, making persons party to the Trust Deed who shouldn’t be.

 

The establishment documents are not executed and dated correctly

 

Do you know how to properly execute legal documents? If your SMSF Establishment documents are not executed and dated correctly, you may not end up with a legally valid SMSF.

 

Do you want to hold your biggest financial nest egg in a structure that may not be legally valid?


How to avoid these mistakes


  1. Take the time to update your records with all government departments so that the information held is identical and accurate.

  2. Search your proposed SMSF Name via Super Fund Lookup to make sure it is sufficiently unique.

  3. Make sure all the tax and payment obligations for yourself and all related entities across all government departments are met. 

  4. TIP – Use an SMSF Service Provider that engages a lawyer to provide SMSF Establishment documents 

  5.  Carefully follow any legal signing instructions provided by the lawyer engaged to provide your SMSF Establishment documents


As your document agent, we can control the effectiveness of the documentation around your SMSF. Our many years of experience in SMSF allows us to help you maintain compliance and avoid complex outcomes. What we do know is that inferior documentation can have impacts well into the future. This is why our documentation service considers events beyond just your lifetime.

Our Trust Deed has been designed to not requires constant upgrades but allows you to include special provisions including the ability to omit specific people from ever being a member of your fund.


Find out more about our Document Agent service here

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