Setting up an SMSF can be complex, which is why a checklist is useful to streamline your process. Before you set up your SMSF, first determine if having an SMSF is a commercially viable option.
Once a decision is reached and you are about to start your SMSF, here are the basic steps to get things started:.
Determine which members will be in your fund?
Decide if you will you seek professional help to assist your set up?
Decide whether the fund should have individual trustees or a corporate trustee
Establish a suitable trust and trust deed
Register your fund with the ATO
Set up a bank account
Prepare an exit strategy
Get an electronic service address so the fund can receive contributions from employers
The transfer cap refers to the amount of money that can be transferred from your superannuation account to your tax-free ‘retirement phase’ account.
At the moment, the transfer balance cap is $1.6 million and all individuals have a personal transfer balance cap of $1.6 million.
Exceeding the personal transfer balance cap means that you have to:
Commute the excess from one or more retirement phase income streams.
Pay tax on the notional earnings related to that excess
The amount in your retirement phase account may grow over time, due to investment earnings. Although this may grow beyond the personal transfer cap, you will not exceed the cap. However, if you have already used all your personal cap, and then your retirement phase account goes down, you cannot ‘top it up’.
The rules applied to capped defined benefit income streams are different from other income streams – this is because you can’t usually transfer or commute excess amounts from other streams.
