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
When a downsizer contribution is ineligible, the fund must re-assess the amount in accordance with the Superannuation Industry (Supervision) Regulations 1994 and the trust deed. This is to determine if the amount can be retained as a non-concessional contribution.
Provided the trust deed allows so, the fund can return the contribution to the member or adjust the prior downsizing contributions to nil and report this amount as a non-concessional contribution when the member meets the age and work tests.
When a contribution can’t be returned or returned in full: Members who no longer have a super interest with the fund, or an insufficient return amount, must have their contribution re-reported as non-concessional, even if the contribution was returned because the member did not meet the age/work tests. Some of the contribution may be an excess non-concessional contribution (ENCC). Regardless of the age of the member, if this is the case the member will receive an ENCC determination or when the fund can’t return the full amount. Members will continue to have access to all review rights under the ENCC scheme. Even if the member is in pension phase, the funds will still need to return an ineligible downsizer contribution if it cannot be accepted.
When a fund receives a release authority: An amount released under these circumstances is treated as a super lump sum as it is a portion of the member’s super interest. Being in pension phase doesn’t prevent a fund from complying with the release authority although it may mean the full amount can’t be released, as the available balance may be lower than the amount stated in the release authority. Where the member’s available balance is lower than the release authority amount, the fund must release the maximum amount available.
The ATO monitors the rectification of this contribution reporting. Where funds don’t act within legislative timeframes, the Australian Prudential Regulation Authority (APRA) may be contacted.
