Changes to the Australian Business Registry (ABR) registration process from 1 January 2015 has seen the Australian Taxation Office introduce new questions to ensure that an SMSF trust is first created prior to its registration with the Regulator. A super fund is a special type of trust – that is, it is required to be set up and maintained for the sole purpose of providing retirement benefits to its members (beneficiaries).
In order to correctly create the fund, it will require:
- trustees (either two or more individuals or a company);
- assets (an initial consideration to give legal effect to the trust can be used);
- identifiable beneficiaries; and
- the intention to create a trust
ABR Changes for SMSFs
The ATO from 1 January 2015 updated the ABR registration process to include additional questions in the registration process for an SMSF. Importantly, these changes reflect the views expressed by the Commissioner that in order for a trust to be created, it must first have assets. As you can see from the image below, each new applicant must now include the value of assets held by the fund at the time of registration (amongst others):
Where the SMSF has been established through the addition of fund assets, the registration will progress you to the next stage and confirm the fund’s entitlement to an ABN (see below):
The Regulator now makes it very clear that there is an expectation that the fund has set aside assets for the purpose of providing super benefits to its members. Without any fund assets, the fund does not exist.
Chicken or the egg – which comes first?
A common and practical issue confronting this revised registration process is the establishment of the fund’s bank account. Typically, when establishing the bank account, you are required to quote either a tax file number (TFN) or Australian Business Number (ABN) to avoid any TFN withholding tax being applied on the account. Whilst you can establish a bank account without providing an ABN or TFN, banks are usually insistent upon these being provided up front. So, how do you balance this with the Regulator’s request that the fund has assets prior to applying for its registrations?
A practical approach to this may simply be to staple a $5 note to the fund’s trust deed, thereby establishing the trust. It seems somewhat trivial, but an important step to ensure that you have correctly established the self-managed super fund.