Self Managed Super

How to set up a self-managed super fund

Setting up a self-managed super fund is fairly straightforward, and may even prove exciting as you begin considering your investment options.

To set up your self-managed super fund you will need to :

Allocate fund members and trustees

Establish the trust and trust deed

Set up a bank account

Get your SMSF registered with the Australian
Taxation Office

Decide upon an investment strategy

Make a plan for wrapping up your SMSF

Comparing self-managed super funds with retail super funds

Deciding to start a self-managed super fund is a very different pathway to using a standard superannuation fund. You may feel like you're losing the safety of smart and reliable investments, but the freedom and flexibility can make it hugely worthwhile. That vintage car you’ve been dreaming of may soon become another smart investment decision in your super portfolio.

SMSF Vs RETAIL SUPER FUNDS

Full flexibility to invest your money as you wish

Limited choice or knowledge around how your super is invested

Choice of who your members and trustees are

No choice of who your members and trustees are

Ability to align your super with your values

Uncertainty of how ethically your money is invested

Ongoing tasks of a self-managed super fund

Having an SMSF can also entail a bit of ongoing work each year, particularly around tax time. From valuing your assets to getting a professional audit, you may find your SMSF keeps you busy.

To keep your self-managed super fund on track you will need to :

Do a valuation of your assets

Organise your financial statements and accounts

Find a registered auditor of SMSFs

Complete and lodge your yearly return

Pay the required self-managed super fund levy

Make any required tax contributions

Rules around managing your own super

If you think a self-managed super fund is a loophole to accessing your super cash and splurging it on fun things, you'll be sadly mistaken. Many rules and regulations apply to self-managed super funds in Australia, which are mapped out in the SIS Act, or the Superannuation Industry (Supervision) Act 1993 (Cth).

Here are just a few of the rules your SMSF will need to follow :

Have 4 members or less

Meet the definition of an ‘Australian superannuation fund’ for tax purposes. This means the fund must have assets located in Australia or be established in Australia and satisfy the central control and management test and the active member test

Comply with investment rules, such as not purchasing assets from members or their related parties

Not lend money, except in a limited number of circumstances eligible for exemption

The risks of a self-managed super fund

Like any big financial decision, deciding to manage your own super has risks; and they aren't particularly small ones.

Some of the risks of implementing a self-managed super fund include :

Pressure to make wise investment decisions

Inability to easily relocate to another country without super fund being impacted

Need for high value of assets to make running costs worthwhile (the golden rule is about a quarter of a million AUD)

Responsibility to accurately report and meet strict ATO deadlines

Self-managed super funds

With the recent announcement that many Australian super funds are underperforming, it's no surprise many of us are considering a self-managed super fund (SMSF). There's a lot to learn and weigh up before taking the leap, even for those with a high level of financial wisdom. But the greater flexibility and control can be a welcomed relief for many.

Rules around managing your own super

Setting up a self-managed super fund is fairly straightforward, and may even prove exciting as you begin considering your investment options.

Allocate fund members and trustees

Establish the trust and trust deed

Set up a bank account

Get your SMSF registered with the Australian
Taxation Office

Decide upon an investment strategy

Make a plan for wrapping up your SMSF

What to do once your self-managed super fund has been established

Once your SMSF has been set up, things get a bit trickier. This is the point at which good decision making and attention to detail become essential.

Once your self-managed super fund has been established you will need to :

Roll across any existing superannuation you have saved

Organise contributions from your employers

Accept contributions with limits

Start making investments within the limitations of the law

Ensure you regularly review your investments and fine tune anything that isn’t performing

Keep a record of everything you do, ensuring everything is well documented for at least 10-years

Once you have started making super payments

If all that information hasn’t got your head spinning, you may be a good candidate for a self-managed super fund. But there’s one last list of things to do to keep your SMSF in check.

Once you're making super payments, you will need to :

Decide if any assets need to be sold

Make sure you are making the minimum payments each year

Appoint an actuary to assess and manage risk

Ensure you withhold an appropriate amount of money for tax

Provide both the Australian Taxation Office and your members with detailed payment summaries

The benefits of a self-managed super fund

For some people, a self-managed super fund proves highly beneficial, allowing greater investment freedom and financial power.

Some of the benefits of managing a self-managed super fund include; :

Flexibility to choose where your money is invested

Control over who the trustees and members of your super fund are

Ability to implement your own tax strategies

Potential to keep your money safe from creditors

Chance to save money on super management fees

Your super,
your way