A self managed super fund (SMSF) is a type of superannuation fund that can provide you with greater control over your retirement savings. With your own SMSF, you will have a wider investment choice and greater power over your investments and choice of assets in which to invest. It is highly advantageous as you are the trustee and member, so you are in charge of the investment decision.
Are you eligible for setting up a SMSF?
SMSFs are not suitable for everyone. And if you happen to posses less than $200,000 in super, then the administrative cost may make the undertaking unprofitable. The cost of setting up a SMSF can vary from person to person. But it mainly depends on your super balance, investment strategy and how you opt to manage your fund. The more complex you make it, the more it will cost you.
Moreover, you need to have a lot of super and extensive expertise in financial and legal matters to set up your own super fund. And if you are planning to manage them all by yourself, then you should be ready to research and track your super investments regularly.
Requirements for establishing a SMSF
To start up your own super fund, you must meet the following conditions:
- Have less than 5 members
- Each individual trustee must also be the member of the fund
- Each member must be a trustee
- If the trustee is a corporation, then each director of the fund is a member
- Fund members cannot be an employee of another fund member, unless they are related
- No trustee can receive payment for their services as a trustee
How to set up a SMSF?
As a trustee, managing your own fund and doing it right is very important. You can set up your own private super fund and control it yourself, but make sure to adhere to the rules and laws that govern superannuation. Here are some guidelines to setup your SMSF:
- Consider your personal circumstances before deciding if SMSF is the right thing for you
- Structure your fund properly as it will influence how you handle your fund. You can structure the fund either as an individual or corporate trustee
- Prepare a trust deed after talking to your accountant or solicitor. This will help you to manage the details of the trustees, their powers, the conditions for contributions, benefit payments, etc.
- Once your fund is established, register your fund with the Australian Taxation Office (ATO)
- Set up a bank account and rollover your super
- Prepare an investment strategy that will take into account the risks, liquidity, diversifications, cash flow, asset distribution, etc.
- Get the life insurance of your fund members, as well as yourself
- Finally, start investing as per your investment strategy and begin to take control of your super
Running a self managed super fund gives you the power to control your super money and where you want to invest it. Though SMSF comes with many advantages, do not forget that you are in charge and responsible for controlling your retirement savings and complying with super and tax laws. The main purpose of an SMSF is to provide money for your retirement. So it is better not to use the funds for your contemporary enjoyment and make sure not to rush in with any decision.