Most Australian’s have their superannuation in a professionally managed superannuation fund however it becoming increasingly popular to have a more hands on approach and set up your own Self-Managed Super Fund (SMSF).
Self-managed super funds can be particularly suitable for people with a lot of super and extensive skills in financial and legal matters or for people who would like to control their own super and invest in property instead of shares/managed funds especially after the last few global financial crisis where a lot of us have ended up with far less super than we had a few years ago.
You can set up your own private super fund and manage it yourself, but there are a lot of strict rules which are controlled by the Australian Taxation Office.
An SMSF must have less than 5 members. Each member is a trustee.
Once the SMSF is set up you have to abide by the rules of the fund including only using the money to provide retirement benefits for later down the track. . For example you cannot use the funds for a holiday now or buy a home to live in or buy a home for a friend or family member to live in. All transactions need to be an investment only and an arm’s length transaction with heavy fines for breaching the guidelines.
You must also keep comprehensive records about the investments and organise an annual audit on the fund. You can pay someone to manage the fund for you however you cannot pay yourself and you must always be ultimately responsible for the investments as the trustee of the fund.
It is important that you understand and know all of your responbilities and tax implications for the fund. You are totally responsible so this shouldn’t be entered into lightly.
A great link for anyone considering starting their own SMSF, is the Self Managed Superannuation Fund Trustee Education Program which is run through the ATO. It is free and designed to assist trustees in understanding their role and responsibilities.
If you’re thinking about setting up a self-managed super fund because you’re not happy with your current fund, you might prefer to consider changing to another fund first. See choosing a super fund on the ATO website
The ATO and ASIC have developed a guide for people who are thinking about self-managed super and this also gives you a more comprehensive understanding of SMSF and what is involved.
- Setting up a self-managed super fund
- Running a self-managed super fund
- Winding up a self-managed super fund
If you do get a self-managed super fund get advice from an expert, for example a member of the Self-Managed Super Fund Professionals’ Association of Australia (SPAA).
If you’re thinking about setting up a self-managed super fund you need to be 100% committed. Before you make that decision, do your research and ask yourself what the real benefit is.