Self-Managed Superannuation Funds (SMSFs) are hot property at the moment with many people joining the crusade to set up and manage their own retirement savings.

Taking care of your own funds is a big responsibility and they aren’t for everyone. If you choose to use a SMSF, how comfortable your life is in retirement will depend on your effort now.

Greater control is the chief reason many give for wanting their own SMSF, followed closely by the desire for greater flexibility over investment choices. You take the role of trustee of your fund and need to comply with superannuation regulations.

You need to have enough Super savings to make your SMSF viable from the start. A common approximation for the amount you need to efficiently start and run a fund, is $200,000 and there are strict rules about how to run your fund and where you can invest.

3 tips about SMSFs

1 They require commitment to run. It takes knowledge, time and skill.

2 Investment control. There are regulatory responsibilities to shoulder and manage.

3 You can have up to 4 members. How many do you want or need?

SMSF checklist

  • Do you need to get informed advice?
  • Do you have the time, skill and assets to run your fund or will you invite professionals to assist?
  • Do you understand the rules and risks? Even if you have professional assistance, you are still responsible.
  • Does your trust deed and investment strategy suit each member of the fund?
  • Can you meet record-keeping and reporting requirements?

Advice about SMSFs

The Self Managed Super Fund Association is the peak professional body representing the SMSF sector in Australia. Its mandate is to lead the professionalism, integrity and sustainability of the SMSF sector.

It promotes a high standard of education among SMSF professionals and trustees and can provide a list of specialist advisers. These advisers cover upfront and ongoing costs of setting up your fund, along with investment options and risks involved.

A licensed adviser can look at your situation and recommend products, insurances and investments.

Time, skill & assets for SMSF

Having responsibility for your SMSF means you need to:

  • make investment choices for your fund, and
  • meet your obligations as trustee

There are costs to factor into your calculations and these may vary depending on whether you choose to use professional services firms and investments chosen. Regulatory costs and insurance premiums require consideration.

SMSF rules & risks

SMSFs can receive significant tax concessions, but to remain eligible, you need to follow relevant laws.

The main obligation of an SMSF is to meet the ‘sole purpose test’ which says the fund is required to be maintained for the sole purpose of providing benefits to members on retirement or to their dependants on member's death. Splurging on a holiday or paying off personal debt puts you in breach. Compliance is paramount or can lead to severe penalties.

Trust deed & investment strategy for SMSF

The trust deed is a legal document that sets out the fund’s rules of operation. SMSF trust deeds needs to be correctly drafted to meet legal requirements, fund objectives and member needs.

An investment strategy provides investment objectives and how you plan to achieve them. It considers the circumstances of all members, such as age and risk tolerance.

Super fund record-keeping & reporting

Trustees need to keep accurate tax and superannuation records. Annually, the SMSF needs to complete a Tax Return and the audit requires certain records be made available.

Those who run successful SMSFs will provide a good quality of life for themselves in retirement and have control over their own destiny.