Setting up a Self Managed Super Fund
Once you have made the decision to become a do-it-yourself superannuation investor, the next step is to setup your own self managed super fund (SMSF).
By this stage you should be aware of the regulations and your responsibilities as an SMSF trustee. If not, then you should definitely do more research before jumping into the complex world of SMSFs.
Establishing your SMSF involves a number of different steps, and each can be done in a different way depending on your preference and your needs. In this guide we will not be covering every single option for establishing an SMSF, but we will look at the typical methods used by many Australians.
Decide on the Structure
Once you have a good understanding of how an SMSF works and what is involved, the first step in establishing your fund is to decide on the structure.
Every SMSF must have a number of trustees who are responsible for the fund. A trustee may be a person or a company, and these are known as personal trustees and corporate trustees.
When using a personal trustee the fund must have at least two trustees. One of the most common structures is for the owner of the SMSF to be a trustee and for their spouse or partner to be the second trustee. The partner may also be a member of the SMSF, however this is entirely optional.
Another option is to use a corporate trustee, which involves establishing a Pty Ltd company. In this situation, ultimately it is the directors of the company who become responsible for the running of the SMSF.
The way in which you structure your SMSF is very important and has serious consequences, so if you are unsure about your structure you should seek advice from a qualified SMSF specialist.
Set Your Investment Strategy
Every SMSF must have a written investment strategy in place. The investment strategy outlines the investment goals for the fund and also dictates what types of assets the fund may invest in.
It is important to ensure your investment strategy document covers all of the possible assets your SMSF may be investing in, however you can change the written strategy at any time to suit your changing needs and objectives.
Establish the Fund
Setting up the physical fund involves the establishment of a trust, plus registration of a TFN (Tax File number) and ABN (Australian Business Number). There are also several documents that must be created such as the trust deed.
Many accountants are able to undertake the steps required to establish the fund, however a growing number of Australians are using online services which do the job for you.
You should only use an online SMSF service if you have a good understanding of what you need and how it is to be structured, as generally the online services are unable to provide you with personal advice on what systems and structures will suit your personal needs and objectives.
Setup Your Accounts
Your SMSF will need a number of different accounts setup before it is fully operational. Every SMSF will need a bank account for your cash holdings, and you will also need to link a new share trading account to your fund if you plan on investing in direct shares.
It is important to keep your SMSF accounts completely separate from your personal and business accounts. For example if you already have a share trading account, you cannot use this one and must setup a completely separate trading account for your SMSF.
Rollover Your Existing Super & Start Investing
Once your SMSF is fully setup and operational you will need to get some money in there. Assuming that you already have superannuation in place, you will simply need to roll any existing super balances into your SMSF cash account.
The next step is perhaps the most exciting, which is to start investing. If you are managing the investment decisions yourself, it cannot be stressed enough the importance of making well informed decisions that match your investment strategy.
If you have any concerns or questions regarding the investment strategy or anything else to do with your SMSF, you are strongly advised to speak with your accountant, financial adviser or other SMSF professional.