According to the latest statistics released by the ATO, the self managed super sector continues to grow, with positive returns on assets, increasing number of funds and members. But is SMSF right for you? Just because you may think that everyone has an SMSF and you’re missing out, is not a good enough reason to set up one. It’s important to look at your personal circumstances (such as current employment and retirement needs) to get a better understanding whether establishing a self-managed fund suits you. Plus, it involves some steps that you should be ready to follow.
The first step in setting up a self managed super, is deciding who are going to be the trustees of your fund. The trustees are the members who can either act as individual trustees, or alternatively, you can have a company and all the directors will then be members of the superannuation fund. So, first you need to decide whether you want your fund to have individuals or a company trustee.
Next is creating the trust deed, a legal document that basically points out the rules on what you need to establish and manage the fund, from the number of members to winding up. Trust deed must be prepared by a qualified individual, hence seek the help of a self managed super Australia expert to help you with that. Also, the deed should be regularly reviewed and updated to ensure your fund is in compliance with all the rules and regulations set by ATO. Moreover, updating your trust deed as necessary is important since you’ll be referring to it to ensure you make the right decision related to the fund.
Once you have all that established, you then need to get a TFN, a tax file number, for each fund member and open a bank cash account to manage all fund’s transactions. You can also fund your SMSF with the money taken from other funds such as industry funds, retail superannuation funds or even another SMSF. Whichever the case, the money from fund’s bank account must be kept separate from members’ individual account. Simply put, your SMSF assets are to be primarily used for employer contributions and salary sacrifice contributions.
Establishing investment strategy should be next on your setting-up list. It sets out the objectives and the type and number of investments your SMSF can make that are appropriate for all members. To maximise returns and to spread investment risk, it is best to have a variety of investments instead of having them all in property, for example.
Compared to a traditional, institutionally-managed superannuation fund, a self managed super offers many advantages for its investors, flexibility being the best one. It allows the investments to be tailored to the specific needs you may have before or after your retirement. This means, with this type of fund you have the flexibility to make fast changes to the investments.