The merits of a self-managed superannuation fund (SMSF) are redoubtable. Not for nothing has it earned a name for itself. The kind of control it can offer you over your investments and the range of assets it allows you to invest in is laudable. This said, there are minuses, too.
For instance, there is no point getting yourself an SMSF until you have something like $200,000 in the kitty. Add to it the running costs of the fund — nothing short of $1,000 to $1,500 annually. Leaving aside the debate over merits and demerits, let us discuss the protocols of setting up a self-managed super fund.
Before anything else, you will need to establish trust. Next, you will have to elect your fund as a regulated one (I am talking about an Australian Business Number or ABN and a tax file for your fund here). Other things definitely come next.
It is worth noting for your accountant to help you open your SMSF and your lawyer to discuss the associated legalities, but unless they are accredited by the Australian Financial Services, they cannot advise you on the merit of your decision.
Give due respect to the trust deed
The trust deed is a very important document and clearly delineates the names of the trustees, their powers, the contribution protocols, and tax benefits among other things. SMSFs cannot run without trustees and these are the guys squarely responsible for the running of the fund.
From filing the annual tax return and making assessments to taking care of the contributions and comprehending the upper caps, all fall within the radar of trustees’ scrutiny.
Fetching the Australian Business Number is crucial
Trustees should fill an application form and get registered for the new tax system superannuity. This is often enough to procure a tax file number and ABN.
Discuss investment strategy
Of course, once the imperatives are handled, you need to focus on your investment strategy. Asset allocation, cash flow, diversification, and a lot more requires being discussed. Needless to say, you must have a superannuation account (distinct from your personal account).
If you have further questions on how to set up your self-managed super fund, or want answers specific to your individual circumstances, please take advantage of our membership offer.