Last Updated on Mar 5, 2020 by James W


Similar to other super funds, SMSF is a great way to save for retirement. The main difference between a Self Managed Super Fund (SMSF) and other kinds of Super is that the members of an SMSF are its trustees. With this, the members of an SMSF manage it for their own benefit.

However, there is one piece of SMSF advice that you should always remember – SMSFs are not suitable for everyone. Managing your own superannuation is a vital financial decision, requiring investment and administration skills as well as adequate time to plan and execute a strategy. However, there are many benefits to running your own superfund, including greater freedom and choice in terms of investments as well as potentially greater returns if you make the right decisions. Also bear in mind that there are professional SMSF Advisors who can assist you with these tasks to make sure you’re on the right path, but ultimately it’s important to think carefully before making the decision to set one up.

Once you’ve decided that running your own SMSF is right for you, the next thing you need to know are the first steps in setting one up. Understanding these steps can help them set up their SMSF in a safe and efficient manner.

Decide the Structure

Once you have a good understanding of what is involved in an SMSF and how it works, the first step in establishing your fund is to decide on its structure. Every Self Managed Super Fund will have a number of trustees who are ultimately responsible for the fund.

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A trustee may either be a small company or a person, and these are known as corporate and personal trustees. If an SMSF has personal trustees, the fund should have a minimum of two individuals involved. One common SMSF structure is for the SMSF’s owner to be a trustee and for their partner or spouse to be the second trustee.

Another sound piece of SMSF advice is to utilize a corporate trustee. This often involves setting up a Pty Ltd company. However, there is a cost involved in establishing these that often ranges from $500 to $1000, and each SMSF member will also be a director.

Aside from that, there are also yearly ASIC funds. Although this trustee set-up is quite expensive, it has some advantages. It allows a much simpler changing of asset name ownership and fund members. In addition, it offers administrative efficiency.

Set Up an Investment Strategy

The next important step involved is to set up an investment strategy. This will clearly outline the fund’s investment goals and your plan to achieve them. When deciding on a goal you must pay close attention to issues that include diversification, likely return and risks from investments, the ability to pay benefits and the liquidity of fund assets. Also make sure to take into account the SMSF members’ current financial situations and their investment risk preferences and tolerance into consideration.

In this vital step, make sure that your investment strategy document covers every possible asset that your Self Managed Super Fund may be investing in. Bear in mind that you can alter your strategy at any time to suit your changing objectives and needs.

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An important note is to put your investment strategy in writing so that you can provide evidence to support your investment decisions and show that your investments strictly comply with the law. This is where it is helpful to obtain the help of a highly-trained financial adviser to steer you in the right direction.

Establishing the Fund

The next important step in creating an SMSF involves the establishment of a trust along with registering an Australian Business Number or ABN and Tax File Number or TFN. At the same time, there are a number of documents that should be drawn up such as the deed of the trust. It is also important for people to advise the ATO that their fund exists to make sure that it is legally entitled to concessional tax treatment. The majority of accountants are capable of performing the steps that are needed to establish an SMSF fund. However, a steadily growing number of people are utilizing online services to do the job for them.

Setting Up the Accounts

The SMSF will require a number of different accounts to be formed before it can be considered fully operational. Every SMSF requires a bank account for its cash holdings. You will also need to connect a new trading share account to your fund if you are planning to invest in direct shares. Your SMSF accounts must be completely separate from your business and personal accounts.

Once these steps are complete you’re well on your way to implementing your investment strategy and watching your SMSF nest egg grow into a fruitful retirement fund.

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Daniel Johns writes about Financial Planning and Personal Finance. He recommends Blueprint Planning as the leading company providing SMSF Advice in Perth, WA.


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