So, you’re thinking about saving some money for when you’ve retired, and you’ve heard of Self Managed Super Funds, and in fact your mate reckons that they’re the best thing since sliced bread and that you should most definitely get one. So, how do you go about starting one?

First off, you should consider whether or not an SMSF is suitable for you. For example, if you have under $200,000 to put into it, you might well find that by the time you’ve paid establishment costs and accounted for the $10,000-$15,000 a year you’re likely to pay for the pleasure of running the fund, the whole venture could end up being a touch uneconomical; you’ll also need both the time and ability to run the fund – two things that not everyone has.

OK, I’m in. What’s next?

It boils down to four key steps, all of which we will look at in greater detail:

• Establishing the trust
• Becoming a regulated fund, obtaining a tax file number and an Australian business number
• Developing an investment strategy
• Opening a bank account

Establishing the trust

This aspect of the trust setup process is probably the least “DIY” of them all, as you will need to employ the services of an accountant or solicitor in order to set up a trust deed. The trust deed is a document detailing things such names of the trustees, the position they have within the trust, contribution conditions and benefit payments; make sure this is signed, dated, and properly executed. All members of the fund need to be trustees, and anyone over the age of eighteen can be a trustee so long as they are not undischarged bankrupts or have been proven guilty of a crime involving dishonesty.

Becoming a regulated fund, obtaining a tax file number and an Australian business number

You and your fellow trustees are responsible for the actions of the fund, including assigning an auditor, completing tax returns and lodging contribution statements. You will also need need to be regulated by the Superannuation Industry) Supervision Act (Or SISA), as doing this will grant you concessional tax treatment.

As Trustees, you and your fellow fund members have 60 days to notify the tax office of your SISA regulation. To do this, either log on to www.abr.gov.au or contact the Small Business information line on 13 28 66. You will then be issued with a tax file number and an Australian business number, quite nicely completing step number two, although be aware that once you have decided to be regulated, the only way out of this is to close the fund.

Developing an investment strategy

Again, this isn’t a particularly DIY process, as in order to do this properly (and you really should be doing this properly), you will need the help of a licensed financial advisor – There’s a lot to think about, including risk, return, liquidity, asset location, and a whole lot more. However, this is one of the more straightforward steps, if not one of the more costly.

Opening a Bank Account

We’re on the home stretch now; just the final step left. You will now need to create a bank account in the in the name of the fund – the reason for this is that you will need to keep your superannuation funds separate from your personal assets.

To Finish:

If you’ve read through this article and you’re still thinking “Yeah, sounds good to me”, then just remember: Make sure you are certain you and your fellow trustees will be able to manage this fund in the correct way – There are harsh penalties for going against the legislation set, for example, if the fund borrows money to invest, you could find yourself in quite severe trouble. However, so long as you stay on the right side of SISA, you could find yourself with quite a comfortable nestegg to retire on once the day comes.

Photo by cimexus

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