Self-Managed Super Funds

A Beginner’s Guide

Planning about retirement is like having to write a thesis paper – you have all the reading materials available in the library, friends who know more about the topic subject who you can always ask, you have information scattered all around you, and a thesis advisor to, well, guide you through the steps. You have all the resources, to be extinguished in a span of months, and you know you have to start working on it eventually, but you don’t really want to deal with it right now. Right?

Retirement planning does not have to be complicated, and luckily, there are tons of options out there to help you save up for the future.

For Australians, a way to save for retirement is through a self-managed super fund (SMSFs). ‘Superfunds’ differ from other types of funds in that the members (usually four or less) are also the trustees. SMSFs are perfect for people with time and skills in financial and legal matters, who want to have full control of their assets and full responsibility of the performance of their funds.

Let’s check out some of the benefits that come with having such great responsibility:

1. Flexibility in investment decisions
2. Control of your investments
3. Tax benefits and concessions
4. Bigger cost savings than other super funds
5. Retirement benefits
6. Better investment performance of your superannuation assets

Whether an SMSF is the right strategy or not will now depend on your individual circumstances, such as age and income, wants and needs, and retirement plans, among others.

Understanding SMSFs

Managing your own superfund is no easy task, but worry not as we will break down into granules the things to consider to make everything work.

Your To-Do list on when…

Setting up your SMSF:

  • Decide on fund members and trustees
  • Establish the trust and the trust deed
  • Set up a bank account for your fund
  • Register with the Australian Taxation Office (ATO)
  • Create your own investment strategy
  • Include a wind-up plan

Once set up:

  • Rolling over of existing super
  • Organising employer contributions
  • Accepting contributions within limits
  • Making investments without breaking rules
  • Regularly reviewing the chosen investment strategy
  • Documenting and keeping records

When you start making payments:

  • Decide if any assets need to be sold
  • Ensure minimum payments are met each year
  • Appoint an actuary
  • Withhold tax
  • Give payment summaries to members and the ATO

Then, each year:

  • Value assets
  • Prepare accounts and financial statements
  • Appoint a registered SMSF auditor
  • Lodge the annual return
  • Pay the SMSF levy
  • Pay any tax that’s due

When the fund is finished:

  • Get a final audit
  • Lodge the final return
  • Pay any outstanding tax
  • Pay out or rollover all of the assets

To say that managing your own superfund involves a heap of responsibilities is an understatement. So before worrying about a yet non-existent superfund, on to more relevant considerations:

  • How do I choose a superfund?
  • What super funds can I choose from?
  • What are the different SMSF investments?
  • Do I have other investment options?
  • Will my self-managed fund outperform my current fund?
  • What are the costs?
  • What are these legal responsibilities I’m being told about?
  • Do I understand the tax implications?
  • What if my relationship with other fund members changes?
  • What SMSF scams should I be aware of?
  • What if I don’t want in anymore?

Remember, an SMSF is a long-term commitment. Ultimately, before diving in, make all the necessary preparations – do your research, or ask your thesis advisor.

Related links:
Self Managed Super Funds for Beginners
Self-Managed Super Funds (SMSFs) – The Good, Bad, and the Ugly
How to Know if a Self-Managed Super Fund is Right For You… What to Invest In… and How to Get Started