If you are looking for more flexibility and a greater control over your DIY superannuation, then this simple guide may be for you. With the rising demand for super funds, they have become the number one choice of many future retirees as the preferred structure to invest their retirement assets. If you are considering setting up a DIY superannuation, you should educate yourself about it and get the right and professional advice from licensed financial accountant or planner before you proceed.
According to the reports of The Australian Taxation Office (ATO), many DIY superannuation members continuously make mistakes. They represent only 2% of the total SMSF population, but you certainly do not want to be a part of that group. Thus, this guide provides general DIY superannuation information only and we highly recommend you hire a professional to ensure your super follows all the SMSF rules.
Appoint An SMSF Professional – This is the first step in the process of setting up your SMSF. You most likely have limited knowledge or experience compared to that of a SMSF financial adviser or a tax specialist. These professional have a whole team of advisers, administrators and accountants highly trained and in tune with all self managed super fund rules. There are many reputable advisory companies that provide such services. The only important thing is to hire the right individual. Thus, make sure you interview the advisers to learn more about their experience to ensure you make the right choice.
Setup your DIY superannuation and create a trust deed – The next thing is to check if are eligible for a SMSF and if you can be a trustee. There are number of self managed super fund rules provided on the ATO website. Visit the ATO website to learn more. Once you have your eligibility cleared, you can proceed with the setup process of your SMSF and the trust deed. Your trust deed sets out the SMSF rules by which your super fund will be run in order to always be in compliance with the ATO laws.
Structuring your SMSF – You can have up to 5 members in your SMSF. Each member is also a trustee of the fund. Also, you can structure your SMSF so it has a corporate trustee. This is basically appointing a company to act as a trustee. You can have either type of SMSF structure, but you’ll need to talk to a SMSF professional or accountant to learn which option is most suitable for you. The choice of a trustee can affect the way you organize your fund, so make sure you check with the professional tax adviser before proceeding.
Registering your SMSF with the ATO – Once you have selected the right trustee, the next step is getting your DIY superannuation acknowledged by the ATO. This can be done by applying for a Australian Business Number (ABN) and a Tax File Number (TFN). Usually it may take you up 28 days (in some cases, even longer) to receive your TFN and ABN.
Setup a bank account – When you are done with your ABN and TFN you need to open a bank account. You need to open a separate account for your DIY superannuation fund to make contributions and pay for fund-related expenses and taxes.
Preparing the investment strategy – Before you do any investing, you need to have an investment strategy. An understanding of the risks, asset and liquidity allocation should be according to the ATO self managed super fund rules.
Investing your assets using the investment strategy – The final step is to start investing your DIY superannuation fund assets in accordance with the investment strategy and SMSF rules. Generally, you have a complete control over the investment choices as long as your fund complies with the tax and superannuation laws. Of course, you have more responsibilities too: SMSF audit, administration, compliance and member reporting every year.