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Everything You Need to Know About the Self-Managed Super Fund

As defined by the Australian Taxation Office, a self-managed super fund, otherwise referred to as an SMSF, is a way for you to save for your retirement. Members of a particular SMSF are themselves trustees and therefore in charge of complying with the tax laws and superannuation. SMSFs are not simply do-it-yourself funds, as most people believe. Here, we will talk about what self-managed super funds are, the critical steps you have to take to run them, and the people you will have to work with.

What is an SMSF?

A self-managed super fund is a superannuation fund that is privately managed by up to four members. It is regulated by the Australian Taxation Office (ATO). The four members are either trustees or directors (if there is a corporate trustee) and are responsible for making decisions pertaining to the fund in compliance with the pertinent laws.

The sole purpose of an SMSF is to secure your retirement money with a legal tax structure that operates in a similar manner as the regular superannuation funds. The biggest difference is that you have to set it up and run it yourself.

How does an SMSF work and what steps will have to be taken?

When you run your own SMSF, you take on the role of director or trustee, thus putting the bulk of the responsibility and legal obligations on yourself. You are to determine an investment strategy and follow it, depending on your retirement needs and risk tolerance. There are specialists such as our guest, Peter Handberg, but you must have financial skills to be able to make sound decisions on your investments.

According to a video posted on the website of the Australian Taxation Office, setting up your self-managed super fund will take several steps, as will managing it. Firstly, you will have to decide who will join you as members and trustees, establish the trust and trust deed, and set up your bank account. Once those steps are underway, you will have to register with the ATO and create your investment strategy that will run from when you are set up until the time you will set for your SMSF to end.

After the initial steps necessary to set up your SMSF, there is more work to do. This includes rolling over any existing super you have and establishing contributions from an employer or employers. This is when you will begin making investments and reviewing your strategy, all whilst documenting everything and keeping thorough records.

Will I need to consult a specialist?

As you may have realised, there is a lot of work involved in setting up and maintaining an SMSF. There are licensed professionals who will be able to give you advice and help you process the pros and cons of an SMSF. From there, they can also guide you through the administrative process and the investment decisions. However, the legal obligations remain on you.

An SMSF is a heavy commitment, and you must do your research, speak to professionals and determine the real benefits before making your decision.