Self Managed Superannuation: Why Set one Up?

Investment Articles > Article: Self Managed Superannuation: Why Set one Up?

There are many benefits to setting up a SMSF, short for "self-managed superannuation fund". First, you should only consider setting up this type of fund if you have more than $200,000 to spare (Australian). This is because there are lots of penalties associated with self-managed superannuation funds gone wrong (which can happen) and many costs associated with setting up and running this type of fund.

If you have plenty of money to run a fund and have been considering doing so for some time, you will have to run your fund and do so wisely, and why not? Just know you will spend a bit of money doing that.

You also have to know how to do it, and this can be quite a task, so not everyone will want to do it. Why do it? Because you would have the most control over your investment. This type of investment is for risk takers that want to maintain full control over their investments.

If you are very savvy about the investment industry and have plenty of disposable income you probably have an interest in running your own "show". While it may not be an easy task it certainly can prove rewarding if you manage to invest in the proper funds. Just know this type of fund is for parties interested in retiring.

You would also have more assets you could choose to invest in. Remember however the only purpose of the SMSF is to help you build your nest egg. You can't use the funds until you retire so if you want money now you will have to invest in something else.

How to Start Your Superannuation Fund SMSF

So how do you do it? The Australian Government and Tax Authorities or Taxation Office offer much in the way of advice, suggesting:

  • First, you must establish a trust from which to operate.
  • Next you must acquire a tax file number and Australian business number so you can elect to be a regulated "fund".
  • Then you must come up with an appropriate investment strategy.
  • Lastly, you must officially create a bank account to manage.

Creating Your Trust Deed

The first step is creating a deed of trust. You should enlist the help of an accountant or other legal representative. You will have to make all financial decisions related to this deed. You can outline in this document how trustees may be appointed and by whom, what the powers of trustees are and how benefits are paid. All of this must occur in proper legal order and under proper legislation.

The trustees hold responsibility over all actions of the fund and must file tax returns and keep track of any contributions made to the fund.

Once the trustees are appointed then they must submit to the Superannuation Industry Act or SISA so they can receive "concessional tax treatment" and register for other appropriate licenses. For example, the fund must apply as a new entity and register under the new tax system. You can fill out a form by visiting This provides you with a tax filing number and Australian business number which allows the business to be regulated.

Preparing Your Investment Strategy

The next great step is preparing the business investment strategy which includes considering things like cash allocation and flow, the liquidity of the fund, whether the fund will be very diverse or not, what types of risk the fund will take on etc. Typically a professional financial adviser or two can help you in matters like this.

Once you select the right funds you then may create a bank account in the name of your fund so the superannuation fund monies are separate from any personal assets so as to not confuse the two.

How to Realize Success in the Self-Managed Superannuation Industry

Not everyone is cut out to run their own self-managed superannuation fund. Those that are competitive and fierce and willing to take risks (and lose) are best suited to this task because there is a lot of risk involved. There are many risks and potential government penalties assigned to individuals that do not follow the rules. For example, if you plan to use your earnings for anything other than retirement and are caught, you could be in bid trouble, and lose any money you have earned for retirement.

For this reason you should not use the money to reinvest. Make sure you know what you get into, and then go for it.

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