Many Australians are hearing about the success of others who started their own SMSFs (self-managed superannuation funds) some time ago and are thinking about doing the same. They dwell on the benefits of taking control of their own retirement nest egg, but some of them gloss over the challenges involved, not only in getting the fund started but also the expertise required to grow the investments.
If you are one of those who are thinking that you could get a better return on your superannuation if you do it yourself, it would be wise to first consider seriously the considerable challenges ahead of you. You must first understand that the management of an SMSF is highly regulated by the ATO (Australian Taxation Office) and as the trustee, it is your responsibility to comply with complex superannuation and taxation laws.
Your first challenge is to set the fund up correctly so that it can receive contributions, be eligible for tax concessions and be correctly structured. Getting it wrong at this point will cost a lot of time and money to rectify, and in the interim, investment opportunities will be missed. Just as one example, there are many administrative tasks required, first in the set-up phase, then in day-to-day operations, as well as strict reporting requirements and deadlines to meet.
You will need to choose and appoint trustees, create the trust deed, register the fund correctly as an Australian super fund, set up a bank account, get an electronic service address and prepare an exit strategy; and this all before you have even thought about where you will be investing the funds.
To do this, you will need a documented investment strategy. There are still issues of how to pay benefits to members, choosing SMSF auditors who must meet specific requirements and be registered with ASIC (Australian Securities and Investments Commission), and the already mentioned administration and reporting.
While none of these challenges are insurmountable, if you still believe that having your own SMSF is the best option for your retirement planning, the good news is that you can have your cake and eat it too. At every step of the way, there are professionals in the relevant fields who can assist you to achieve your SMSF goals.
Accountants can help with establishing financial systems, a legal professional can prepare your trust deed and a financial advisor can help you with your investment strategy. Regarding the administration and reporting, companies such as SMSF Assure are assisting many SMSF trustees with the initial set up and the ongoing running of their funds.
Be prudent, be aware that there will be challenges, but if you take advantage of the professional help that is available, you can run your own SMSF successfully and take charge of your retirement planning.