A private superannuation fund is one that you manage yourself. In Australia, this is what is referred to as a self managed super fund (SMSF). The Australian Taxation Office is responsible for regulating a SMSF; the fund is entitled to a maximum of four members. Each member must be a trustee, or if there is a corporate trustee they must be directors. They are responsible for making decisions concerning the fund. To those who have a SMSF, it is your responsibility to manage it and comply with the law.
It is difficult to run your own fund. There are several things that you must do when running an SMSF.
There is a difference between mainstream funds and self managed super funds. A mainstream fund is regulated by the Australian Prudential Authority (APRA) and they pool the savings of its members and invest on their behalf.
How to manage a SMSF
The Australian Taxation Office (ATO) is responsible for regulating self managed super funds, which are legal tax structures. Their main aim is to provide for an individuals retirement.
It is difficult to run your own fund. There are several things that you must do when running an SMSF, these include:
- Take on the role of trustee or director and impose the required legal duties.
- Establish an investment strategy and follow it to ensure that it meets your retirement needs.
- Use the available funds so that retirement benefits are provided for.
- Keep extensive records and allow them to be audited yearly by an auditor.
What you will need to run the fund
- A substantial amount of capital to set the fund and run it for one year.
- To budget for continuous expenses such as audit, accounting, financial and legal advice.
- The financial expertise to make effective investment decisions. It is a good idea to hire a professional in their area to look at your circumstances and provide advice.
- To arrange your own insurance which includes permanent and total disability cover as well as income protection.
In order to plan your budget accordingly and work out how administrative fees effect your final payout, you can use superannuation calculator from Australian Securities and Investment Commission website.
If you need assistance with investment decisions or administration you can hire a SMSF adviser. However, you cannot pass on your responsibility of a trustee or director.
Before you get any advice from your accountant, make sure that they are licensed. You can check by asking for their AFSL licence number, you can also search their name on the ASIC financial adviser register this will enable you to check what type of products they are qualified to advise on.
If you would like to set up an SMSF you will need to be fully committed. Make sure that you do the required research prior to making a final decision.