Of the five categories of superannuation funds in Australia, more and more people are being drawn to the hands-on approach offered by self managed super funds (SMSF). The volume of funds and the number of members attached to them has grown considerably in the past few years. In fact, since June 2009 the number of SMSFs has blossomed from just under 400,000 to over 500,000 – and there are now in excess of one million members.

With this category ever-expanding, you might be wondering how you too can join the throng of Australians choosing to manage their own super. Here’s how you can go about setting one up.

Advice is crucial

There are a lot of benefits with this type of super fund. You have the ability to tailor your super investments to your needs, both now and well into retirement. However, they aren’t for everyone. An SMSF has quite a complex structure that has a number of roles and requires a lot of involvement over time. They are best suited to someone who has a fair bit of experience in superannuation, particularly since you will have ultimate responsibility for your own investments. You’ll need to do your research to work out whether it is the right fund for you.

The steps 

There are a number of steps to setting up an SMSF, so it’s worth getting professional advice. An accountant and financial adviser can help you decipher the ins and outs of what’s involved in managing an SMSF, as well as assisting you in the set up. You can even appoint them to manage the SMSF and provide investment and insurance advice for you – that way, you can enjoy the benefits and expertise without the hard work.

There are multiple hurdles to jump through to set up an SMSF. Broadly, the process involves:

• Choosing the structure of your fund, whether a corporate trustee (usually a company) or four individual trustees
• Creating a trust, including picking and appointing trustees, assets, beneficiaries and organising the trust deed
• Registering the fund with the ATO
• Opening a bank account, into which contributions will go and expenses will be paid from
• Preparing an investment strategy

Points to note

Each of these steps require careful consideration and planning. After all, your super should provide for a comfortable retirement and you want to make sure you can get the best from your investment. The process can seem relatively straight forward on paper, but there are a number of extra tips you need to bear in mind. For one, you’ll need a reasonably large amount of money in the fund. Set up fees, ongoing charges, as well as expenses for professional help, can quickly become a drain on your super. The costs need to be worthwhile over the long term.

Make sure you have an accountant and financial adviser on board to juggle this administration and guide your investments.