The questions to answer before setting up a fund.

When thinking about setting up an Self-Managed Superannuation Fund (SMSF), it is important to consider whether having your own fund is right for you:

• Do you have enough time, knowledge and skills to manage your own super?
  
  
• Do you understand the legal and other obligations you are taking on?
  
  
• Do you need the additional flexibility and other benefits an SMSF can provide?
  
  
• Together, do all the proposed members of the SMSF have enough super to make an SMSF cost-effective, if cost is a consideration?

It is important to remember that an SMSF is just one option for your superannuation savings and that your needs may be met by alternative arrangements. 

If you are unsure about the answers to these questions, you should seek appropriately qualified professional advice when deciding on the best superannuation solution for you.

Once you have decided to start your SMSF there are several important legal and administrative issues you need to address. They are:

Obtain a trust deed

SMSFs need this legal document, which establishes the SMSF and sets out the rules for running the fund. Your trust deed can be tailored to meet the specific needs and objectives of fund members, but can only be prepared by a suitably experienced legal professional, whether that is done online or directly with a lawyer.

Choose to have individual trustees or a corporate trustee

You will need to decide whether you and the other members of your SMSF will each be an individual trustee or you will use a company to act as trustee, with each of the members as directors of that company. 

Your individual responsibilities in terms of running the SMSF properly are the same in either case. Consultation with the professional assisting with the set-up can provide the information you need to decide which option works best in your circumstances.

Sign trustee documents

As well as the trust documents, several other documents should be signed at the same time. These are crucial in the establishment of the SMSF as a separate legal entity for superannuation and tax law, in particular, including:

• Your fund needs to be registered with the Australian Taxation Office within 60 days of being established and you need to elect for your fund to be regulated so it is eligible for the superannuation tax concessions.
  
  
• Once the ATO has approved your fund's registration, you will be issued with a tax file number (TFN) and Australian business number (ABN) for your fund.
  
  
• You will need to record each member's TFN.
  
  
• All new trustees must sign a trustee declaration within 21 days of becoming a trustee or director of a corporate trustee. 

Open a bank account

Your SMSF will need a bank account so it can accept cash contributions, receive income from investments, and pay fund expenses and benefits to members. The account needs to be opened in the names of your fund's trustees and the money must be kept completely separate from your personal or business assets.

Prepare an investment strategy

As a trustee you must prepare an investment strategy for your fund before any investments can be made. The strategy needs to:

• Set out the fund's objectives, which should be meaningful and measurable.
  
  
• Outline the investments to be made to achieve the objectives, which is usually done by stipulating how much of the fund can be invested in each asset class (i.e. cash, fixed income, property and shares).

Trustees are also required to consider whether the fund should offer and hold insurances on behalf of members.

Start saving for retirement using your SMSF

Having set up the SMSF, registering it with the regulator and setting out your plans for investing your superannuation savings within the investment strategy, you are ready to start implementing those retirement strategies.

Making investment decisions, purchasing appropriate insurance policies where required, putting in place estate-planning arrangements by way of binding death benefit nominations or other means set out in the trust deed, or starting a pension for members who are ready for retirement and are able to access their superannuation savings, are some of the activities trustees will need to turn their mind to as part of their new responsibilities.

You are in control

The important thing is that you are in control. Do not forget that with that control also comes responsibilities, many of which you may be able to handle yourself. 

You are, of course, allowed to seek professional assistance and provided it relates to your duties in running the SMSF, can be paid by the fund. Do what you are good at and outsource the rest to qualified professionals.

Where to get advice or guidance

If you are not sure whether an SMSF is right for you, or would like some help setting up or running it, there are professionals who can provide advice or guidance. These include:

• Lawyers, who can provide you with a trust deed and other relevant paperwork for the establishment of the fund.
  
  
• Financial advisers, who can help you prepare, implement and review your fund's investment strategy and the investments made in accordance with that strategy.
  
  
• Accountants, who can prepare your annual accounts and annual return, and help with other required record keeping as well as provide taxation advice.
  
  
• An auditor, who must be appointed to sign off on your fund each year to the regulator.