5 Things to know before setting up SMSF

The SMSF is one of the fastest growing type of superannuation fund in Australia. It is very popular among many Australians because it provides many benefits and gives the chance everyone to have the power to control their own fund. It offers flexibility by allowing investments in other assets such as direct shares, properties and other valuable assets which may not be available with other superannuation funds. The decision to set up an SMSF, or self manged superannuation fund, can be one of the most important decision you will ever make. But just like any other decision you make in your life, setting up an SMSF requires close attention and consideration because not getting it right can negatively affect your financial budget after your retirement. It is a huge financial decision, and you will need the skills and the knowledge to run the SMSF correctly and successfully. Therefore if you are interested in setting up an SMSF the following text will highlight the most important things that you should know before establishing your own super fund.


Trustee Structure. The SMSF generally includes 1 to 4 members and it is managed either by individual or corporate trustees who are also members of the super fund. Whether to establish a corporate trustee structure or to have individual trustee structure is one of the most important decisions that you will need to make before setting up your SMSF. The recent studies show that an SMSF managed by individual trustees is more common among the people in Australia. Usually every member must be a trustee of the super fund.

Who Will Be The Trustees Of Your SMSF. Before setting the SMSF, it is essential to know exactly who will be the other trustees. We said that the SMSF can include up to 4 members, but you cannot include your own employees in your SMSF. You can put a company to your SMSF as long as the directors of the company and the members of the fund are one and the same.

The Significance Of The Trust Deed. Undoubtedly the trust deed is the most important document of your SMSF, because it outlines the laws and the rules that must be respected by every member of the super fund. For example the trust deed states explicitly who the member are, how new members can enter the fund, how existing members can be removed, what pensions can be paid to the members and so on. Every SMSF needs to operate in accordance to the rules so that the benefits to each member can be maximized.

Investment Strategy. The trustees or the members of the SMSF need to develop appropriate investment strategy. The development of such investment strategy is determined by law. The importance of the investment strategy can be seen in the fact that this strategy needs to be designed in a way to protect the retirement benefits of each member, to ensure that only proper investments will be made, and to minimize or even eliminate the risk of making irresponsible investments by some members. The investment strategy of the super fund should be used as a tool for measuring the performances of the fund against the established goals and objectives by the trustees.

Understanding The Obligations Of The Fund. As a trustee of the super fund, you and the the other members have the responsibility to ensure that the SMSF is functioning as planned, so that the benefits of each member can be maximized. For that reason, a number of documents need to be prepared annually such as financial and member statements, SMSF returns statement and other important documents. An SMSF professional can be included for assistance in these important fund obligations. Furthermore, an independent audit need to be obtained every year. The role of the audit is to ensure that the financial position of the super fund is strong, reliable and accurate.

This is an excellent short overview of the key elements that you should be aware of and to keep in mind before establishing your own SMSF. For those who already have self managed superannuation fund, this summary is also a helpful tool to identify if there are some gaps in the established SMSF.

Goran Nikolov is a content writer of Protista, a website where you can find a lot of interesting lists. He is from Macedonia and has a passion to write lists about everything that surrounds him, especially about sports, health, music, technology and history. Goran loves to play basketball in his free time, enjoys playing on his guitar and sharing his thoughts with others.