Self-managed super funds keep growing in number and in the assets they hold, and many new funds are set up by younger Australians. For the latest figures, see the ATO's SMSF statistics.
If you're thinking about an SMSF, this checklist will help.
- Get expert advice. An SMSF suits some people, not everyone. Ask a licensed financial adviser whether the benefits will outweigh the costs for you.
- Choose the trustee structure. Individual trustees and a company as trustee differ in cost, in how penalties apply, in what happens when a member leaves or dies, and in how the fund's assets are kept separate. Choose carefully.
- Prepare an investment strategy. Prepare one, and review it regularly. Consider diversification, how easily assets can be turned into cash, members' circumstances and insurance for members.
- Sign the documents. The trust deed is the fund's rule book, and each trustee must sign the ATO's trustee declaration. Following them helps the fund avoid penalties and complications.
- Stay an Australian super fund. To keep its tax concessions, the fund must meet the tests for an Australian superannuation fund at all times. These include where the fund is managed and controlled, so check them before a member spends long periods overseas.
- Register the fund. The fund needs an ABN, registration with the ATO, and a bank account in its own name.
- Check before every rollover. Before the fund makes or receives a rollover, check the rules that apply and how any untaxed amounts are treated.
- Plan the way out. The trust deed and members' death benefit nominations should cover what happens if a member dies or leaves the fund, and how the fund would be wound up.
An SMSF has two sides: it brings flexibility and choice, and it demands attention, knowledge and skill. This checklist is a good place to start.
If you're a trustee, or thinking of becoming one, your accountant or financial planner can help you work through it.