Self managed super fund is ideal for people who want to take things into their hands. Greater control means greater power over your money. Since you are your own director/trustee, you choose exactly where to invest your superannuation money, which fees to pay, or what insurance to take. With smsf, you have greater flexibility to mix various investments in order to match your needs. And what matters most, you can reduce tax through effective Smsf strategies.
However, most people feel reserved when it comes to the self managed super fund. That’s because they don’t truly understand the basis of this fund type. The main concern is how to avoid risks and common mistakes. There are few things you need to consider before starting an smsf. Know exactly what your total balance is, number of trustees, and most importantly, how much time you can spend on your smsf. Quickly go through our simple guide below to understand how self managed super fund works.
Step 1 – Consider Your Personal Circumstances. Is the smsf is the right choice for you or not? To be part of this superannuation fund, you must have at least $200,000 or more, with which you can invest in assets such as residential property or stocks . A general rule is that the bigger the fund’s balance, the more cost effective smsf is and greater retirement benefits.
Step 2 – Work Out The Structure Of Your Fund. You decide whether you will set up the self managed super fund as an individual trustee or as a corporate. How you run your smsf in the future depends on the structure you choose. A corporate trustee might cost more as you need to setup a separate company, but offers greater flexibility. You can change the fund members anytime you want without filling out paperwork.
Step 3 – Create Your Smsf and Trust Deed. Make sure you fill out the required forms and paperwork needed required for setting up the smsf. You need to sign the trust deed as well, since it is a legal document that determines the rules and the obligations of all trustees. If you are not familiar with the whole procedure, find a professional adviser or accountant to help you set your smsf.
Step 4 – Register With ATO. Once you have determined the number of trustees, register your fund with the Australian Taxation Office (ATO). A professional will ensure you stay on top of regulation changes and prevent any civil penalties in the future.
Step 5 – Set Up a Bank Account. Professional accountant will help you open up a bank account which is to be used for managing fund’s money only.
Step 6 – Prepare An Investment Strategy. It is important to have an investment strategy or business plan for your smsf. It should be in written form and reviewed from time to time. Keep in mind the investment objectives, cash flow and risks involved when planning your self managed super fund.
Step 7 – Consider Insurance. According to the smsf rules, you are obligated to get a life insurance for all fund members as part of your smsf investment strategy. The good news is that you can choose the insurance yourself, in order to protect your income and get the most efficient tax outcome.