5 Key Considerations Before Setting Up A Self Managed Super Fund

Setting up a self managed super fund (SMSF) is an exciting opportunity to take full control of your retirement savings. It allows you to tailor investments to suit your financial goals and gives you the flexibility to manage your super on your terms. 

However, there are important factors to consider to ensure the process runs smoothly and remains compliant. Setting up an SMSF before you are ready to manage it or have an idea of your investment strategy can be an expensive exercise.

By understanding these key considerations, you can make informed decisions and take advantage of the benefits an SMSF offers.

1. Start With Why – What’s Your Motivation For An SMSF?

Before setting up a self managed super fund, it’s crucial to have a clear purpose. Why do you want to manage your own super? Your reason will be personal, as an SMSF is a long-term financial commitment that may span 20 to 30 years. Some common reasons people consider setting up a super fund include:

• Control and Responsibility – Business owners and self-directed investors often prefer managing their own retirement funds instead of relying on retail or industry funds.
• Dissatisfaction with Large Super Funds – Some investors feel retail and industry funds lack competition and flexibility.
• Ethical Investing – Many want to invest in ways that align with their personal beliefs, whether that means avoiding fossil fuels or choosing specific industries.
• Commercial Property Investment – Business owners may want to purchase property through their SMSF to lease back to their own company, providing tax and financial benefits.

If you don’t have a strong reason for setting up an SMSF, it may be worth reconsidering and seeking professional advice before proceeding.

2. Investment Strategy – Know Your Plan

An SMSF allows for greater investment flexibility, but that also means you need a strategy before setting up a self managed super fund. It’s essential to determine:

• What asset classes you want to invest in – Shares, property, managed funds, or alternative investments?
• Your risk tolerance – How much risk are you comfortable taking?
• Whether you’ll seek professional advice – While accountants can’t provide investment advice, we can connect you with trusted financial advisors.

While Solve Accounting cannot provide investment advice, we can introduce you to trusted professionals in our network who can help develop a strategy tailored to your needs.

A well-thought-out strategy ensures you can effectively manage your SMSF and avoid poor decision-making that could impact your retirement savings.

3. Contributions – Can You Fund Your SMSF?

Your SMSF will need regular contributions to be effective. If you don’t have the financial capacity to make ongoing contributions, it might not be the right time to set up an SMSF.

• Employees & Executives – Employer contributions (Super Guarantee) are made regularly.
• Business Owners & Directors – You must ensure you have sufficient cash flow to make regular contributions from your personal funds.
• New Business Owners – If you’re in the early stages of business and haven’t built up profits, setting up a self managed super fund may not be the best option yet.

Proper planning ensures your SMSF remains financially viable in the long term.

4. Simplicity Is Key – Keep It Manageable

The best SMSF strategies are simple and effective. If your investment plan is overly complex, you may struggle to manage it efficiently. Some key points to consider:

• Avoid overcomplicating your portfolio – Stick to investments you understand.
• Ensure your SMSF documentation is clear – Complex paperwork could indicate unnecessary costs.
• Understand your ongoing compliance requirements – Annual reporting, audits, and tax obligations must be met.

A simple, well-structured SMSF is easier to manage and more likely to succeed.

5. Be Prepared To Manage It Yourself

As the name suggests, a self managed super fund requires active management. You must be comfortable handling administration, investment decisions, and compliance.

• Accountants and administrators can assist – While we can manage compliance and reporting, you are ultimately responsible for decisions.
• You must understand financial statements – If you don’t, your accountant should be able to explain them to you.
• Avoid paying for unnecessary extras – Some firms charge high fees for complex reports you may not need.

If managing your own super feels overwhelming, setting up a self managed super fund may not be the best fit.

Choosing The Right Trustee Structure

An important step in setting up a super fund is deciding whether to have individual or corporate trustees:

• Individual Trustees: Lower setup costs, suitable for small funds.
• Corporate Trustee (Company as a Trustee): Better legal protection and succession planning.

Steps To Setting Up A Self Managed Super Fund

If you’re ready to take control of your retirement savings, here are the key steps to setting up SMSF:

• Choose Trustees: Decide between individual or corporate trustees.
• Create a Trust and Trust Deed: Establish the fund’s rules.
• Register with the ATO: Obtain an Australian Business Number (ABN) and Tax File Number (TFN).
• Open a Bank Account: A dedicated SMSF account is required.
• Develop an Investment Strategy: Ensure it aligns with retirement objectives.
• Ensure Ongoing Compliance:Arrange audits and maintain financial records.

For help with this process book a call with our experienced SMSF accountants today.  

How Can Solve Help?

Setting up a self managed super fund can provide significant financial benefits, but ensuring compliance and managing administration can be challenging. Our team at Solve Accounting makes the process seamless by handling everything from SMSF set up to compliance and reporting.

We work closely with our clients to simplify the complexities of SMSF management, helping you navigate regulations, handle documentation, and meet your reporting obligations. With our expertise, you can focus on growing your super while we handle the administrative burden.

For more details on what services accountants can and can’t provide when it comes to SMSFs, refer to ASIC Information Sheet 216.

If you’re considering an SMSF, view our services or contact us to speak with our team today.

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