Setting up an SMSF can be complicated. Not getting it right can materially affect your financial situation and retirement plans.
The first question you need to be sure about is whether an SMSF is the right fit. Seeking specialised financial advice can help you determine this answer. Some considerations include:
You must ensure you have an appropriate superannuation balance before considering an SMSF. While a low balance can be a red flag, it is not always a barrier to entry. However, in many cases, establishing an SMSF with a starting balance of $200,000 or below may not be in your best interests. This is because SMSFs tend to be more cost efficient with larger balances.
You must also understand your motivation for establishing an SMSF. The most common motivation SMSF trustees indicate is control. Control of an SMSF allows individuals to have a wide range of investment choice, flexibility and engagement with their superannuation. However, superannuation law is complex and you need to ensure your ambitions are allowed by the regulations and will be able to achieved in an SMSF.
Costs and time
SMSFs incur a wide range of costs in establishment and the day to day running of the fund. Ensure you are across the estimated establishment, accounting and audit costs that will be incurred by your SMSF. Speak with your advisers so you are across all other incidental costs, which unlike large super funds generally occur with fixed rates rather than as a proportion of your balance.
SMSFs also require dedicated attention from trustees which will take time out of your daily life to manage. Understanding from the outset your legislated responsibilities and obligations before establishing an SMSF is important.
Once you have decided that an SMSF is right for you, you must engage in the establishment process. A specialist SMSF adviser is best person to help you to choose a trustee structure, select a trust deed, complete ATO registration and fund set up.
Investment Strategy and Insurance
Upon establishment you must also create an investment strategy which must be regularly reviewed.
Your investment strategy should be in writing and must consider: