The Ideal way to set up a DIY super fund

Self-managed super funds are becoming a trend when it comes to retirement planning. This is because of all the benefits they offer when compared to third-party managed funds which are low tax rates, ease of organization and low setup costs. DIY super funds don’t require special criteria and can be organized by any employee. Additionally, they can be organized by 5 (or fewer members) and are regulated by Australian Taxation Office. One of the members is set as a trustee of the fund holding most of the responsibilities in terms of investment decisions and legal acts. Although simple to establish there are certain preparation points that need to be satisfied before the fund is set.

The first question that you may ask is if anyone can set up a DIY superannuation fund (or self-managed superannuation fund). Yes, nearly anyone can set up and manage a DIY super, but in some cases you, as a trustee may be the only one to choose where to invest your employer’s compulsory contributions.

Before you start or enter a super, you need to have a strong reason. Commonly the reason is a control over the investment of retirement funds. Moreover, some people believe that banks and other investment companies are not the right choice for them and feel that they will do much better with super fund.

Another common question is how much money is needed to start up a DIY super fund. Generally speaking, around $250,000 is an estimated sum of money that is cost-effective for this particular type of fund. However, even if you cannot gather that much money, your fund can still be cost-effective if proper contributions are made in the first two years.

Although we mentioned that super funds are easy to set up that doesn’t mean that previous experience and preparation is not required. The trustee of the fund must know what awaits him/her. Hence, he/she needs to have some investment skills and knowledge in order to make the right decisions and generate income to the fund. Furthermore, there are many investment strategies that DIY super funds may use. These strategies offer several benefits in terms of taxation procedure and financial management. Actually, this is the main reason why many choose this fund.