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Why are DIY funds so popular?

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A Self Managed Super Fund (SMSF) can have up to four members and each member must also be a trustee. The trustee board is responsible for running the fund and each member trustee is in control of their own destiny. So why are these sorts of funds so popular?

It’s yours
The first reason is the fund is set up for you and you get to make the decisions. In a large public or company fund, the trustees run the fund for thousands of members and their decisions may not suit your needs or goals. Of course, the decisions you make must comply with the trust deed governing the fund and the superannuation rules.

You are in control
As trustee you can change the trust deed or make policy decisions to suit your needs quickly, often without bureaucratic hurdles to overcome. For instance, you could change an investment manager or start or stop an income stream with minimal fuss.

Manage your super together
Most SMSFs have two members - often a married couple. A SMSF means you can combine your superannuation and take advantage of investment opportunities that may not have been possible alone. You may be able to access wholesale managed funds with lower fees or buy direct property with your combined funds.

Your SMSF may become a ‘family fund’ holding valuable assets that can be passed on from generation to generation.

How much does it cost?
The costs of running a SMSF depend on how much you do yourself and how much you outsource. Approximate costs for setting up a new fund are around $1,500 and the compulsory annual audit is around $500. Most trustees use an administration service to keep fund records and prepare tax and annual returns. This can cost approximately $2,500 a year. Some trustees will pay for advice from stockbrokers or financial advisers.

Fees payable to run a SMSF are often fixed rather than being calculated as a percentage of assets. This means a SMSF becomes more cost effective as the size of your fund grows.

A word of warning
Running your own fund does take time and the Tax Office has the job of making sure you follow the superannuation rules. Specialist financial advisers and administration companies can help keep you on the straight and narrow but ultimately you are responsible.

We recommend you talk to an expert before you take the plunge to make sure you are opting for a SMSF for the right reasons.

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