Taking the DIY Super 6C Challenge - dummies

By Trish Power

Part of DIY Super For Dummies Cheat Sheet (Australian Edition)

You don’t have to be an expert in super, or be a guru in investing, or be particularly fond of paperwork to run your own super fund. Setting up and running a DIY super fund can be a relatively straightforward process, but you need to get it right from the start.

Six factors (all starting with the letter C) determine whether you have the opportunity, means, skills and inclination to drive your own super future, using a DIY super fund. Take this Super 6C Challenge:

  • Can you? Generally, nearly anyone can set up a DIY super fund, officially known as a self-managed super fund (SMSF); but, if you’re an employee, you can’t arrange your employer’s compulsory contributions to be paid into your SMSF unless you have the right to choose your own super fund.

  • Control. Taking control of your super is often the main reason for setting up a SMSF. Running a self-managed super fund also gives you flexibility over your level of super contributions, types of investments, tax planning and estate planning.

  • Cost. Generally, you need a superannuation balance of around $200,000 to $250,000, either on your own or among the other members who are to be in the fund, for DIY super to be cost-effective, according to a research report commissioned by the Australian Securities and Investments Commission (ASIC). If you don’t have $200,000 in super, it may still be cost-effective if you make substantial contributions in the first year or two.

  • Competence. Do you have sufficient knowledge of super and the skills to run a SMSF? Do you have access to advisers with SMSF and tax expertise, such as an accountant or tax-savvy financial planner? You also need to consider whether you’re going to do your fund’s administration or delegate that task to a service provider.

  • Compliance. You can expect fairly onerous reporting, monitoring and investment requirements. Are you up to it?

  • Commitment. DIY super is a lifelong journey — at least until you retire and maybe longer if your fund is going to provide you with a pension, or your children with superannuation benefits. Running your fund can take up quite a bit of time, too, particularly if you’re planning to be an active investor.