Superannuation
Starting your DIY super fund
So you've decided to take the plunge and set up your own DIY super fund. Here are a few pointers on what you need to do to get started.
The process for setting up your DIY super fund includes a number of steps, including:
- establishing the fund and preparing a trust deed
- appointing fund trustees
- formulating an investment strategy
- meeting ongoing management, administration and reporting requirements in accordance with super and tax rules
Establishing the fund and preparing the trust deed
The first thing you must do is set up your DIY super fund as a trust and prepare a trust deed. Professional advice is needed to prepare the deed.
The trust deed sets out how the fund will operate and covers:
- who the trustees are and how they are appointed or removed
- trustee powers
- eligibility for fund membership
- how contributions are accepted and members paid
- how the fund will be wound up
- how to value the assets
DIY super funds are regulated by the Australian Taxation Office (ATO). Trustees must notify the ATO via a ‘notice of election to be a regulated superannuation fund' and request a Tax File Number and Australian Business Number within 60 days of commencing the fund.
To become a regulated fund, and qualify for tax concessions, the
trustee/s must ensure the trust deed either appoints a corporate trustee (who is subject to the Corporations law), or states that the sole or primary purpose of the fund is to pay old-age pensions.
Trustees must also open a bank account for the fund. It is important to separate the fund's assets from personal and/or business assets.
Appointing trustees
DIY super funds are different to other superannuation funds as all members must be trustees. Members are responsible for running the fund including investing the funds' assets, paying benefits and meeting the administrative and compliance requirements of the fund. Trustees must consent in writing to their appointment as a trustee.
DIY super funds must have four or less members. If the trustee is a company, all fund members must be directors of the trustee company. Other requirements include:
- no person other than a member can be a trustee or a director of the trustee company. Similar rules with slight variations apply to single member DIY super funds.
- trustees cannot receive any remuneration for their services and cannot be employees of the other members unless they are related.
- you must be 18 years old or over (although people under 18 can be members of DIY super funds once established), have no criminal convictions relating to dishonest behaviour and not be an undischarged bankrupt.
Formulating your investment strategy
As a DIY super fund trustee you must prepare an investment objective for your fund and choose an investment strategy. The investment strategy must reflect the fund's purpose and circumstances and detail how it will:
- maximise member returns within an acceptable level of risk
- diversify across a range of assets (for example, shares, property, fixed interest)
- pay benefits and fees as required
Remember, the sole purpose of your DIY super fund is to save for your retirement. The Australian Taxation Office has strict guidelines on what DIY super funds can and can't invest in.
Ongoing management and compliance
The administrative requirements of running your own DIY super fund include:
- keeping accurate and accessible accounts for the fund
- preparing an annual operating statement and annual statement of the fund's financial position
- maintaining minutes of all trustee meetings
- retaining copies of all annual returns and reports given to members for a period of 10 years
- reporting all contributions made to the ATO by specified dates each year
Your DIY super fund must appoint an eligible auditor to conduct an annual audit of the fund's financial accounts and statements.
Like to know more?
Download our DIY Super Check List
