For many years, DIY super, or self managed super funds (SMSFs), have been popular with small business owners and professionals, including brokers. So why has DIY super become so popular and is it worth considering for your broking business?

Taking control of your own super can have some real advantages and is one of the main reasons why self managed super funds have become so popular with brokers. For example, you can play an active role in how your retirement funds are invested (provided you stick within the rules). You can invest in a wide range of investments including shares, property (including residential) and even collectables such as artwork or even antique cars. However, with this greater investment control comes much greater responsibility.

Who can establish a self managed super fund?
Self managed super funds aren’t for everybody. For starters, a self managed super fund must have four or less members, with each member of the fund being a trustee. Also, no member of the fund can be an employee of another member of the fund, unless they are related, and no trustee can receive any remuneration for the services they provide as trustee .

As each member of the fund must be a trustee, each member has responsibility for running the fund. This includes making contributions, paying retirement and other benefits from the fund and implementing the fund’s investment strategy. These are all onerous tasks which should be taken very seriously. So, if you are thinking of running your own self managed super fund, you will have to determine whether you will be able to put the required time and resources into it.

Controlling the investment strategy
As mentioned, one of the advantages of establishing a self managed super fund is the control you have over the investment strategy of your retirement funds. While you have the ability to invest in a wide range of investments, there are some very strict rules you need to adhere to as trustee. Firstly, you can’t just go and invest in anything that takes your fancy. You must have a fully documented investment strategy in place that you must adhere to. And, any investments you make must pass the ‘sole purpose test’. That is, the investment must be for the sole purpose of providing funds for retirement. This means that you cannot invest in a seaside property and use it as your weekender or family retreat. Or, you can’t invest in a painting to hang on your wall at home. Remember, every investment decision you make must be made only on the basis that it will provide a good investment return for the superannuation fund.

Is a self managed super fund right for you?

Acting as trustee for your own self managed super fund carries many responsibilities and can be very time consuming. Penalties for breaching your obligations can be also be costly. You need to weigh up the advantages of being able to control your own retirement funds over the extra time and resources required to manage such a fund. If you feel that you can manage your super better than the super schemes in the marketplace, and if you can devote the required time and resources to running your own fund, then perhaps self managed super might be right for you. Before making any decision though, speak to your accountant or tax agent and financial adviser.