Time is the key to ensuring wealth. Most people don’t start thinking about superannuation until their forties or later. The best time to start thinking about retirement is as soon as you start work. Saving from an early age almost guarantees a wealthy retirement through the power of compounding. So please encourage you kids, nieces and nephews to get in the habit of making voluntary contributions to their superannuation funds. Whether you’re twenty or sixty it is not to early or late to start a Self Managed Superannuation Fund (SMSF), just make sure you don’t leave it too late.

It is possible to establish your own SMSF for free, yes absolutely zip zero nadda, by writing your own trust deed and supporting documents. However, most of us should fork-out the $110-$140 for a professionally prepared trust deed and ancillary documents.

There are plethora of SMSF service providers trying to sell SMSF set-up services, with fees ranging from many hundreds to a thousand or more. At the other extreme some companies will do it for free, but watch out for their catches. The right choice for you will depend on how comfortable you are in dealing with financial and legal documents.

Accountants will generally charge $500-$700 to establish a SMSF for you. All you’ll get for that is the same as if you do it online for yourself for $110. Your accountant will probably sue the same providers I’ll going to link to and they’ll charge you $600 for doing it!

I used and can recommend Cleardocs. For $137.50 you get the following:

• A Product Disclosure Statement in plain language
• Consents for the trustees, or directors of the trustee
• Minutes to set up the fund and to set its investment strategy
• Applications, beneficiary notices, and TFN notices for the members
• ATO trustee declaration form
• The Trust deed.

The other provider which looks to provide an even better deal is Trustdeed.com.au Fore $110 you get:

• Trust Deed of your Self Managed Super Fund
• A Product Disclosure Statement
• Consents for member to be trustees of Super Fund or consent of Directors of the trustee company to act as trustees of Super Fund
• Minutes of Members / Trustees to set up the fund
• Generic Investment strategy of your Self Managed Super Fund
• Applications to become member
• non-binding beneficiary nomination forms,
• Instruction sheets on
  • how to open bank accounts
  • broker accounts and apply for Tax File Number
  • Australian Business Number
  • Fund to be a complying fund.
  • How to roll over existing funds to your Self Managed Super Fund and
  • “What to do next”.

Yet another option is full service providers like e-superfund, who often has offers for free setup and first year fee free. They’re able to charge an incredibly low annual fee of $599, by capturing client information electronically directly from the clients Broker and Bank. While that limits you to the accounts you can open that probably isn’t a big hurdle for most people. Don;t forget to add-on the $150 supervisory levy and remember you’ll have tax to pay on income within the SMSF.

The government and most companies focus on the minimum dollar amount that is suitable for setting up a SMSF, but I think a better criteria is your financial intelligence. If you need to pay hundreds of dollars to have someone setup you SMSF then you may want to think hard about why you want to  set-up a SMSF to begin with.

While I consider your financial intelligence most important in deciding whether a SMSF is for you, the amount in your superannuation account is also important. Currently, there is no set minimum, but you and I both know how regulators love to meddle, so no doubt they will one day set a minimum. I believe $100,000 is enough for most people, some individuals could even consider starting a SMSF with as little as $50,000.

The main consideration here is the administrations cost. You should keep costs to under 1% of your fund.
The minimum costs you’ll incur are:

• Audit costs – around $350 (let me know if you can get it cheaper.)
• Supervisory levy – $150
• For a total of $500. That’s what I pay to manage my own superannuation fund.

I do my own accounting for our SMSF. It’s reasonably straight forward and the wonderful people at the ATO are always happy to help out with the technicalities. While I’m not an accountant I have a good grasp of accounting and have prepared my own tax on and off for years. If you need an accountant then they’ll charge you $800 – $2000 or a percent of you assets.

I also do my own investment management and administrative duties like fund minutes. If you need a third party to do this for you then you’ll incur more costs. For example if you are going to use managed funds then you’ll pay 0.8% – 2% of your fund balance.

In summary, if you have $100,000 in your combined superannuation accounts and have an interest in managing your own money, which everyone should have, then you should consider a SMSF. $50,000 is the absolute minimum you should have prior to establishing an SMSF and then you’d need to ensure you kept your costs down by either using a provider like e-superfund or maintaining your own records. A more important criteria is an interest in managing your own money. Like health I view finances as an important aspect of life that everyone should manage, alas there are a lot of unhealthy and financially illiterate people who apparently disagree with me. You can establish a SMSF for as little as $110 or even free if you sign up at a full service provider. The best place to start is the ATO’s document on operating a self managed superannuation fund.

Related posts:

1. Preparing your own Self Managed Super Fund (SMSF) Tax
2. Self Managed Super Fund Performance
3. SMSF’s the Largest and Best
4. Delving into my Super
5. Fusion Investment Fund Update
6. Cost of Ownership