DIY Self-Managed Superannuation Funds DIY super involves setting up your own self-managed superannuation fund which will give you the flexibility of choosing exactly where to invest your money. As of this writing, there are currently over 300,000 self-managed super funds representing more than half a million Australians. The number of these funds continues to grow by a few thousand each month. Requirements Self-managed superannuation funds must have four or less members with each member being a trustee. Members are not allowed to be employees of each other unless they are related and cannot receive any form of payment for their role as a trustee. Tax Concessions To benefit from tax concessions afforded to superannuation funds, self-managed funds must comply with the Superannuation Industry (Supervision) Act (SIS Act) which was introduced in 1993 to supervise the superannuation industry. Failure to comply with the SIS Act may result in contributions taxed at a rate of 47% which more than three times the 15% rate of complying funds. Common breaches include investments which do not pass the sole purpose test (see below), not keeping super and personal assets separate, running a business within the fund and using money from the fund for personal purposes. Sole Purpose Test A DIY super fund must pass the sole purpose test which ensures that benefits from any investments made cannot be derived prior to a members retirement age. This will, unfortunately, eliminate many attractive investment options which provide fringe benefits such as holiday homes, yachts and golf club memberships. Operational Costs There are various costs involved in the running of a DIY self-managed super fund. These include setup costs and annual fees and charges for accounting, auditing and ASIC lodgement fees. On average, it could cost you about $1,000 to establish the fund with annual fees running at about $2,000 or more. Depending on the value of your fund, this could be a substantial amount which will render it impractical to go the DIY route, particularly if your fund has a small value. How to Set Up a Self Managed Superannuation Fund Unless you have significant experience with superannuation funds, you'll probably need to consult a qualified accountant, solictor or superannuation specialist for help in setting up your fund. Here are the basic steps in setting up your own diy super fund: Prepare a trust deed as evidence of the existence of the trust which outlines the rules governing the operation of the fund. For self managed superannuation funds, all members must be appointed as trustees (unless they are not eligible under certain conditions) who are responsible for proper management of the fund and ensuring that it complies with the SIS Act. For the fund to be taxed concessionally as a super fund, trustees must elect to be 'regulated' under SISA. A Tax File Number (TFN) and Australian Business Number (ABN) must then be obtained for the fund from the Australian Tax Office (ATO).