How to set up a Self-Managed Super Fund Trust to invest in property

Before the GFC, not many people were thinking about Self-Managed Super Funds (SMSF) but changes to the law to enable investment in property has changed all that. Now a growing band of investors are taking control of their own SMSFs, and wrestling with the many investment options such as real estate, shares, bonds and term deposits or managed funds. But having an SMSF is not for everyone, because of the reporting standards and the set-up costs.
Here are some things to consider before you enter the DIY world of super investing.

  1. Setting up a trust. You need to register with the ATO and obtain an ABN and a tax file number. Prepare an investment strategy and open a bank account and decide whether you want to be a trustee for the trust or appoint a corporate trustee and become a director.

  2. Do you earn enough? If you do not have about $200,000-$300,000 a year then it is probably not worth it to you because of the costs of running a trust (about $1500-$3000 per year). And experts expect running costs to increase as regulators get further involved.

  3. Set-up costs. Things are cheaper than they used to be however start-up costs still range from $500 to about $1500 depending on your trust structure. Corporate trustees are handy because they make having a death in the family easier to handle.

  4. Are you protected? SMSFs are not protected against fraud the same way other investments are, and your SMSF trustees must also be aware of their legal responsibilities. Also, what happens if the property that you invest in loses money.