I'd like to do that! I reckon I couldn't do worse than the professional managers have done in the past year or so. That's what a lot of people are thinking, but running your own super race involves a bit more than grabbing your money and yelling "C'mon, baby, let's go". The professionals have done badly recently because world sharemarkets have been horrible. There's no guarantee you could have done any better.

OK, but at least I'd be responsible for my own losses rather than paying someone to lose money for me. That's true, but there are also costs involved in running your own fund. Barbara Smith, the technical director with Taxpayers Australia and co-author of Do It Yourself Superannuation, says you need about $100,000 to make setting up your own super fund worthwhile because of the costs involved. Super funds are legally required to be audited each year and Smith says the standard fee for an accountant to do the accounts, tax returns and audit the fund is about $1600. You also pay $45 a year to the Tax Office for the privilege of having it regulate the fund.

How do I get started?
To set up a fund, Smith says you need a trust deed and to apply to the Tax Office for the fund to be regulated and issued with an Australian Business Number and Tax File Number. Most people buy a pre-prepared standard trust deed although you can get a lawyer to draw one up. Smith says costs start at about $275.

As part of setting up the fund, you and any other members will have to act as trustees. The law requires that all members of your DIY fund be trustees, no member of the fund can be the employee of another member (unless they're related), and you can't have more than four members. Alternatively, you can appoint a company as trustee so long as the company directors and fund members are the same and you still meet the rules about four members and no employee.

Smith says you should take time to research what's involved before setting up your fund as not everyone is suited to DIY super. She says you need to be well-organised to run your own fund and have the time to spend on making sure you meet all the rules and invest your money well. She says DIY is not suited to people who become stressed at the idea of managing money or people who won't be about to do the legwork such as people who are going to work overseas.

But isn't the big advantage that I can invest where I want?
You certainly have more say in where your money is invested but that doesn't mean you can do whatever you like with the money. Your fund must have a written investment strategy and it must follow that strategy. Most importantly, it must also meet the "sole purpose test" a legal requirement that super money is invested solely for the purpose of providing retirement benefits to fund members. If you get any immediate benefits from the investments even incidental ones the fund can be found to be in breach of the rules and lose its tax concessions or the trustees may be fined.

Smith says there are also prohibitions on the fund borrowing or lending money to related parties. These are both common areas where people run into trouble.

Are there any exceptions to that?
There are no exceptions to the borrowing rule but if it has enough money the fund can buy your company's business premises so long as the business rents the premises from the super fund on commercial terms. Smith says the fund can also buy assets in partnership with fund members so long as it doesn't have to borrow to do so and the assets bought are not borrowed against. In practice, she says, many people borrow against other assets to buy assets such as investment properties in partnership with their super fund.

Can I sell assets to the fund?
Generally not. However, you can sell listed securities such as shares to the fund at market price, as well as your business premises and in-house assets as long as the total in-house assets held by your fund are less than 5 per cent of the fund's assets.

Smith says her advice is to keep it simple: "Don't try to get clever and you won't get into trouble."

For more information, try Do It Yourself Superannuation by Austin Donnelly and Barbara Smith (Wrightbooks, $24.95) or the Tax Office publication "A guide for trustees running a self-managed superannuation fund" from www.ato.gov.au

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