SMSF Setup Guide: How do you Start a Self Managed Super Fund?

  • Troy BurnsTroy Burns
  • Updated Feb 22, 2023

  • What changed?

    We updated some content to make the article more up to date.

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    This information has been reviewed by our SMSF Mates before it was published as part of our review process.

Operating your very own SMSF can be a fulfilling and financially rewarding experience, assuming you have done your homework and the fund is set up correctly from the beginning. Getting it right from the start will avoid costly mistakes and the potential for penalties which we would all rather avoid. 

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Provided the SMSF is set up correctly, the fund will have eligibility for tax concessions which are provided by the superannuation legislation. What this means is that member contributions and earnings which the fund generates are taxed at the concessional rate of 15% (certain limits apply).

How much money do you need for an SMSF establishment?

The cost of an SMSF establishment can vary depending on the structure chosen (individual trustee or corporate trustee) and the level of financial advice received during the set up process. There are also many ongoing costs to run the fund and maintain compliance with super laws and legislation. In some cases, the fund expenses can be fixed, which means that funds with higher balances may be better off when compared to a percentage based fee structure of an industry or retail fund.

The primary variable in the set up cost is how you choose to structure your SMSF. Fees range from around $700 at the most basic level to about $3500 for a corporate trustee with some personal financial advice.

Should you get assistance with a new SMSF setup or do it yourself?

If you’re looking to get assistance with the set up of an SMSF, then there are two different service categories worth considering:

  1. SMSF specialists at various locations who provide individual services for taxation, auditing, legal advice, administration and investment management.
  2.  Service providers who offer all-inclusive SMSF services listed above under the same umbrella, and are often referred to as integrated service providers.

Just like you can register a company yourself, you could also set up an SMSF in a similar way. Still, it is always recommended to seek professional advice before you begin the process, so it is done the right way. Typically when setting up an SMSF, you will need the professional assistance of an accountant, a lawyer and potentially a financial advisor to help you get the fund off the ground.

How much does it cost to set up an SMSF?

The SMSF establishment costs range from around $700 – $1000 for this step. This includes the cost to create the trust deed, which is the first step in setting up a new SMSF. Other items included in the initial setup process are the creation of the fund’s meeting minutes template, investment strategy and the registration of a Tax File Number (TFN) and an Australian Business Number (ABN). If you decide that a corporate trustee structure is suitable for your SMSF, you can add another $1000 for this step.

What are the main steps to get an SMSF set up correctly?

If you have decided to set up an SMSF, whether it be with the help of a financial professional or setting it up yourself, it’s essential to understand the main steps to getting started. Here we have outlined the ten steps which are required to get your SMSF off the ground.

Decide on the members for the Self Managed Super Fund

You can have up to four fund members or trustees in the SMSF, and they must satisfy the following conditions:

  1.  The SMSF will have one Australian-based asset or the fund will be established in Australia.
  2.  The investment management and control of the SMSF will usually happen in Australia, and not from abroad.
  3.  Members of the SMSF must be residents of Australia and must hold at least 50% of total assets within the fund.

The above conditions must be achieved for the SMSF to qualify as an Australian superannuation fund and receive the eligible tax concessions.

Decide on the type of SMSF structure

By now, you have probably heard the term individual trustee or corporate trustee structure, which refers to the fact an SMSF is set up as a trust. Trustees manage assets on behalf of the beneficiaries, and every member of the SMSF must either be an individual trustee or a corporate trustee. If you elect the corporate trustee structure, this means that each of the SMSF’s members must be a director of the company which is the trustee. The main advantage of the corporate trustee structure is that it is far easier and cost-effective to facilitate a member change when compared to an individual trustee structure. That is because it’s much easier to change a director of a company than to change a trustee. However, you will have to consider the ASIC costs and review fees associated with operating a company for the corporate trustee option.

That being said, all SMSF trustees are responsible for the SMSF’s annual compliance requirements with regard to taxation, administration and legal matters. All trustees of the SMSF must sign a statutory declaration stating that they understand all obligations to the Australian Taxation Office.

Complete the SMSF trust deed

The SMSF trust deed outlines the important things like how the fund will be established, how it will operate and the administration requirements. It should be written in a way that complies with the superannuation law and legislation, and it will include the names of all the trustees/members and the objectives of the fund. An SMSF must satisfy the sole purpose test, which means its sole intention is to provide benefits to its members or their dependants if a member dies before they retire. The trust deed must also stipulate whether the benefits will be paid to members as a lump sum or in regular income streams.

Apply for an ABN and register the SMSF with the ATO

Once the fund structure is established, it must be registered with the ATO within sixty days; which is done by completing an ABN application form. This can be done by yourself, or your accountant can do it for you.

Open a bank account for the SMSF

Similar to operating a company bank account, your SMSF will need its own SMSF bank account which is separate from the personal accounts of the fund’s members. This SMSF bank account is used for receiving the member’s contributions and paying any member benefits when required. Once the account is registered, you will need to notify the ATO of the account details.

Organise member contributions and rollovers

The electronic service address of the SMSF will allow the fund to receive contributions paid by the member’s employer, and these payments are transferred electronically using the system called SuperStream. It’s crucial to organise the specifics of the member’s contributions which includes rollovers from other superannuation funds, as part of the setup process.

Document the SMSF’s investment strategy

The SMSF must have a documented investment strategy as it forms an integral part of the fund’s annual review and audit. It should comply with the fund’s sole purpose test and be a guide for the trustee’s investment decision making at all times. The investment strategy must specifically address the assets it is investing in, especially when it relates to complex investments like futures or cryptocurrencies.

The fund can only invest in assets if the trustee can justify the investment with regard to the investment strategy.

There are several important considerations when developing an SMSF investment strategy which include:

  • What age are each of the members within the SMSF, and what financial position and risk appetite do they have?
  •  How can the fund diversify the investments and lower the risk when required?
  • What are the major asset classes within the SMSF and why this is the case?
  • What is the liquidity of the assets within the fund and how easily can they be sold?
  • What are the insurance requirements of the fund, and do you have adequate coverage for the members?

You will have to consider the make-up of the members in the fund carefully when determining the fund’s investment strategy. A fund with members in the accumulation phase will have a different strategy than one with members close to retirement.

Develop an exit strategy

In the unlikely event that the fund will have to be wound up, it’s essential to consider and plan for an exit from the fund if need be. By planning ahead and defining the strategy from the outset, you can avoid potential issues between members when the time comes. Problems that might cause an SMSF to wind up include the following:

  • Trustees decide they do not want the ongoing administrative burden of managing the SMSF, which can be significant.
  • When all members have been paid their entitlements or have passed away.
  • If the members of the SMSF decide they want to switch back to a regular superannuation fund.
  • SMSF members want to relocate overseas and change their tax residency status.

When defining the exit strategy, the trustees should ensure that they can access all records and accounts when required, have binding death nominations in place, and consider appointing a power of attorney.

Appoint a licensed SMSF auditor 

SMSFs must be audited each year by an independent and licensed SMSF auditor by ASIC. It should be part of your SMSF set-up process to appoint an auditor as it is a legal requirement to have one.

Select a broker to use for your investments

Deciding on a broker to partner with for the investments in the SMSF is one that shouldn’t be taken lightly. The types of assets you wish to trade and the technology required to execute your investment strategy are all considerations when determining which broker is going to be best to use. One of the more popular choices for SMSF investor’s brokerage accounts is Interactive Brokers, which offers one of the most extensive selections of assets to trade and highly competitive fees and commissions. Read more about Interactive Brokers here with our comprehensive review.

Summing it all up

Spending the time in setting up your SMSF correctly is critical if you want to benefit from the tax effectiveness and concessions available to a compliant SMSF, and it also promotes the proper operation of your fund.

Investing the money and due diligence, in the beginning, could save you a lot if you have to change things down the track. Before you decide if an SMSF is the right thing for you, you should seek independent financial advice from a professional.

General Advice Warning

Troy Burns

Non-Correlated Capital

Troy has more than 15 years investment and fund management experience, including management of hedge funds and multi-strategy funds. Troy has raised and managed over 300 million dollars in investments and has engaged and serviced over 150 high-net-worth clients for Non-Correlated Capital, the investment company which he serves as CEO and Portfolio Manager. Based out of Perth, Western Australia, Troy is one of the founders of SMSF Mate.

Troy’s educational qualifications include a Masters of Business Administration, Masters of Applied Finance, and Advanced Diploma, Financial Markets, completed at Charles Sturt University. Troy has also previously worked as a derivatives trader and the managing director of a civil engineering company.

You can find out more about Troy or connect with him on Linkedin here:

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Kind words from Aussies managing
their own self funded futures

  • SMSF Mate is a unique website because it has ideas about how to approach SMSFs, insurance and other financial topics that come straight from first hand experience. It's much more useful than what you find on all the other financial websites that just offer generic info that you could easily get on the ATO's website. It's also nice to know there's no financial incentive behind the information, it's legitimately there to help people understand self-managed super funds and how to get the most out of them, not to get an affiliate commission from a broker or other financial services provider. The investment product information is also incredibly useful, I've never seen this kind of functionality on any other website that let's you look at such a wide range of products, sort by what info is most interesting or important to you, and subscribe to updates for different funds and financial products all in one place. Definitely worth checking out if you own or are considering an SMSF!

    David G, Self-Employed, SMSF Owner
  • SMSF Mate provides a unique insight into superannuation and financial topics in a way that is easier to understand than conventional websites. The colloquial nature of the site makes it easy to understand and they often speak about complicated topics in lamens terms so I can wrap my head around them. The investment product information is a great way to research funds that I am interested in investing in with my SMSF and there is a lot of helpful information on the site for better structuring my investment portfolio. In comparison to other websites which offer similar information, SMSF Mate excels as the information is free to access whereas many other sites charge a subscription fee for the same thing. Overall, I think SMSF Mate is a great resource for SMSF trustees and is worth looking at for a variety of super-related topics. Thanks.

    Tim B, Business Owner, SMSF Trustee