How to Start an SMSF: A Step-by-Step Guide
A Self-Managed Super Fund (SMSF) is a private superannuation fund that you manage yourself, offering flexibility and control over your retirement savings. However, setting up an SMSF involves strict regulations, responsibilities, and financial considerations. In this guide, we’ll walk you through the essential steps to establish an SMSF and ensure it remains compliant with Australian laws.
What is an SMSF?
An SMSF is a superannuation trust structure designed to provide retirement benefits for its members. Unlike traditional super funds, an SMSF allows members to control investment decisions and tailor their financial strategies. However, trustees must comply with the Superannuation Industry (Supervision) Act 1993 (SIS Act) and regulatory requirements from the Australian Taxation Office (ATO).
Step 1: Choose Your SMSF Structure
You can structure your SMSF in two ways:
Individual Trustees – Cheaper to set up but requires 2–6 members (all must be trustees).
Corporate Trustee – A company acts as trustee, offering easier asset management and succession planning. ASIC registration fees apply. It can have one or two members as directors.
Note: A corporate trustee provides better asset protection and succession planning. It reduces paperwork if trustees change.
Step 2: Appoint Eligible Trustees
Trustees must following conditions for eligibility:
Be over 18, not under legal disability, and not disqualified (e.g., undischarged bankrupts).
Sign a Trustee Declaration within 21 days, acknowledging their legal duties.
Tip: To be a trustee or director of a corporate trustee, you must not have any outstanding tax
or super affairs, for example any unlodged tax returns and unpaid tax debts
Step 3: Establish the Trust & Trust Deed
An SMSF must be set up as a trust with a legally binding trust deed outlining:
The fund’s rules and objectives
How trustees manage investments and benefits
Member contributions and withdrawal rules
Requirement: The deed must comply with super laws and be signed by all trustees.
Step 4: Meet Australian Residency Rules
An SMSF must meets all three of these residency conditions:
Be established in Australia (or hold at least one local asset).
Have central management (strategic decisions) ordinarily in Australia.
Have at least 50% of assets/benefits tied to Australian-resident members.
Note: Temporary overseas stays are allowed, but permanent relocation breaches residency.
Step 5: Hold Fund Assets Correctly
Assets must be held in the fund’s name (e.g., “[Trustees] as trustees for [Fund Name]”).
Keep assets separate from personal or business holdings.
Example: If using a corporate trustee, title assets as “[Company Name] as trustee for [Fund Name]”.
Step 6: Register Your SMSF
Within 60 days of establishment you must:
Apply for an Australian Business Number (ABN) and Tax File Number (TFN) via the Australian Business Register.
Register for GST if turnover exceeds $75,000 (rare for most SMSFs).
Outcome: Your fund will appear on Super Fund Lookup once registered.
Step 7: Open a Dedicated Bank Account
Use the fund’s name to accept contributions, pay expenses, and manage investments.
Maintain separate member accounts to track entitlements.
Tip: Require joint signatories for added security.
Step 8: Obtain an Electronic Service Address (ESA)
Employers use SuperStream to pay contributions. Also need to use SuperStream to roll over super to or from the fund. You’ll need an ESA to receive payments. Get one through an SMSF administrator or messaging provider.
Step 9: Develop an Investment Strategy
Your strategy must:
Align with members’ retirement goals and risk tolerance.
Consider diversification, liquidity, and insurance needs.
Be reviewed regularly.
Requirement: Document all investment decisions and compliance with laws.
Step 10: Plan for Risks and Death Benefits
Insurance: Protect members and assets (premiums may be tax-deductible).
Death Benefit Nominations: Specify beneficiaries (binding or non-binding).
Step 11: Prepare an Exit Plan
Plan for winding up the fund due to:
Member disputes, incapacity, or overseas relocation.
Poor performance or liquidity issues.
Include: Estimated costs, asset liquidity, and instructions for death benefits.
Is an SMSF Right for You?
An SMSF provides greater control and flexibility but comes with legal and financial responsibilities. If you’re considering an SMSF, consult with us.
Final Thoughts
Starting an SMSF can be rewarding if managed correctly. By following the right steps and staying compliant, you can maximize your retirement savings while maintaining investment control.
Would you like personalized guidance on setting up an SMSF? Contact us today to explore your options!
