How to Do The SMSF Setup: A Step-by-Step Guide
- Written by The Express

Setting up a Self-Managed Super Fund (SMSF) is a significant financial decision that allows you to take control of your retirement savings. An SMSF setup offers flexibility and potential tax benefits, but it also comes with responsibilities and regulatory obligations. This guide will walk you through the key steps for an SMSF setup, ensuring you start on the right path.
What is an SMSF?
An SMSF is a private superannuation fund that you manage yourself. Unlike other super funds, SMSFs are regulated by the Australian Taxation Office (ATO) and allow up to six members, all of whom are trustees. Trustees are responsible for complying with legal obligations and making investment decisions.
Benefits of Setting Up an SMSF
- Investment Control: You can tailor your investment strategy to align with your financial goals, including property, shares, and other assets.
- Tax Benefits: SMSFs offer tax advantages, such as a 15% concessional tax rate on earnings within the fund.
- Cost Management: Depending on the size of your super balance, an SMSF can be more cost-effective than retail or industry funds.
- Estate Planning: SMSFs provide flexibility in estate planning, allowing specific allocation of assets to beneficiaries.
Step-by-Step SMSF Setup
- Decide on Membership and Structure Determine who will be part of the SMSF. You can have between one and six members. • Choose the SMSF’s structure:
- Individual Trustees: Each member is a trustee.
- Corporate Trustee: A company acts as the trustee, and each member is a director.
- Corporate trustees offer continuity and legal protection, making them a popular choice despite higher setup costs.
- Create a Trust and Trust Deed Establishing a trust is a legal requirement for setting up an SMSF. • The trust deed outlines the fund’s rules, including:
- Member contributions
- Investment strategies
- Payment of benefits Ensure the deed complies with the Superannuation Industry (Supervision) Act 1993 (SIS Act).
- Register the SMSF with the ATO Apply for an Australian Business Number (ABN) and Tax File Number (TFN). • Elect for the SMSF to be regulated by the ATO to receive tax concessions.
- Set Up a Bank Account Open a separate bank account in the fund’s name to manage contributions, earnings, and expenses. • Keep the SMSF’s assets separate from personal or business accounts.
- Develop an Investment Strategy Create a documented investment strategy tailored to the members’ retirement goals, risk tolerance, and financial circumstances. • Include diversification, liquidity, and the ability to pay member benefits. • Review and update the strategy regularly.
- Organize Insurance for Members Consider life, total and permanent disability (TPD), and income protection insurance for members. • Document the decision on insurance coverage in the fund’s records.
- Accept Contributions and Rollovers The SMSF can start accepting contributions from members and employers. • Roll over existing superannuation balances into the SMSF. • Ensure contributions comply with caps and eligibility rules.
- Stay Compliant with Legal Obligations Annual Audit: Engage an independent SMSF auditor to review the fund’s financial records and compliance. • Lodging Tax Returns: File an annual return with the ATO and pay any applicable taxes. • Record Keeping: Maintain detailed records, including minutes of trustee meetings, financial statements, and member statements.
Costs of Setting Up an SMSF
The costs of SMSF setup vary based on the chosen structure and service providers. Key expenses include:
- Establishment Costs: $1,500 to $3,000 (trust deed, registration, and bank account setup).
- Annual Operating Costs: $3,000 to $10,000 (audit, tax return, and investment advice).
While the initial and ongoing expenses may seem significant, they can be outweighed by the potential savings and control gained with a substantial super balance.
Common Mistakes to Avoid
- Non-Compliance: Failure to comply with regulations can result in hefty penalties.
- Poor Record Keeping: Maintain accurate records to avoid compliance issues.
- Overlooking Diversification: Concentrating investments in one asset class increases risk.
- Neglecting Insurance: Lack of insurance coverage can leave members vulnerable.
Is an SMSF Right for You?
An SMSF can be a powerful tool for managing your retirement savings, but it’s not suitable for everyone. Consider these factors:
- Your financial knowledge and willingness to manage the fund.
- The size of your super balance; experts recommend at least $200,000 to make SMSFs cost-effective.
- Your ability to meet compliance and regulatory obligations.
Seek Professional Advice
Setting up and managing an SMSF involves complexities that may require professional guidance. Engage financial advisors, accountants, and legal experts to ensure your SMSF operates smoothly and remains compliant.
Final Thoughts
An SMSF setup can empower you to take control of your retirement savings, offering flexibility and potential benefits. By following the steps outlined in this guide and seeking professional advice when needed, you can build a robust foundation for your financial future. However, always weigh the responsibilities and costs against the potential rewards to ensure an SMSF aligns with your retirement goals.