Before setting up an SMSF, think carefully about whether you have the time, skills and commitment to manage it properly. If you're unsure, consider speaking with a licensed financial adviser, accountant or legal professional.

Before getting started, consider reading the following articles:

• What is an SMSF?
• Is a Self-Managed Super Fund right for you?
• Rules and duties of Self-Managed Super Fund trustees

Steps to consider in setting up an SMSF

Setting up an SMSF involves more than just paperwork. It’s about building a compliant structure that supports members' long-term goals.

For the most up to date steps on setting up an SMSF, refer to the ATO website.

Step 1. Decide on your structure

Choose between:

• Individual trustees: Each member must be a trustee of the SMSF.
• Corporate trustee: A company acts as trustee of the SMSF, and each member must be a director of the company.

To understand more detail around the differences in these structures refer to the ATO’s article on choosing your SMSF trustee structures

Read more from the ATO on the other rules that apply for single member funds.

In order to be an Australian super fund, an SMSF needs to meet the following conditions:

1. Established or has assets held in Australia
2. Is centrally managed and controlled ordinarily in Australia
3. Has active members

To find out more information around the requirements for your SMSF to meet Australian standards, refer to the ATO.

Step 2. Choose trustees

All trustees or directors must be eligible, i.e.

• Over 18 years old
• Not be a disqualified person
• Not be under a legal disability

For members younger than 18 years of age, there are other rules that apply. In certain circumstances a legal representative is required to be appointed. Read more from the ATO.

Each trustee or director of a corporate trustee must sign a declaration, within 21 days, confirming they understand their responsibilities under superannuation law.

Read the latest ATO guidance on appointing trustees.

Step 3. Setting up the trustee company & SMSF trust deed

If a corporate trustee has been selected, the company will need to be incorporated first before executing the trust deed.

A trust deed is a legal document that sets out the rules for how an SMSF will operate.

The trust deed must:

• Be specifically designed for your fund to align with its objectives and support the needs of its members.
• Clearly state that the fund exists solely to provide retirement benefits to its members or death benefits to their beneficiaries.

Step 4. Holding SMSF assets

In order for your SMSF to be legally established you must have:

• trustees
• beneficiaries
• a trust deed
• assets set aside for the benefit of members

Your SMSF can hold a nominal amount with the trust deed, if you foresee a rollover, transfer or contribution shortly after the SMSF is setup.

For any contributions or rollovers you should ensure that you properly document these, including things like the amount, type and breakdown of components.

As part of your responsibilities as a trustee of an SMSF you should keep SMSF assets legally separate from personal or business assets. Depending on the funds structure, fund assets should be registered as either:

• Individual trustees: “as a trustee for [the fund's name] or
• Corporate trustee: 'as trustee for [fund name]

If you'd like to understand more, refer to the ATO's guidance on holding SMSF assets.

Step 5. Register your SMSF with the ATO

You will need to apply for:

• An Australian Business Number (ABN)
• A Tax File Number (TFN)

Once the SMSF established, you will need to complete the registration within 60 days to receive tax concessions and operate effectively.

Step 6. Open a dedicated SMSF bank account

Your SMSF needs its own bank account to:

• Receive contributions and rollovers
• Receive investment income
• Pay fund expenses

This account will need to be in the fund’s name and separate from personal accounts. You’ll also need to notify the ATO of the account details.

Step 7. Get an Electronic Service Address (ESA)

An ESA is required to receive contributions and make rollovers into or out of your SMSF via SuperStream. Your ESA ensures payments and data are correctly routed to your SMSF. If you have an administrator or accountant they should be able to assist you with this.

Definition: SuperStream

It’s the government’s platform where all employers are required to pay contributions and send information to super funds. Payments and data are electronically tagged and distributed to the appropriate fund providers, which is why your SMSF will need its own ESA.

Once you have your ESA setup you should consider doing the following:

1. Updating your records with the ATO, so you can receive employer contributions, process rollovers in and out of the SMSF and receive electronic release authorities
2. Notify your employer of your SMSF details such as, ABN, BSB and bank account number for payments and ESA

Step 8. Develop an investment strategy

Your SMSF should have a written investment strategy that considers:

• Its member’s risk tolerance
• How all members would like to diversify assets
• Liquidity of investments
• Insurance needs, to cover things such as death, terminal medical condition, permanent or temporary incapacity

The investment strategy should reflect the retirement objectives of all members and be reviewed regularly to ensure it remains aligned with the fund’s sole purpose of providing retirement benefits to members or to pay death benefits to members beneficiaries.

Step 9. Understand your ongoing responsibilities

Once your SMSF is set up, be mindful of obligations such as:

• Keeping detailed records - including but not limited to; all contributions, income, expenses, fees, trustee decisions, and fund activities
• Conducting annual audits
• Lodging annual returns with the ATO
• Staying compliant with superannuation laws
• Notifying the ATO of any changes related to your SMSF

Step 10. Consider your exit plan

When setting up your SMSF, it’s wise to plan ahead and think about any circumstances or unexpected events, that might lead you to close your SMSF, such as:

• Relocation overseas,
• Loss of capacity
• Relationship breakdown between trustees
• All members have left the SMSF

Setting up an SMSF can offer flexibility, control and tailored investment opportunities. But it’s not a decision to take lightly. If you're unsure of what is entailed in setting up and managing an SMSF, consider speaking with a licensed financial adviser, accountant or legal professional.