Thinking about setting up a Self-Managed Super Fund (SMSF)? Explore some of the steps required to set up an SMSF.
An SMSF is a super fund that you manage yourself. It can have up to six members.
All trustees, or directors of a trustee company, of an SMSF are responsible for running the fund and making decisions that are in the best financial interests of all members. This means you are responsible for decisions made by other trustees even if you're not involved in making the decision.
These responsibilities come with risks, such as:
As a trustee, you are personally liable for the fund's decisions, even if you use a professional such as a financial adviser, accountant or legal professional
The investments made may not bring the returns expected
Reduced consumer protections, unlike retail and industry regulated super funds, SMSFs are not subject to APRA's prudential oversight. If something goes wrong (such as fraud, theft, or poor trustee decisions), and no third-party financial firms that provide advice or services, was involved, SMSF members generally cannot take a complaint to the Australian Financial Complaints Authority (AFCA). As trustee, you are responsible for protecting the fund's assets and can therefore be personally liable.
If the relationship between the members of the SMSF breaks down or a member dies or becomes ill, there may be a negative impact on the SMSF
For more information on what an SMSF is and the risks involved, refer to MoneySmart
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:
Setting up an SMSF involves more than just paperwork. It’s about building a compliant structure that supports members' long-term goals. There are a number of steps involved and accountants or administrators can assist, however as a trustee you are personally responsible to ensure your SMSF is compliant.
For the most up to date steps on setting up an SMSF, refer to the ATO website.
Step 1. Decide who will be involved in your SMSF
Most SMSFs have one or two members. It is common for couple to share an SMSF and both would be trustees or directors of the corporate trustee.
Most people are allowed to be part of an SMSF but some people are specifically excluded. This includes anyone who is bankrupt or has been convicted of an offence involving dishonesty. It also includes some people who have been legally barred from being the trustee of an SMSF.
Some people can be members of an SMSF but can’t be a trustee or director of the corporate trustee (eg children under 18, people who aren’t legally allowed to make financial decisions for themselves – such as someone with dementia). There are some special rules to watch for here but it is possible for someone else to be a trustee in their place.
Step 2. Decide on your structure
Choose between:
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.
Step 3. Setting up the trustee company & SMSF trust deed
If you’ve decided on a corporate trustee, company will need to be set up first before you sign the trust deed. To set up a company, each director will need a Director Identification Number if they don’t already have one.
A trust deed is a legal document that sets out the rules for how an SMSF will operate.
You may want to consider having an account or lawyer assist you in arranging both the trustee company and trust deed.
Step 4. Register your SMSF with the ATO
You'll need to register your SMSF with the ATO. As part of that process, you'll also apply for:
Normally your accountant or SMSF administrator will do this for you.
You will need the ATO to confirm your fund’s status, as other funds won’t transfer money to your SMSF until they can see your fund listed on the official register of all super funds as confirmed. Sometimes this can take a while but its important to wait.
Step 5. Open a dedicated SMSF bank account
Your SMSF needs its own bank account to:
This account will need to be in the fund’s name e.g. if you have a corporate trustee, the bank account should be set up in the following name:
[Company name] as trustee for [Fund name]
If you have individual trustees, it should be:
[First Individual Name] and [Second Individual’s name] as trustee for [Fund Name]
If there are more than two individual trustees, you’ll need to list them all.
You’ll also need to notify the ATO of the account details. Your accountant or SMSF administrator will usually do this for you.
Step 6. Get an Electronic Service Address (ESA)
Your SMSF needs an ESA to receive contributions and make rollovers into or out of your SMSF. An ESA ensures your SMSF can meet the rules about how 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 and they will often have an ESA for your fund already.
Once you have your ESA you should consider doing the following:
Updating your records with the ATO, so you can receive employer contributions, process rollovers in and out of the SMSF and certain other important communications from the ATO.
Notify your employer of your SMSF details such as, ABN, BSB and bank account number for payments and ESA
Step 7. Develop an investment strategy
Your SMSF should have a written investment strategy that considers:
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.
At this point, you can start investing the money coming into your fund. Your SMSF’s investments should be kept separate from your other personal and business assets. Just like the SMSF’s bank account, they should be held in the name of the trustee of the fund, not your name.
Step 8. Ensure you have appropriate insurance coverage
Rolling over from an industry or retail super fund may mean you lose any insurance cover attached to your account, such as life, total and permanent disability or income protection insurance.
Review any existing insurance policies and other benefits you have in your current super fund. These can’t be transferred to your SMSF, so you may need to arrange new cover separately or leaving some of your super in your old fund (known as doing a “partial rollover” because you only partially transfer your super to your new SMSF). Make sure you check with your old fund to see if there’s anything else you need to do to keep your insurance.
Step 9. Understand your ongoing responsibilities
Once your SMSF is set up, be mindful of obligations such as:
Step 10. Keep actively reviewing your fund
Your work isn’t over once your SMSF has been set up and invested. You should regularly review the investments and even whether the SMSF is still right for you. If something major changes in your life, it might be time to reconsider the SMSF as well. For example, some people choose to wind up their SMSF if they move overseas, get older or following the death of one of the trustees.
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.
This article is intended to provide general information of an educational nature only. The information may include general advice but does not take into account your individual objectives, financial situation, needs or tax circumstances, and so you should consider the appropriateness of the advice having regard to your circumstances before acting on it. Where applicable, you should obtain and read the relevant Product Disclosure Statement (PDS) and other important disclosure documents before making a decision about acquiring or continuing to hold a product. You should consider seeking independent professional financial, tax and/or legal advice before making any decision based on this information.
The above information is not tax advice. Taxation laws are complex and subject to change. Commonwealth Bank does not provide tax (financial) advice under the Tax Agent Services Act 2009 (Cth). You should consider seeking independent tax advice from a registered tax agent, accountant or adviser before you make any decisions based on this information.
The information in this article and any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time of its publication but no representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or completeness of any statement made in this article.
