How to set up a self-managed super fund: everything you need to know

A handy way to think about SMSFs is like a four-wheel drive: a special-purpose vehicle built for people with specific needs and the confidence to handle the extra features. It offers control and flexibility, but it may also mean more responsibility, more upkeep, and more know‑how. So if your needs are simple, a regular super fund may already have the features for your needs.

While SMSFs may give you more choice and flexibility, this may also means more responsibility. SMSFs are tightly regulated. Meaning you'll be required to comply with some complex super and tax rules and do regular reporting from day one. 

Please consider getting financial advice before making an investment decision.

An SMSF has a few key moving parts that all need to work together. They all sit inside a framework of super rules and tax rules, overseen by the ATO as the regulator. ASIC also play a role in regulating the gatekeepers – the accountants, financial planners, auditors and product providers.

In practice, that means making sure you have the right elements in place, such as:

• The right trustee structure - all members need to act as individual trustees, or as director of a company acting as trustee
• A properly prepared trust deed - the SMSF's own rulebook
• A documented investment strategy that considers the need to hold life insurance
• The right legal ownership of the fund's assets
• Importantly, the ability to meet the ongoing admin obligations. This includes keeping records, preparing fund reporting, arranging an annual audit, preparing the SMSF’s annual tax and compliance return, and then lodging it. 

An SMSF has multiple parts - trustee structure, trust deed, investment strategy, assets and admin. All of it must comply with super and tax laws, and with the ATO as the regulator.

Here’s a simple, broad look at the possible advantages and disadvantages of running your own super fund.

• Investment choice
  SMSFs may offer more choice than many large funds, including things like direct property and cryptocurrency.
• Flexibility
  You can implement your own tailored investment strategy and decide what types of investments the fund invests in. 
• Control
  You get to decide which professionals you work with, such as tax, legal and financial experts. You also have control over when and how benefits are paid.
• May be more cost-effective for higher balances
  Because many SMSF costs are fixed, the SMSF structure may suit some people with larger balances. 
• More options to manage tax outcomes
  Super has its own tax rules and obligations. With an SMSF, you may have more control over timing and strategy; however, the rules may be complex, and seeking tax, legal and financial advice is recommended. 

• More paperwork
  There’s significant admin, record-keeping, reporting, and compliance work every year.
• More time and effort
  You need to stay involved and keep up with laws, rules, and obligations to ensure compliance. 
• You may need to live in Australia
  Residency rules generally mean you must physically be in Australia. So, you need to consider your individual circumstances if you spend long periods overseas. 
• More duty and responsibility
  Trustees have legal obligations. If these rules are broken, penalties may apply to individuals and the fund.
• Costs may be high for smaller balances
  Fixed costs may make SMSFs less cost-effective when comparing small and large funds. 
• Harder and more expensive to unwind
  Closing an SMSF may be complex, especially if the assets are hard to sell. Selling assets within an SMSF often requires agreement from all trustees.
• Changes in members’ lives may create problems
  Things like death, divorce, bankruptcy, or someone moving overseas may have a big impact on how an SMSF is taxed and how it works.
• Fewer safety nets
  If you manage your own SMSF, it’s important to know you may not have the same protections applicable to members of larger super funds. This includes safeguards in cases of theft or fraud, and access to low‑cost dispute resolution services.

SMSF costs fall into two main buckets: set‑up costs and ongoing yearly costs.

These may include:

• Legal documents to create the SMSF.
• Legal and financial advice to transfer benefits to an SMSF.
• Setting up a corporate trustee, if you choose that structure.
• Using an accountant or SMSF admin provider to set up and manage ATO registration.

These may include:

• Administration.
• Accounting and tax reporting.
• An independent annual audit.
• Ongoing legal and financial advice.  

The key thing to remember is that many SMSF costs are fixed. That’s why SMSFs may be relatively expensive for smaller balances, and why people often compare SMSF costs differently to large super funds.

Some SMSFs may be set up within a few weeks, but timing depends on factors like:

• How quickly paperwork is prepared and signed.
• Whether you choose a corporate trustee.
• The registration process.
• Setting up the required bank accounts and electronic service providers.
• How long rollovers from existing super funds take.
• Whether you’re setting up borrowing arrangements.
  

Here’s the typical setup process. 

SMSFs usually use one of two setups:

• Individual trustees: the members are the trustees.
• Corporate trustee: a company is the trustee, and members are directors of that company. A dedicated trustee company may help keep SMSF duties separate and simpler.

A corporate trustee may cost more upfront, but some people may find it simpler in the long-term . Especially if there are later changes to members.

There are different requirements based on your trustee structure.

For individual trustees, each member of the fund will need to be appointed as a trustee, and all trustees will need to be a member of that fund.

For corporate trustee structures, each member of the fund will need to be appointed as a director, and all directors will need to be a member of that fund.

The trust deed contains the rules for the SMSF. It explains what trustees can and can’t do. It’s the key document relieiedd on if a dispute arises.

An SMSF admin service provider helps to set up and run the fund.

SMSF assets need to be held in the correct name.

This step requires Trustees to sign a declaration confirming their obligations, and the fund must be registered and regulated by the ATO.

Your SMSF needs its own bank account to receive contributions and rollovers, pay bills, and manage investments. 

This helps the SMSF receive contributions and rollovers electronically through the same SuperStream system used by super funds and employers.

An SMSF must have an investment strategy which is a written plan that guides how the fund invests. This should include:

• Your retirement goals and timeframes.
• Investment choice.
• Liquidity, or having cash available to pay costs and benefits.
• Risk profile.
• Whether to hold life insurances for members.

Not many people think about this at the start, but it’s important. An exit plan helps you think through scenarios such as:

• When you might close the SMSF in the future, for example due to advancing age or declining health.
• What happens if members’ circumstances change or if they leave the SMSF. 
• How you’d sell or transfer assets.

Daniel and Priya are in their late 40s with $950,000 in combined super. 

They want more control and a clean, compliant SMSF set‑up, so they follow a clear checklist and make key decisions early.

1) Trustee structure:

They set up a company to act as trustee - a corporate trustee - and make themselves the directors. This is the most common structure across SMSFs, and it allows for later changes to members. 

2) Appoint directors:

They both become directors of the trustee company, so the structure meets the SMSF rules. They agree they'll be involved in running the fund and in making all the key strategic decisions.

3) SMSF trust deed:

They set up a trust deed that names trustees and defines the SMSF rules.

4) Appoint an admin service provider:

They appoint service providers, such as an SMSF admin service provider, to help them set up and run the fund.

5) Sign declaration

They sign the SMSF trustee declaration and fill out the required paperwork to register the SMSF, allowing it to be regulated by the ATO.

6) Bank account:

They open a dedicated SMSF bank account and use it for everything. This includes rollovers, contributions, investment income, and expenses.

7) Electronic service address:

They get an electronic service address so contributions and rollovers can be received electronically. 

8) Investment strategy:

Before investing, they write their investment strategy that aligns to their goals, risk comfort, diversification needs and the fund’s ability to meet fees.

9) Exit plan: 

They put an exit plan in writing early so they’ve already agreed what they’ll do if they ever want to close the fund. This helps reduce the risk of potentially expensive, last‑minute decisions later on. 

How they keep compliance on track long-term:

Daniel and Priya set a recurring yearly routine: They take time to review their investment strategy, confirm their assets still align with it, and keep the right records on hand.

They also book in their annual audit and prepare what’s needed for their annual reporting and return. That way the SMSF’s admin becomes a steady, manageable task rather than a once‑a‑year scramble. 

It takes time and careful decision-making to set up your SMSF the right way.

Getting professional advice, such as tax, legal and financial, may help you:

• Decide if an SMSF is right for you.
• Choose the right structure.
• Set it up correctly from the start.
• Build an investment strategy that fits your goals.
• Understand your responsibilities and ongoing obligations.
• Ensure compliance with laws, rules and obligations.

That’s why Colonial First State offers financial advice options. They range from comprehensive, ongoing advice with a financial adviser who specialises in SMSFs, to more general advice which may point you in the right direction.