Setting Up a Self Managed Super Fund: A Guide

Did you know that more than 1.1 million Australians have chosen to take control of their retirement savings by setting up a self-managed super fund (SMSF)? That’s right! With an SMSF, individuals have the freedom to manage their own investments and make decisions about their future. But before you dive into this exciting realm of financial independence, it’s important to understand the steps involved in setting up an SMSF and the responsibilities that come with it.

self managed super fund

Key Takeaways:

  • Learn how to set up a self-managed super fund (SMSF) and take control of your retirement savings.
  • Understand the steps involved in creating an SMSF and the compliance requirements.
  • Consider the risks and responsibilities that come with managing your own super fund.
  • Explore the time and cost commitments associated with an SMSF.
  • Discover the financial and legal knowledge required to effectively manage an SMSF.

The Risks and Responsibilities of SMSFs

All members of a Self-Managed Super Fund (SMSF) bear the responsibility for making decisions and complying with legal obligations. It is important to understand the risks involved in managing an SMSF and the potential impact on your retirement savings.

Risks of SMSFs: One risk is the potential loss of money through theft or fraud. As trustees, you have a personal liability for the decisions made on behalf of the fund. There is also the possibility of lower-than-expected investment returns, which can affect the growth of your superannuation savings.

Responsibilities of SMSF Trustees: SMSF trustees must comply with the law and fulfill ongoing obligations. These responsibilities include managing and investing the fund’s assets, maintaining accurate records, preparing financial statements, and arranging an annual audit. It is essential to stay up to date with SMSF compliance requirements to avoid penalties and maintain the fund’s compliance status.

Impacts of Relationship Breakdown: Relationship breakdowns can have significant implications for SMSFs. When a member enters a relationship breakdown, it may result in the need to split superannuation assets. This process can be complex and may require legal assistance to ensure a fair distribution of assets while remaining compliant with the superannuation laws.

Theft or Fraud in SMSFs: SMSFs can be targeted by fraudsters, posing a risk to your retirement savings. It is important to implement robust security measures and regularly monitor the fund’s transactions to detect and prevent any unauthorized activity or fraudulent behavior.

Insurance in SMSFs: It is crucial to consider insurance coverage for members of an SMSF. When transitioning from an industry or retail fund to an SMSF, it is important to assess insurance needs carefully. Insurance coverage may be lost, leaving members unprotected in the event of illness, injury, or death. It is advisable to review your insurance requirements and consult with a financial adviser to ensure appropriate coverage options are in place.

Time and Cost Considerations of SMSFs

Managing a self-managed super fund (SMSF) requires a significant time commitment and ongoing dedication. As a trustee, you have various responsibilities, including researching investment opportunities, staying updated on superannuation and tax laws, setting up and reviewing investment strategies, accounting, record-keeping, and arranging annual audits.

On average, SMSF trustees spend more than eight hours a month managing their funds, totaling over 100 hours per year. This time commitment should be taken into account when considering whether an SMSF is the right choice for you.

When it comes to costs, it’s important to be aware of the expenses associated with setting up and managing an SMSF. There are initial setup costs, such as legal documentation, trust deed establishment, and ATO registration, which can vary depending on your specific needs and circumstances.

Ongoing SMSF costs include investing, accounting, auditing, tax advice, legal advice, financial advice, and insurance premiums. While some of these costs may be tax-deductible, most of them are out-of-pocket expenses that need to be considered when evaluating the affordability of an SMSF.

Managing an SMSF requires financial literacy or the engagement of professional service providers, which may increase the ongoing costs. Therefore, it’s crucial to assess whether the potential benefits of an SMSF outweigh its financial commitments.

In order to effectively manage a Self Managed Super Fund (SMSF), trustees must possess the necessary financial and legal knowledge and skills. Having a solid understanding of these areas is crucial for the successful operation of an SMSF and ensuring compliance with regulatory requirements.

One of the key responsibilities of trustees is to set and manage an investment strategy that aligns with the risk tolerance and retirement needs of the fund members. This involves making informed decisions about asset allocation, diversification, and investment selection. Trustees must also stay up-to-date with tax, superannuation, and investment laws to ensure tax compliance and avoid any legal issues.

Insurance is another important consideration for SMSFs. Trustees need to arrange appropriate insurance coverage for fund members to protect their assets and provide financial security in the event of unexpected circumstances.

Understanding different investment markets is essential for SMSF trustees, as it allows them to make informed investment decisions and optimize their fund’s performance. This includes being aware of market trends, conducting thorough research, and seeking professional advice when needed.

Building and managing a diversified investment portfolio is also crucial to minimize risk and maximize returns. Trustees should aim to spread investments across various asset classes, such as stocks, bonds, property, and cash, to achieve a balanced and well-structured portfolio.

It’s important to note that individuals should be cautious of anyone offering to set up an SMSF with the intention of using superannuation funds for debt repayments, as this is illegal. Always ensure the legitimacy of any offers or schemes before engaging in them.

The Australian Securities and Investments Commission (ASIC) provides valuable resources to help individuals assess the suitability of an SMSF based on their superannuation balance. It’s recommended to consult these resources and seek professional financial advice before making any decisions regarding the establishment and management of an SMSF.

Starting Balance Considerations

The decision to set up a Self Managed Super Fund (SMSF) should be based on its overall suitability, rather than solely focusing on the starting balance of the fund. While a lower starting balance may be suitable for individuals who are willing and capable of handling most of the administration and management themselves, it’s important to consider other factors as well.

For example, an SMSF with a lower starting balance may still be feasible if there are plans to add additional assets to the fund in the future. This could include acquiring a business property, receiving an inheritance, or transferring funds from another superannuation account. On the other hand, a higher starting balance may not be the best option if it doesn’t align with the trustee’s objectives, financial situation, or long-term needs.

When assessing the suitability of an SMSF based on the starting balance, it’s crucial to take into account the trustee’s willingness and ability to effectively manage the fund, potential growth opportunities, and broader investment strategies.

The Australian Securities and Investments Commission (ASIC) provides case studies and resources that can help individuals determine whether an SMSF is suitable based on their specific superannuation balance.

Researching Investment Options

One of the advantages of having a self-managed super fund (SMSF) is the ability to have control and access to a diverse range of investment options. As an SMSF trustee, you have the freedom to choose where your retirement savings are invested, allowing you to tailor your investment strategy to your specific financial goals and risk tolerance.

However, it’s important to note that there are strict rules and regulations in place regarding what can be invested in an SMSF. These rules are designed to ensure that the fund’s investments are made in a way that aligns with the sole purpose of providing retirement benefits to the fund’s members.

To make informed investment decisions for your SMSF, it’s crucial to conduct thorough research and have a clear understanding of the investment options allowed under superannuation laws and regulations. The Australian Taxation Office (ATO) provides guidance on the types of investments that can be made within an SMSF and any specific restrictions that may apply.

When researching investment options for your SMSF, consider factors such as:

  • The risk profile and investment objectives of the fund
  • Diversification to spread risk across different asset classes
  • Consideration of returns, liquidity, and potential capital growth
  • The fund’s cash flow requirements and liquidity needs
  • Compliance with investment restrictions and regulations

By conducting proper research and understanding the investment options available to you, you can make informed decisions that align with your SMSF’s investment objectives and comply with regulatory requirements.

Seeking Professional Advice

While professionals like SMSF auditors, accountants, and lawyers can provide valuable assistance with setting up and managing an SMSF, it’s important to understand the limitations of their advice. For comprehensive and tailored guidance, it is recommended to work with a licensed financial adviser who specializes in SMSFs.

The Importance of Professional Advice

A financial adviser with expertise in SMSFs can help in various aspects of the process, including:

  • Gaining a clear understanding of the suitability of an SMSF for your specific circumstances, goals, and risk tolerance.
  • Assisting in the selection of an appropriate trustee structure that aligns with your needs and complies with regulatory requirements.
  • Providing insights into the potential risks and costs associated with managing an SMSF, as well as the benefits that may be lost by transitioning from another super fund.
  • Offering guidance on the required skills, knowledge, and time commitment necessary to effectively manage an SMSF.
  • Helping you understand the penalties and consequences of non-compliance with SMSF regulations.

Working with a Specialized Financial Adviser

When seeking professional advice for SMSF setup and management, it is important to engage a licensed financial adviser who specializes in SMSFs and has experience in navigating the complexities of superannuation and investment strategies. Such a professional can provide personalized financial advice and help you make informed decisions throughout your SMSF journey.

By collaborating with a specialized financial adviser, you can ensure that your fund is set up correctly, compliant with SMSF regulations, and aligned with your retirement goals. The adviser will consider your financial situation, risk profile, and long-term objectives to provide you with a comprehensive strategy tailored to your specific needs.

Remember, SMSFs are subject to strict compliance requirements, and the guidance of a qualified and experienced financial adviser is essential to mitigate risks and maximize the potential benefits of managing your own superannuation.

Registering Your SMSF

To establish an SMSF, you must register the fund with the ATO by applying for an Australian Business Number (ABN). The ATO regulates all SMSFs and provides concessional tax treatment to compliant funds. The registration process may take several weeks, so it’s advisable to begin the process well in advance and ensure all necessary forms and documentation are completed correctly.

Choosing a Trustee Structure

The choice of trustee structure is a significant decision that impacts compliance obligations and how fund assets are managed in a self-managed super fund (SMSF). There are two options for trustee structure in an SMSF: individual trustees and corporate trustees.

Under the individual trustee structure, each member of the SMSF acts as a trustee. This means that every member has equal responsibility for managing the fund, making investment decisions, and ensuring compliance with superannuation laws and regulations.

On the other hand, the corporate trustee structure involves setting up a company to act as the trustee of the SMSF. In this structure, the members of the SMSF become directors of the company and have the authority to make decisions on behalf of the fund.

Both the individual trustee and corporate trustee structures have their advantages and disadvantages. With individual trustees, there is flexibility and continuity in case of member changes, as new members can easily be added or removed. However, this structure may lead to complexities in asset ownership, especially if one member leaves the SMSF.

On the other hand, having a corporate trustee simplifies asset ownership as the company holds legal title to the fund’s assets. Additionally, it provides a structure that can better manage future changes in membership. However, setting up and maintaining a company as the SMSF trustee incurs additional costs and ongoing obligations.

When choosing a trustee structure for your SMSF, it’s essential to consider the specific needs and circumstances of your fund and its members. Seeking professional advice from SMSF specialists, such as financial advisers and lawyers, can help you make an informed decision based on your unique situation.

Organizing and Signing Documents

Once you have decided on the trustee structure for your self-managed super fund (SMSF), the next step is to organize and sign the necessary documents.

One of the most important documents you will need to establish is the SMSF trust deed. The trust deed lays out the rules and governance of the SMSF, including the rights and responsibilities of the trustees, the investment strategy of the fund, and the procedures for winding up the fund. It is essential to have a well-drafted and legally compliant trust deed to ensure that your SMSF operates within the boundaries of the law.

In addition to the trust deed, you may also need to prepare other documentation, such as trustee appointment forms. These forms confirm the appointment of trustees or directors and require written consent from the individuals undertaking these roles. It is crucial for all trustees to understand their obligations and responsibilities before signing these documents.

Consulting a legal adviser who specializes in SMSFs is highly recommended to ensure that your trust deed and other documents comply with the relevant regulations. A legal expert will guide you through the process, ensuring that all necessary paperwork is completed accurately and in accordance with the law.

Remember, your SMSF trust deed and other documentation are crucial for establishing the rules and governance of your fund, outlining trustee appointments, and ensuring compliance with the regulations. Seeking professional advice can help you navigate this process and ensure that your SMSF is set up correctly.

Establishing Bank Accounts

Once you have successfully registered your SMSF, it is crucial to establish separate bank accounts for the fund. These bank accounts serve different purposes and help you effectively manage your self-managed super fund.

The first type of bank account you need to set up is a SMSF cash account. This account is used for receiving contributions from members and paying for various expenses related to the fund’s operation. It serves as a central hub for managing the flow of funds within the SMSF.

The second type of bank account is a SMSF clearing account. This account is specifically designed for buying and selling assets within the SMSF. It allows you to conduct transactions related to investments and ensures that all purchases and sales are made in the name of the fund, rather than the individual trustees or members.

When establishing bank accounts for your SMSF, it is crucial to choose a reliable and secure SMSF bank account with online and mobile banking functionality. This will provide you with convenient access to your funds, as well as streamlined fund management, reporting, and auditing processes.

Furthermore, consider selecting a bank that offers third-party authority options. This allows you to grant limited access to trusted professionals, such as accountants or financial advisers, who can assist you with managing and monitoring your SMSF.

By setting up separate bank accounts for your SMSF and choosing the right financial institution, you can ensure efficient fund management and compliance with SMSF regulations.


Setting up a self-managed super fund (SMSF) is a significant decision that requires a thorough assessment of its suitability, understanding of the associated risks and responsibilities, and compliance with SMSF regulations. It is vital to seek professional advice from SMSF specialists, such as financial advisers, accountants, and lawyers, to ensure the proper setup, compliance, and effective management of your SMSF.

By considering professional advice, individuals can make informed decisions about their SMSF, including assessing the suitability of an SMSF based on their financial situation, retirement goals, and risk tolerance. Additionally, seeking expert guidance can help navigate the complexities of compliance, ensuring that trustees fulfill their obligations and meet the necessary regulatory requirements.

Understanding the time and cost commitments involved in managing an SMSF is essential. Trustees should be prepared for the ongoing responsibilities of researching investments, staying updated on relevant laws, implementing and reviewing investment strategies, maintaining accounting records, and arranging annual audits. It is also important to comply with SMSF regulations, including registration with the Australian Taxation Office (ATO) and choosing an appropriate trustee structure that aligns with the fund’s objectives.

By taking a proactive approach, staying informed, and seeking professional advice, individuals can effectively assess the suitability of an SMSF, understand the risks and responsibilities involved, and comply with SMSF regulations. Managing an SMSF offers greater control over retirement savings, providing flexibility and choice in investment strategies to achieve financial goals.


How do I set up a self-managed super fund (SMSF)?

Setting up an SMSF involves registering the fund with the Australian Taxation Office (ATO) by applying for an Australian Business Number (ABN). It’s recommended to consult professionals who can guide you through the process and ensure compliance with regulations.

What are the risks and responsibilities associated with SMSFs?

SMSF trustees are responsible for complying with the law and making decisions for the fund. Risks include theft or fraud, personal liability for fund decisions, potential lower investment returns, impacts of relationship breakdown, illness, or death on the fund, and the potential loss of insurance coverage.

How much time and money does managing an SMSF require?

Managing an SMSF is time-consuming and involves ongoing commitments. On average, trustees spend more than eight hours a month managing their funds. It’s important to consider the set-up costs and ongoing expenses associated with an SMSF, including investing, accounting, auditing, tax advice, legal advice, financial advice, and insurance premiums.

Trustee responsibilities include setting and managing an investment strategy, complying with tax and super laws, arranging insurance, understanding different investment markets, and building a diversified portfolio. It’s important to have a good understanding of finance and law or seek professional advice.

How does the starting balance of an SMSF impact its suitability?

The suitability of an SMSF is not solely based on the starting balance. Other factors such as the trustee’s ability to manage the fund and potential future contributions or assets need to be considered. ASIC provides case studies to help individuals assess suitability based on their superannuation balance.

What investment options are allowed in an SMSF?

SMSFs have a wide range of investment options, but there are strict rules to follow. Research and understand the investment options allowed under superannuation laws and regulations, considering any restrictions imposed by the ATO.

Should I seek professional advice for setting up an SMSF?

It’s highly recommended to seek professional advice from specialists such as financial advisers, accountants, and lawyers who have expertise in SMSFs. They can help with compliance, decision-making, and providing tailored financial advice.

How do I register my SMSF?

To register an SMSF, you need to apply for an ABN through the ATO. The registration process may take several weeks, so it’s important to start early and ensure all necessary forms and documentation are completed accurately.

What trustee structure should I choose for my SMSF?

SMSFs can have either an individual trustee structure or a corporate trustee structure. Each structure has its advantages and disadvantages, such as flexibility and continuity in case of member changes or simplifying asset ownership. Consult professionals to determine the most suitable structure for your SMSF.

What documents do I need to organize and sign for my SMSF?

Key documents include the trust deed, which establishes the rules and governance of the SMSF, and written consents from trustees or directors accepting their appointments. Legal advice is recommended to ensure all necessary documents are compliant.

How do I establish bank accounts for my SMSF?

Separate bank accounts for the SMSF need to be set up, including a cash account for contributions and expenses and a clearing account for buying and selling assets. Choose a reliable SMSF bank account with online and mobile banking functionality to streamline fund management.

What should I consider before setting up an SMSF?

Assess the suitability of an SMSF based on factors such as risks, responsibilities, time commitment, costs, investment options, and compliance obligations. Seek professional advice to make informed decisions and ensure compliance with regulations.