How to set up an SMSF (step by step)

Before you start: is an SMSF actually right for you?

ASIC’s working benchmark is that SMSFs become cost-competitive with retail funds at roughly $200,000 to $500,000. Our calculator lets you plug in actual fee quotes to find your personal break-even. Don’t set up an SMSF if:

• Your combined fund balance is under $200k and you’re not actively contributing large amounts
• You don’t have the time or interest to manage investments, bookkeeping, and compliance
• Your main reason is “to buy property” and you haven’t costed the gearing, liquidity and sole-purpose rules

Step 1: Choose a trustee structure

Two options: individual trustees or a corporate trustee.

• Individual trustees — cheaper (no company fees), but every member must be a trustee, documents must be changed whenever members join/leave, and liability is personal.
• Corporate trustee — a company acts as trustee with members as directors. Costs $597 to set up with ASIC plus ~$60/year. Easier administration, cleaner succession, limited liability. Most accountants recommend it.

Step 2: Create the trust and trust deed

The trust deed is the legal document setting out how the SMSF operates. You can’t write one yourself — use a templated deed from an SMSF specialist ($200–$600) or have a lawyer draft a custom one ($1,000+).

Step 3: Register with the ATO

Within 60 days of establishment, apply for:

• Australian Business Number (ABN)
• Tax File Number (TFN)
• Regulation as an SMSF
• GST (optional, usually only if running a business-like property operation)

This is free if you do it yourself via the ABR; your SMSF administrator will usually bundle it.

Step 4: Open a bank account

In the fund’s name. This holds contributions, rollovers, investment income, and pays expenses. All super money must flow through here — not through personal accounts.

Step 5: Prepare an investment strategy

Legally required. Must address: risk, diversification, liquidity, ability to pay member benefits, and whether each member should hold insurance. A one-page document is usually sufficient. Review it annually.

Step 6: Roll over existing super

Use SuperStream-compliant rollover forms to move your APRA fund balances into the new SMSF. Allow 2–4 weeks. This is also the point to decide whether to keep any insurance you currently have — once you leave your old fund, the insurance usually lapses.

Step 7: Start investing

Common SMSF investments: Australian and international shares, ETFs, cash and term deposits, direct residential or commercial property, managed funds. Forbidden without strict conditions: loans to members, collectibles stored at home, in-house assets exceeding 5% of fund value, and buying your own residential property from yourself.

Ongoing obligations

• Annual audit by an independent ASIC-registered SMSF auditor — typically $300–$600
• Annual return lodged with the ATO (combined income tax + regulatory return) — supervisory levy currently $259
• Accounting and reporting — most people use an SMSF admin service ($800–$2,000 per year) rather than DIY
• Trustee declarations — every new trustee signs one within 21 days of becoming a trustee
• Event-based reporting for members with pension accounts — usually 28 days from the event

Typical annual cost

Compare that to an APRA fund charging 0.9% on a $400,000 balance: $3,600/year. The break-even rises quickly as your balance grows.

Common mistakes

• Paying personal expenses from the SMSF bank account
• Buying a holiday home you use yourself (breach of sole-purpose test)
• Lending money to family members
• Forgetting to update the trust deed when members change
• Missing the annual return deadline — penalties escalate fast