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How to set up a SMSF
Step 1: Choose a trustee structure

Do you and your fellow members want to be ‘individual trustees’ or you will use a ‘corporate trustee’? This is an important decision, as it will impact a range of other steps, such as the name(s) in which the investments are held and how your fund will need to be run. While individual trustees are more common, a corporate trustee could be more cost-effective and provided greater control and protection.

Step 2: Obtain a trust deed

SMSFs need to have a ‘trust deed’. This is a legal document that sets out the rules for establishing and running your fund and, along with the superannuation laws, governs how your fund needs to be operated.

Your trust deed can be tailored to meet the specific needs and objectives of your fund members, but not to the extent that it overrides other legal requirements. Because the trust deed is a very important legal document, it should be prepared by a suitably experienced legal professional. You could use a lawyer who specialises in this area or purchase a deed from an SMSF service provider that has been ‘pre-prepared’ by legal experts.

Step 3: Sign trustee declarations

All new trustees must sign a ‘trustee declaration’ within 21 days of becoming a trustee or director of a corporate trustee. This form requires you to acknowledge you understand:

  • your fund is to be maintained for the “sole purpose” of providing benefits to your members upon their retirement  or your members’ beneficiaries if they die

  • the general duties you will need to meet

  • the rules that apply when making contributions, purchasing and managing investments and paying benefits

  • your legal and other obligations.

Download the Australian Tax Office’s trustee declaration form.

Step 4: Open a bank account

Your SMSF will need a bank account so it can accept cash contributions, receive income from investments, pay fund expenses and pay benefits to members. The account needs to be opened in the names of your fund’s trustees and the money must be kept completely separate from your personal or business assets.

Also, your fund must hold assets before it can be legally established. This is usually done by making cash contributions into your fund’s bank account. While this can be a nominal amount, you may want to contribute say $3,000 to $5,000 so your fund will have enough cash to cover some or all of the set-up costs. Such contributions will count towards your contribution caps.

Step 5: Record members’ TFNs

Your fund will need to record each member’s Tax File Number (TFN). If it doesn’t, your fund:

  • won’t be able to accept personal after-tax super contributions and contributions on behalf of a spouse, and

  • will need to deduct additional tax from employer contributions and contributions claimed as a tax deduction.

Also, your members may not be able to receive a co-contribution from the Government or Low Income Superannuation Contribution.

Step 6: Register with ATO

Your fund needs to be registered with the Australian Tax Office (ATO) within 60 days of being established. You’ll need to elect for your fund to be regulated, so it will be eligible for the superannuation tax concessions. Once the ATO has approved your fund’s registration, you will be issued with a TFN and ABN for your fund. You may also need to register your fund for GST and/or PAYG withholding tax.

Step 7: Prepare an investment strategy

You must prepare an investment strategy for your fund that takes into account all your members’ needs and circumstances before any investments can be made. The investment strategy needs to:

  • set out your fund’s objectives, which should be meaningful and measurable, and

  • outline the investments that will be made to achieve the objectives.

The trustees are also required to consider whether your fund should take out insurances on behalf of the members.

Step 8: Accept contributions and rollovers

Cash contributions can be made into your fund. Money can also be rolled over (transferred) directly from another complying super fund. The fund that you transfer the money from will usually need to establish that your SMSF is a complying superannuation fund by looking up your fund’s details on the Australian Tax Office website. It would therefore usually only be possible to rollover money to your fund when it is up and running.

Step 9: Appoint professionals

You need to appoint an independent auditor to review your fund’s activities each year and ensure it complies with the relevant laws. You may also want to use the services of other professionals, such as a:

  • lawyer who can provide you with an appropriate trust deed and governing rules for your fund, and advise you on other legal matters

  • financial or investment advisor who can help you prepare, implement and review your fund’s investment strategy

  • accountant and registered tax agent who can look after your fund’s record keeping and reporting requirements, and provide taxation advice and prepare and lodge tax returns

  • fund administrator whocan help you look after the day-to-day running of your fund.

Step 10: Plan for the future

If your SMSF’s trust deed allows it your members should consider nominating who they would like to receive their super if they die. Your fund may also want to take a range of insurances for you and your other fund members. This can make the cover more affordable than if your members’ bought it themselves outside of super.


How the SMSF purchases a property:
  • Step 1: The trustee of your SMSF needs to confirm that purchasing an investment property with borrowed fund is consistent with the SMSF’s investment strategy and the SMSF Trust Deed expresses that borrowing is allowed

  • Step 2: The trustee of your SMSF selects a residential investment property to purchase.

  • Step 3: The trustee of your SMSF appoints a Custodian (bare trust) to purchase the residential investment property on its behalf.

  • Step 4: The trustee of your SMSF applies for a Super Fund Home Loan and provides documentation to St.George.

  • Step 5: The trustee of the SMSF seeks financial advice from an accredited SMSF financial planner and has an SOA completed which confirms that purchasing an investment property with borrowed fund is consistent with the SMSF’s investment strategy meets the risk profile of the SMSF members – a Financial Advice Certificate will need to be provided as part of the credit criteria

  • Step 6: The Custodian pays the deposit and exchanges contracts on the purchase of the residential investment property.

  • Step 7: If  the lender approves the loan, your Custodian mortgages the property to the lender to complete the purchase.

  • Step 8: The trustee of your SMSF pays the legal costs and stamp duty on the purchase.

  • Step 9: Once the loan is advanced, the trustee of your SMSF collects rent, pays the usual outgoings on the property and makes the loan repayments. It manages the property in the same way as any other real estate investment.

  • Step 10: The property is held in trust and once the loan is repaid, the legal title may be transferred from the Custodian to the SMSF or the property may be sold.


Key benefits
  • Property held in a SMSF is a limited recourse loan, where the amount that we may recover on default is limited to the secured property itself and all other assets of your SMSF are protected

  • Use rental income to assist in repaying the loan

  • You may be entitled to gearing benefits – offset loan interest and expenses against rental income and income tax benefits – concessional tax rates on income after expenses.1

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