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10 steps to starting an SMSF

There are a number of important steps you need to complete when setting up an SMSF. While these can seem intimidating, a specialist SMSF administration service can undertake most of these responsibilities on your behalf, saving you both time and money. 

Find out more about our partnership with administrator Heffron SMSF Solutions and how we can help you set up and administer your SMSF

You should consider seeking professional advice or guidance when deciding on the best superannuation solution for you. It is recommended that you also seek advice from a registered tax agent to determine the tax implications for you. NAB is not a registered tax agent and the tax information contained on this website should not be relied upon to determine your personal tax obligations.

Step 1: Choose a trustee structure

The first thing you need to do is decide whether you and your fellow members will each be an individual trustee 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, there are a number of benefits of having a corporate trustee.

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. The deed should cover, among other things:

  • your fund's objectives
  • who your members are
  • who can be a trustee and how trustees are to be appointed or removed
  • when contributions can be made
  • how and when benefits can be paid
  • how professional advisers are to be appointed, and
  • the procedures for winding up your fund.

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.

Find out more about our SMSF establishment service, including trust deed preparation from Heffron SMSF Solutions.

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, and
  • your legal and other obligations.

Download the Australian Taxation Office's trustee declaration form

Step 4: Record members' TFNs

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

  • will not be able to accept personal contributions and contributions on behalf of a spouse, and will need to deduct additional tax from employer contributions 

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

Step 5: Register with ATO

Your fund needs to be registered with the Australian Taxation Office (ATO) within 60 days of being established and you will need to elect for your fund to be regulated, so that it will be eligible for the superannuation tax concessions. You do this by applying for an Australian Business Number (ABN) at the Australian Business Register. When completing the ABN application you should also ask for a tax file number (TFN) for your fund. 

You will also need to register your fund for GST if it is likely to have an annual turnover of more than $75,000 pa. Annual GST turnover does not include contributions, income from financial assets (such as interest, dividends and rent from Australian residential property) and income generated outside Australia, but does include income from the lease of equipment or commercial property. This registration is required under the GST Act and must be completed within 21 days after becoming required to register for GST.

You may also need to be registered for PAYG withholding tax, such as in the case where your fund is going to make payments (lump sum or pensions) to members aged less than 60 years old.

While these steps may sound onerous, a good SMSF administration service will undertake these responsibilities for you. Alternatively, your accountant or financial planner may be able to assist.

Step 6: 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 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, which can usually be done by stipulating how much of the fund can be invested in each asset class (ie cash, fixed income, property and shares).

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

While a professional can assist with most of the steps in this guide, preparing an investment strategy should be guided by the trustees; after all, only you know what you are comfortable investing in, and how you want to direct your retirement savings. 

Step 8: Accept rollovers and contributions

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 Taxation 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. If you have not engaged them already in the establishment of your fund, 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 adviser, 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 annual returns
  • a fund administrator, who can help you look after the day-to-day running of your fund, and
  • an auditor, who must be appointed to sign off on your fund each year to the Regulator.

Step 10: Prepare for the future

Your members should consider completing a binding death benefit nomination so their super will be paid to their preferred beneficiary/ies in the event of death. The options available in your SMSF will depend on what's allowed under the trust deed. It's important to know what type of nominations can be made in line with your trust deed and the form in which the nominations must be made to ensure they are valid. 

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. 

Tailored solutions Setting up your SMSF

We're giving you the tools you need to get you started with your SMSF:

  • Great value establishment service.
  • Expert help in managing your SMSF.
  • Easy online application.