Five steps to setting up a self managed super fund (SMSF)

Once you’ve decided an SMSF is right for you, it’s important to understand the steps involved in setting up an SMSF. Here are five steps you will need to take.

1. Establish a Trust

The first step involved with setting up an SMSF and registering an SMSF with the ATO is establishing a trust. A trust is required to have the following:

  • trustees
  • assets
  • identifiable beneficiaries
  • intention to create a trust.

2. Obtain the trust deed

The trust deed sets out the rules and conditions under which the SMSF will operate, so it’s important to start with a well-drafted trust deed. It should be prepared by someone competent to do so, such as a legal practitioner or a recognised deed provider who understands superannuation law (and SMSFs in particular) and designed to give the trustees maximum control and flexibility. When the trust deed is complete, it should be executed by the trustee(s) according to the rules applying in their state.

The trust deed:

  • stipulates the regulations for the trustee to follow, though it is not permitted to contain clauses that would require the trustee or trustees to breach the Superannuation Industry (Supervision) Act 1993
  • should be drafted to allow the SMSF to target its objectives
  • can be amended, but only in line with the rules set out in the original trust deed
  • determines how member accounts will be calculated. In the accumulation phase, the trust deed will indicate how earnings will be credited to each member’s account
  • specifies whether the SMSF can pay pensions, and if so, how.

Provisions that could be contained within a trust deed

A trust deed for an SMSF could contain provisions that deal with the following:

  • who will be a trustee of the SMSF
  • who can be a member of the SMSF
  • trustee rights to amend the trust deed
  • member investment choice availability
  • when and how benefits can be paid
  • types of income streams the SMSF can pay
  • acceptance of binding death benefit nominations
  • who benefits can be paid to upon death of a member
  • rules to establish and administer fund reserve accounts
  • when and how the SMSF should be wound up.

3. Sign a declaration

When you’re a trustee or director of the corporate trustee of an SMSF, you’re required to sign a declaration form stating that you understand your obligations, duties and responsibilities as a trustee or director of the corporate trustee of an SMSF. The declaration must be in the approved form (available from the ATO) and completed within 21 days of you becoming a trustee.

Your obligations and responsibilities as a trustee of an SMSF include:

  • acting honestly in all matters affecting the SMSF
  • exercising the degree of care, skill and diligence of an ordinary prudent person
  • acting in the best interest of the members
  • keeping SMSF assets separate from your personal and business assets (and those of any other trustees of the fund)
  • not doing anything that would impede trustees from performing their functions and powers
  • formulating and implementing an investment strategy
  • managing reserves responsibly
  • allowing the members access to certain information.

You must keep your completed declaration for at least 10 years and make it available to the ATO if requested.

4. Lodge an election with the regulator

Within 60 days of the establishment of an SMSF, the trustees must lodge an election to be regulated with the ATO. This election is irrevocable and advises the ATO that the SMSF will be subject to the requirements of the relevant superannuation legislation and will be entitled to concessional taxation treatment at the rate of 15% as a complying fund.

If an election notice is not lodged, the SMSF will not be treated as a complying fund for taxation purposes and the SMSF will be taxed at the highest marginal tax rate.

5. Open a cash account

The trustee of an SMSF will generally need to set up a cash account so the fund can accept contributions, rollovers and earnings from investments. This account will also be required to pay expenses such as annual supervisory levy, accounting fees, taxation liabilities and importantly, member benefits.

Next: Who can be a trustee and what are their responsibilities?

Ready to start?

Discover our SMSF solution.

Call 1300 554 267 with any questions or request a callback.

As with other aspects of self managed super funds there are rules around who can be a Trustee or Director of the corporate Trustee of your SMSF. This article explains some of those Trustee rules.
As the Trustee or Director of the corporate trustee of your SMSF it is essential that you understand the stringent rules that apply. Here we look at some of the key rules.
An SMSF allows you to manage your own superannuation investments for your retirement. It’s important to understand the basics before getting started.
There are a number of benefits to an SMSF. We explore the main benefits to setting up an SMSF and managing your own superannuation.

Learn about managing your own super, frequently asked questions and more. 

Learn about SMSF

Find out how BT can help you invest and manage your SMSF – all in one place.

Find out more

The information in this document has been prepared by Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714. The information is general in nature and does not take into account your personal needs, objectives or circumstances and therefore, before acting on this information, you should consider whether it is appropriate for you.

BT Portfolio Services Ltd ABN 73 095 055 208 AFSL 233715 (BTPS) operates BT Panorama Investments (the investor directed portfolio service operated by BTPS). BT Funds Management Limited ABN 63 002 916 458 AFSL 233724 (BTFM) is the responsible entity and issuer of interests in BT Cash and Westpac Financial Services Ltd ABN 20 000 241 127 AFSL 233716 is the responsible entity and issuer of interests in BT Managed Portfolios. An Investor Guide is available for BT Panorama Investments and a PDS is available for BT Cash and BT Managed Portfolios (the Panorama products). These disclosure documents can be obtained from BTPS by visiting or calling 1300 881 716. A person should obtain and consider the disclosure documents before deciding whether to acquire, continue to hold or dispose of interests in the Panorama products.

BTPS, BTFM and WFSL are subsidiaries of Westpac Banking Corporation ABN 33 007 457 141 (Westpac). Apart from any interest investors may have in Westpac term deposits or securities acquired through Panorama, an investment in or acquired through Panorama is not an investment in a bank or a bank deposit. Westpac and its related entities do not guarantee an investment in or acquired through Panorama Investments.

© Westpac Banking Corporation 2016