How to Start a SMSF in Australia (2025 Guide)

Taking the plunge and starting a Self-Managed Super Fund (SMSF) is a big decision. At its core, it means you’re stepping into the driver’s seat of your retirement savings, becoming the trustee of your very own fund. You go from being a passenger in a large retail or industry fund to the active manager of your financial destiny. This guide explains how to start a SMSF, from understanding the requirements to the final setup steps.

What Is an SMSF and Why Do People Start One?

A Self-Managed Super Fund, or what many call a DIY super fund, is a private super fund that you control and manage yourself. It’s a world away from your typical retail or industry fund where professionals manage a giant pool of money for thousands of members. With an SMSF, you and up to five other people (usually family) have total control over your investment strategy and the day-to-day running of the fund, making it a powerful tool for those wanting to take charge of their retirement.

The primary benefit and motivation behind setting up an SMSF is control. Key benefits include:

• Investment Control & Flexibility: You can invest in a wider range of assets, including direct residential or commercial property, unlisted shares, and even certain collectibles (though rules are strict). This is a key difference compared to standard super funds which have a limited menu.
• Property Investment: A major drawcard for many is the ability to use their super to purchase investment properties, often through a Limited Recourse Borrowing Arrangement (LRBA).
• Tax Strategies: SMSFs offer sophisticated tax planning opportunities, especially in the pension phase. You have direct control over managing capital gains tax (CGT) and utilising franking credits.
• Pooling Family Super: It’s a great way for families to consolidate their super into one, larger investment pool. This can open up bigger and better investment opportunities that might have been out of reach individually.

Can Anyone Start an SMSF?

While the idea of a DIY super fund is appealing, not everyone can or should start one. The Australian Taxation Office (ATO) has clear eligibility criteria and there are practical considerations to ensure it’s a worthwhile venture.

To be a trustee (or a director of a corporate trustee), you must:

• Be over 18 years old.
• Not be under a legal disability (e.g., declared mentally incapable).
• Not be bankrupt.
• Not be a ‘disqualified person’, which generally means you have not been convicted of an offence involving dishonesty.

Beyond the legal SMSF requirements Australia, there’s the practical question of your fund’s balance. While there’s no official minimum, most financial professionals recommend having at least $200,000 in super before starting an SMSF. Below this amount, the fixed annual running costs can erode your returns, making retail or industry funds more cost-effective.

Typical SMSF investor profiles include experienced business owners, property investors, and high-income professionals who have the financial literacy and time required for active management.

Step-by-Step Process to Start an SMSF in 2025

If you’ve determined an SMSF is right for you, here is the step-by-step process for setting up an SMSF.

Step 1 – Decide the Structure (Individual vs Corporate Trustee)

Your first decision is the trustee structure. Will members act as individual trustees, or will you establish a proprietary limited (Pty Ltd) company to act as the corporate trustee?

• Individual Trustee: All members are trustees. Cheaper to set up initially, but administratively complex if a member joins, leaves, or passes away, as all asset titles must be changed.
• Corporate Trustee: A company acts as the trustee, and all members are directors. While it involves an ASIC setup cost (approx. $576) and a small annual review fee, it offers greater asset protection, simpler administration when members change, and is the only structure for a sole member fund.

Step 2 – Prepare an SMSF Trust Deed

The trust deed is the legal rulebook for your fund. This critical document outlines the fund’s objectives, who can be a member, how contributions and payments are managed, and what the fund can invest in. Using a cheap, generic deed can severely limit your options. A high-quality, legally compliant deed is essential for long-term flexibility and SMSF compliance.

Step 3 – Appoint Trustees and Sign Declarations

Once the structure is set, you must formally appoint the trustees (or directors of the corporate trustee). Every person involved is required to sign the official ATO Trustee Declaration. This confirms you understand the significant legal duties and SMSF trustee responsibilities you are undertaking.

Step 4 – Apply for an ABN, TFN & Register with the ATO

Now it’s time to make your fund official. The ATO SMSF registration process involves applying for an Australian Business Number (ABN) and a Tax File Number (TFN) specifically for the fund. This is typically done through the Australian Business Register portal. The ATO will review your application and, once approved (which can take several weeks), your SMSF will officially exist.

Step 5 – Set Up an SMSF Bank Account

This is a non-negotiable rule: your fund must have its own, dedicated bank account. You cannot mix fund money with your personal or business finances. Every dollar—contributions, rollovers, investment income, and expenses—must flow through this single, separate account to maintain a clear audit trail.

Step 6 – Roll Over Super from Other Funds

With the bank account open, you can consolidate your super. You’ll need to contact your old super funds to initiate a rollover into your new SMSF. This is now done electronically using the SuperStream system. You will need to provide your old fund with the SMSF’s ABN, its bank account details, and an Electronic Service Address (ESA) to facilitate the transfer.

Step 7 – Create an Investment Strategy

Your final setup task is to create a formal SMSF investment strategy. This must be a written plan detailing how you will invest the fund’s assets to meet your retirement goals. It must consider risk, diversification, liquidity (to pay expenses and pensions), and the insurance needs of the members. The strategy must be reviewed regularly and guide every investment decision you make, whether in property, shares, term deposits, or other permitted assets.

How Much Does It Cost to Start an SMSF?

Understanding the financial commitment is crucial when deciding if an SMSF is worth it.

The initial SMSF setup cost typically ranges from $1,500 to $3,000. This covers establishing the trust deed, company registration for a corporate trustee, and initial professional advice.

After setup, you must budget for ongoing annual costs, which generally fall between $2,000 and $5,000 per year. These include:

• Annual Audit Fee: A mandatory review by an independent SMSF auditor.
• Accounting & Tax Lodgement Fees: For preparing financial statements and the SMSF annual return.
• ATO Supervisory Levy: A fee paid to the ATO to cover regulatory costs.
• Ongoing ASIC Fee: An annual review fee if you have a corporate trustee.

What Are Your Ongoing Responsibilities?

Running an SMSF is an active role. Your ongoing SMSF trustee responsibilities are legal obligations and central to maintaining your fund’s health and compliance.

Your key duties include:

• Lodging the SMSF Annual Return: A yearly report to the ATO detailing the fund’s financials, member information, and compliance with super laws.
• Arranging an Independent Audit: Your fund must be audited annually by an approved SMSF auditor before you lodge your return.
• Meticulous Record-Keeping: You must keep detailed records of all transactions, investment decisions, and meeting minutes for at least five to ten years.
• Staying Compliant: You must adhere to the superannuation laws, primarily the Superannuation Industry (Supervision) Act 1993 (SIS Act), at all times.

Common Mistakes to Avoid When Starting an SMSF

Even with the best intentions, new trustees can make costly errors. Be vigilant to avoid these common pitfalls:

• Using Fund Money for Personal Use: The “sole purpose test” dictates the fund must be run for the sole purpose of providing retirement benefits. Using its assets for personal or business benefit is a major breach.
• Not Understanding Trustee Obligations: Signing the Trustee Declaration is a legal commitment. Failing to understand your duties is not an excuse for non-compliance.
• Poor Documentation: Inadequate record-keeping for investments, decisions, and transactions is a common red flag for auditors and the ATO.

Is a Self-Managed Super Fund Right for You?

Deciding is SMSF worth it requires a clear-eyed assessment of the SMSF pros and cons.

Pros:

• Control: Ultimate say over your investment choices.
• Investment Flexibility: Access to assets like direct property and unlisted shares.
• Tax Planning: Advanced strategies to legally minimise tax.
• Cost-Effective for Large Balances: Fixed fees can be cheaper than percentage-based fees on balances over ~$500k.

Cons:

• Time Commitment: Requires significant time for research, administration, and management.
• Cost: Setup and ongoing fees can be high, especially for smaller balances.
• Legal Responsibility: As a trustee, you are personally liable for all decisions and any breaches of the law.

Are You SMSF Ready? A Final Checklist:

• Is your super balance (or combined family balance) over $200,000?
• Do you have the time and genuine interest to actively manage a portfolio?
• Are you confident in your financial literacy or willing to seek professional advice?
• Are you prepared to be legally responsible for SMSF compliance?

If you answered yes to these questions, an SMSF could be a powerful vehicle for your retirement. The drive for control is why the SMSF sector holds over $900 billion of Australia’s retirement savings. You can see the full picture by exploring the latest SMSF population data on the ATO website or the latest superannuation statistics on APRA’s website.

Get Help Setting Up Your SMSF

While this guide covers how to start a SMSF, the process is complex and the stakes are high. Engaging a specialist tax agent, accountant, or financial adviser is highly recommended. These professionals ensure your setup is compliant from day one, your structure is optimal for your goals, and you avoid costly mistakes. They handle the technical aspects of ATO SMSF registration and deed preparation, allowing you to focus on the big picture.

The right tailored advice is invaluable. Navigating the world of SMSFs takes more than just reading a guide; it requires real-world experience. The team at Nanak Accountants has been guiding clients through SMSF setup, compliance, and strategy for decades. We’re here to make sure your move into self-management is built on a strong, compliant foundation from day one.

Ready to take the next step with confidence? Book a Free SMSF Discovery Call with us today!