Self-Managed Super Funds (SMSFs): Here’s how to set one up and manage it to grow your wealth

Nick Sundich Nick Sundich, February 17, 2023

Setting up an Australian self-managed super fund (SMSF) requires a significant amount of research, planning and financial commitment.

Depending on the level of control you want to have over your investments, SMSFs can be a great way to provide for your retirement.

They are also a popular option for those seeking to pass on their wealth to future generations.

But how do you set up and manage an SMSF?



How to set up an SMSF


1. Determine if an SMSF if appropriate for you

Before you get started, it is important to understand that an SMSF is not suitable for every person or situation.

It can provide considerable tax advantages but also carries additional risks and responsibilities.

You should seek professional advice from an accountant, financial adviser or lawyer before deciding whether setting up an SMSF is the best option for your circumstances.


2. Register it with relevant authorities

Once you’ve made the decision to set up your own SMSF, the first step is to register it with the Australian Taxation Office (ATO).

This includes lodging a Trustee Declaration form, which states that all trustees agree to act in accordance with the rules of the fund outlined in the trust deed.

You will then be required to set up a corporate trustee or appoint individual trustees, who must comply with certain legal requirements such as being 18 years old or older and having no bankruptcy history.

It is also necessary to establish a bank account in the name of the fund and apply for an ABN and TFN number from the ATO.


How to manage an SMSF

It is essential that trustees make informed decisions when managing SMSFs, particularly when making investment decisions.

This is because trustees are responsible for any losses incurred as well as any penalties imposed by regulators for non-compliance issues. So, the following two steps may help.


1. Abide with legislation and keep up to date with it

After registration, trustees must ensure they comply with relevant legislation and regulations by following specific administrative procedures mandated by law.

These include appointing auditors, developing investment strategies and preparing annual accounts each year.

It is also important for those managing their own SMSF to stay up-to-date on changes in legislation or regulations so they can adjust their strategy accordingly to remain compliant.

To do this trustees should regularly review their investments, benchmark performance against similar funds or seek advice from expert advisers if necessary.


2. Consider using SMSF specialist software

To help manage these responsibilities effectively it may be beneficial to use SMSF specialist software which provides assistance with record keeping, reporting requirements and compliance obligations.

This can help simplify some of the more complex aspects of running an SMSF such as calculating contributions caps and assessing transfer balance caps when dealing with pension phase members.

Such software can also help with transitioning from accumulation phase back into pension phase when withdrawing money from superannuation accounts.

In addition, there are several service providers who offer additional support such as actuarial services and tax advice when setting up or managing an SMSF.

These providers have access to sophisticated technology which helps them assess market trends quickly so they can provide accurate investment advice tailored toward individual needs in terms of risk appetite and growth potential.


Setting up an SMSF is a big commitment

Overall, setting up an Australian SMSF has many advantages but it should not be undertaken lightly due to its complexity and time consuming nature.

They also carry additional risks which require careful consideration before undertaking this responsibility.

With thorough research, dedication and preparation however those willing to commit can reap considerable benefits in terms of financial security both now and into their retirement years for themselves and their families.


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