The process of setting up a SMSF is fairly straightforward. The most important thing is to ensure that each of the prescribed steps is completed before you move to the next one. The steps recommended by the ATO are:

Step 1: Obtain a Trust Deed  

A ‘Trust Deed’ is a legal document that will govern every aspect of the setting up and management of your SMSF. Since it is a legal document, it should be drawn up by a qualified legal professional. He/she should be able to advise you about the items that should be included in the deed. As a general rule of thumb, the deed should spell out the membership of the fund (i.e. the trustees and their responsibilities), the aims of the fund, the management and payment of benefits and procedures for the appointment of professional advisers. The trust deed should be reviewed regularly to ensure that it continues to comply with current legislation.

Step 2: Appoint Trustees: 

After obtaining your trust deed you can formally appoint the trustees of your fund. There are several options available to you, including:

  1. Appointing yourself as a sole trustee
  2. Appointing up to four individual members
  3. Appointing a corporate trustee. (This is where you set up a company to act as the trustee of the fund. Every member of the fund will also have to be a director of the company)

The following persons may not serve as trustees: 

  1. Undischarged bankrupts
  2. Anyone convicted of a serious offence involving dishonesty
  3. Anyone who has committed a serious breach of the SISA act
  4. Mentally impaired individuals
  5. Minors under 18 years of age

The latter two groups may be recognised as members of a SMSF but cannot be trustees. In practice this means that they will be represented by another trustee (usually a parent or other relative).

In addition to the above exclusions it should also be noted that no trustee may be employed by another trustee (unless they are related) and that no trustee may receive compensation for his/her activities as a trustee of the fund.

If you make use of a corporate trustee all of the above provisions apply, and you will also have to pay attention to the following in setting up your company:

  1. Every member of the fund will also have to be a director of the company.
  2. The corporate trustee (company) may not be paid for its services as a trustee
  3. The directors of the corporate trustee may not be paid for duties and services in direct relation to the fund.

Step 3: Sign a trustee declaration 

The trustee declaration is a document that should be signed by all trustees to confirm that they understand their duties and responsibilities as trustees (or as directors of the corporate trustee). This declaration should always be easily accessible in case it is requested during an audit or review. Non-compliance with this could attract severe penalties.

Step 4: Elect to be regulated by the ATO 

As soon as your fund is legally set up you should register it with the ATO and elect for the fund to be regulated by them. This election must be registered within 60 days of establishing the SMSF otherwise the ATO may not accept your registration.

Election to be regulated is an absolutely vital step, as funds that are not regulated cannot claim the tax concessions associated with SMSF’s. Members will also not be able to claim deductions for contributions that they have made to the fund.

Once you have made the election it is irreversible and the fund will remain regulated until it is wound up.

Once you are officially registered with the ATO your fund will be allocated a Tax File Number (TFN) and an Australian Business Number (ABN). This will allow you to open a bank account and to carry out normal business functions. The ATO will also place details of your fund on the Australian Business Register and on the ‘Super Fund Look-up’ website at These entries will allow other super funds to ascertain whether you are operating a compliant fund for the purpose of transferring superannuation benefits.

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