SMSF Setup and the Rules You Must Know

An SMSF makes sense when: your balance is over $200,000 (the fixed compliance costs — audit, accounting, ATO fees — are proportionally smaller at scale), you want to hold specific assets (direct Australian shares, commercial property, unlisted shares in your business), you want the flexibility of a LRBA to buy property, or you have specific estate planning objectives a retail fund can't accommodate. Fixed costs of running an SMSF: ATO supervisory levy ($259/year), independent audit ($400–$800/year), accounting and tax return ($1,500–$3,000/year). Total: approximately $2,200–$4,000/year minimum. At a $200,000 balance, this is 1–2% in fixed costs — broadly comparable to an industry fund's MER. Above $400,000, the cost advantage becomes clear. The main risks of SMSF that people underestimate: (1) you are the trustee (or director of the trustee company) and personally liable for compliance failures, (2) the sole purpose test is strict — any personal use of SMSF assets is a serious breach, (3) the administrative burden is real — annual audit, investment strategy documentation, contribution records. You must genuinely engage with the management, not just set and forget.

Setting up an SMSF involves: (1) establishing the trust deed (use a specialist SMSF trust deed provider — not a generic template), (2) establishing the trustee structure — individual trustees (minimum 2, must include all members) or a corporate trustee (Pty Ltd company, recommended for asset protection and flexibility), (3) applying for an ABN and TFN for the fund, (4) opening a cash account in the fund's name, (5) rolling over existing super from retail/industry funds. Corporate trustee vs individual trustees: always use a corporate trustee. It costs $1,000–$1,500 to establish but provides: cleaner asset ownership documentation (all assets in the company name, not 'individuals as trustee'), easier succession when members join or leave, protection of personal assets from fund liabilities, and cleaner estate planning. Once established, the fund must maintain a written investment strategy, lodge an annual tax return, undergo an annual independent audit, and meet reporting requirements including Transfer Balance Account Reports for pension members. Your SMSF accountant manages most of this — but you need to understand what they're doing and why.