Establishing Your Own Self-Managed Superannuation Fund

Relevant For:

Business owners and high-income earners considering self-managed superannuation funds.

Key Points:

  • SMSFs control a large percentage of the superannuation market.
  • Advantages include control, investment choice, cost-effectiveness, and flexibility.
  • Responsibilities include compliance with the “Sole Purpose Test”, investment strategy documentation, and record-keeping.
  • Annual reporting requires financial reports, audits, tax returns, and member statements.
  • Proper advice is essential for managing compliance and avoiding penalties.

Full Article:

Many business owners and high-income earners are turning to self-managed superannuation funds (SMSFs) to secure their retirement.

If you’re considering setting up an SMSF, it’s advisable to have already accumulated around $300,000 in superannuation savings or have the capacity to reach this amount soon. This is because the annual costs for taxation, accounting, and auditing of an SMSF generally start from $2,750.

What is an SMSF?

An SMSF is typically characterised by the following:

  • Less than seven members.
  • All trustees are members, and all members are trustees. For corporate trustees, all directors must be members and vice versa.
  • A single-member fund can have a sole director company as trustee with the member as the director, or two individual trustees, where one may be a non-member.
  • No member can be an employee of another member unless they are related.
  • No trustee can receive remuneration for their services.

Advantages of an SMSF:

  • Control: Business owners can directly manage their retirement savings and investment decisions.
  • Investment Choice: Flexibility to include direct investments, such as business premises, shares, managed funds, cryptocurrency or precious metals.
  • Costs: Potentially less expensive than other options, depending on the fund’s size and investment strategies.
  • Flexibility: The SMSF trust deed allows benefits to be paid as a lump sum, pension, or a combination, tailored to personal retirement needs.


With these advantages come increased legislative compliance and trustee obligations, monitored by the ATO. Key responsibilities include:

  • Ensuring the “Sole Purpose Test” is met, maintaining the fund solely for retirement benefits.
  • Documenting and regularly reviewing an investment strategy.
  • Keeping proper records for 5-10 years.
  • Holding assets in the name of the trustee company or individual trustees.
  • Prohibiting loans or financial assistance to members or their relatives.
  • Avoiding borrowings except in limited circumstances.
  • Restricting asset purchases from members or associated entities to market value transactions for specific asset types.
  • Ensuring benefits are only paid out under legally permitted conditions.

Annual Reporting Requirements:

Trustees must also comply with annual reporting requirements, including:

  • Preparing a financial report in the appropriate format.
  • Auditing the financial report by an approved auditor.
  • Lodging a combined income tax and regulatory return with the ATO.
  • Submitting member statements for superannuation surcharge purposes.

While these responsibilities and reporting requirements can seem onerous, they are manageable with proper advice, training, and discipline. Expert advice is crucial to ensure compliance and avoid the significant penalties associated with non-compliance.