SMSF Setup Guide: What You Need to Know Before You Start

How much do you need to start an SMSF?

The ATO and most SMSF specialists recommend a minimum balance of $250,000 before establishing a self-managed super fund. Below that threshold, the fixed annual compliance costs typically erode any investment return advantage over industry or retail funds. That said, there is no legal minimum — if you're planning to contribute substantially in the first year, or rolling over multiple member balances, the fund can be viable at a lower starting point. Run the numbers with an SMSF specialist before proceeding.

Should you use individual trustees or a corporate trustee?

This is the most consequential structural decision. Individual trustees mean each member is personally named as a trustee — assets are held in the trustees' names, and any change of membership requires re-registering every asset. A corporate trustee (a company established solely as trustee) holds all assets in one name, makes membership changes administrative rather than legal, and provides cleaner separation between trustee and personal capacity. Corporate trustees also carry reduced penalty exposure: individual trustees face penalties applied to each trustee separately; corporate trustees receive a single penalty. The cost to incorporate a corporate trustee is around $600, making it the better choice for almost every new SMSF.

What is a trust deed and what must it contain?

The trust deed is the governing document of your SMSF. It must permit the fund to accept contributions and rollovers, make pension payments, and invest in the asset classes you intend to hold. A poorly drafted deed can prevent a fund from borrowing to purchase property under a limited recourse borrowing arrangement (LRBA), or from paying certain pension types. Deed upgrades are necessary when super legislation changes — a deed written in 2015 may not permit strategies available under 2025-26 rules. Use a deed from a reputable SMSF specialist and budget around $250–$500 for periodic updates.

What are your investment strategy obligations?

Every SMSF must have a written investment strategy that considers risk, return, liquidity, diversification, and the insurance needs of each member. This is not a checkbox — the ATO has issued compliance notices to funds with generic single-page strategies, particularly where the actual portfolio is heavily concentrated in one asset class. Your strategy should be reviewed annually and updated whenever member circumstances change. Holding over 90% in a single asset, such as residential property, without documenting why this meets member needs is an audit flag.

What does annual SMSF compliance actually cost?

Realistic all-in annual costs for a straightforward SMSF — one or two members, shares and cash, no property or borrowing — run between $2,500 and $5,000. This covers the independent annual audit (mandatory for all SMSFs), preparation of annual financial statements and tax return, and the ATO supervisory levy ($259 per year as of 2025-26). Add LRBA loan administration, pension documentation, or complex investment structures and the total rises. SMSFs with property borrowing arrangements commonly see compliance costs of $5,000–$8,000 annually. These costs are deductible to the fund but should be factored into your net return calculation.

What are the most common SMSF pitfalls?

The in-house assets rule limits related-party investments (loans to members, shares in related companies) to 5% of fund assets. Breaching this, even inadvertently, creates a significant compliance issue. Lending fund money to members is prohibited outright. Purchasing personal-use assets — holiday homes you stay in, artworks you display — from or for members is prohibited. The ATO's SMSF auditor notification system flags these transactions, so the risk of detection is real. Early professional advice on a specific strategy costs far less than remediation after the fact.