SuperEasy Articles
What is a Self Managed Superannuation Fund (SMSF)?


A Self-Managed Superannuation Fund (SMSF), also called Do It Yourself (DIY) Super Fund, is a superannuation fund that is regulated by the Australian Taxation Office (ATO) and all members of the fund (maximum of 4) are the trustees of the fund. The exceptions to this rule are, if a member is a minor, or a person is under legal disability. In such cases regulatory provisions state, that a member of a SMSF cannot be the trustee of the fund, and needs to be represented by some other trustee of the fund. The principle that all members of the fund are also the trustees, ensures that each trustee takes part in the decision making process of the fund. Trustees also ensure that the fund complies with the Superannuation Industry (Supervision) Act 1993 (SISA), the rules governing the operation of SMSFs, as well as with other legislative and administrative requirements. Breach of any legislative requirements could result in the fund losing its complying status and trustees facing civil and criminal penalties.
If a SMSF complies with the SISA standards, the fund is a complying superannuation fund and is taxed concessionally at a maximum rate of 15%. To stay complying, the fund needs to meet the sole purpose test, i.e. providing benefits to fund's members on or after retirement, paying benefits to members on the member's death, or benefits being passed on to a member's dependants or legal representatives.

The main difference between a SMSF and any other type of superannuation fund, such as government, industry, retail, or corporate fund, is the fact, that SMSF trustees also being the members of the fund cannot pay themselves any fee for performing trustees' duties. This works in the SMSF's advantage if trustees properly manage the fund's activity, therefore saving on the professional trustee's fees. This can also be a disadvantage, and can waste the fund's assets, if the trustees are not proficient and diligent in performing his/her duties.
So when deciding which type of fund you want to invest your retirement nest egg in, make sure that you understand all the available options, this being one of the most important investment decisions you will ever make.

SMSF is a perfect vehicle for investors, looking to have control over their superannuation assets, who are prepared to work at managing their investments and enjoy the benefits. Apart from managing the investments, some other responsibilities of the trustees are:

  • Paying members' benefits,
  • Record keeping of membership details (and retention of all records for a minimum of 10 years),
  • Annual tax returns to the ATO (and retention of all tax information for a minimum of 10 years),
  • Change of membership in the fund, or trustee details changes, need to be reflected in the trust deed and the ATO notified,
  • Payment of the annual $45 Superannuation Supervisory Levy.

Fund Types

There are two types of regulated SMSFs. The most common type is usually called a non-corporate SMSF, and the other one a corporate SMSF. Non-corporate SMSF can be a single or multiple member fund. Corporate SMSF can also be single or multiple member fund.

Non-corporate single member fund has only one member. The member is also the trustee of the fund, and the fund must have another individual as a trustee only. The second trustee cannot be a member of the fund. He or she can be a relative of the member, or alternatively, can be any other person providing the member is not an employee of that person.

Non-corporate multiple member fund has more than one, and up to four members. Each trustee of the fund is also the member of the fund. Members of the fund cannot be employees of another member, unless they are related.

Corporate single member fund has only one member and a company as a trustee.

    The member:
  • Must be the sole director of that company, or
  • Must be related to the other director of the trustee company and they have to be the only two directors of that company.

Corporate multiple member fund has more than one, and up to four members, and a company as a trustee of the fund. Each director of the company is a member of the fund.

Fund Establishment

Setting up a SMSF is a relatively easy process, however in the process, there are some legislative requirements that need to be carefully considered. We have listed the steps involved and sequence of events from the time of ordering the establishment of the SMSF with SuperEasy Pty Ltd to the end of the year tax reporting. Please note: other companies will have different steps and procedures for the establishment of a fund.

Before establishing a SMSF with SuperEasy®, an applicant needs to have the following details ready:

  • Name of the Fund,
  • Type of the Fund: Corporate or Non-Corporate, Single or Multiple member,
  • Name of the Trustee(s)/member(s), and their Date of Birth,
  • Details of Membership category (member, trustee, both).
  • Contact/postal and Residential details (name, address, phone, email) of all trustees/members.

Once the fund details are entered into our web application via Supereasy, and the payment is confirmed, following documents are provided:

  • Hard copy and soft copy of the Trust Deed,
  • Do it Yourself guide for Self Managed Superannuation Funds (ATO publication),
  • SuperEasy® check list of the main steps in establishing a SMSF,
  • The ATO form Application to register for Superannuation Entities (one electronic copy generically populated with the trustees details as supplied by the founder of the fund during the application Set-up process, and one paper based blank copy (original ATO form). Please note, this form includes: Tax File Number (TFN), Australian Business Number (ABN) and Notice to relevant authority to become a Regulated Superannuation Fund,
  • SuperEasy® instructions on how to fill in "The Application to Register for Superannuation Entities". The instructions are provided for trustees who want to fill out the application themselves and not use generically pre-filled SuperEasy® Application,
  • The ATO Instructions for Application to register for Superannuation Entities document, (original form provided by the ATO),
  • Resolutions to Establish a SMSF Form,
  • Notice of Consent to Act as Trustee Form,
  • Application for Membership of SMSF Form,
  • Product Disclosure Statement (PDS) (supplied on request),
  • Rollover Application Form Template,
  • Investment Strategy Template,
  • Binding Death Benefit Beneficiary Nomination Fact Sheet,
  • Sample Binding Death Benefit Beneficiary Nomination Form,
  • SuperEasy's DIY / Regulated SMSF Superannuation Guide.

After receiving the documents, to activate the fund, trustees will need to do the following:

  • The trustees must execute the Trust Deed (read, sign and date the Trust Deed),
  • The trustees must take the Trust Deed to the bank of their choice, and open the bank account in the name of the SMSF,
  • The SMSF is now ready to accept contributions,
  • The trustees must fill in and sign the Application to register for Superannuation Entities (SuperEasy® Instruction sheet supplied). The form is supplied in a pre-filled electronic format,
  • The trustees have to mail to the ATO (filled-in and signed by all trustees/members) the Application to register for Superannuation Entities, within 60 days after the execution of the Trust Deed,
  • Once the Compliance letter, ABN and TFN are received from the ATO, the trustees can start rollover of their super from previous superannuation providers into the nominated SMSFs bank account,
  • The trustees now have the responsibility of managing the SMSFs investment. The Investment Strategy needs to be completed before the investing can start,
  • After receiving the tax file number and the ABN from the ATO, the trustees should notify the bank where they have opened the fund's bank account, about the received SMSF's tax file number.

Zdenko Simonic
Founder & CEO of SuperEasy Pty Ltd

First Published: 12 August 2004 - Copyright © SuperEasy Pty Ltd

This article is intended to be a factual analysis of past investment returns. It is not intended, nor is it to be regarded, as investment/securities advice. It does not take into account whether any particular investment or type of investment is suitable for your individual circumstances. It is strongly recommended that you seek professional advice before making any investment choice or decision.

SuperEasy Pty Ltd is not licensed to provide advice on investments, or legalities of the types of investments that you can have. We strongly recommend that you seek professional advice from an AFSL holder before making any investment choice or decision.