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What to consider before setting up an SMSF

While the idea of an SMSF is appealing to more and more Australians, there are rules and regulations you need to adhere to before embarking on the journey. Here, we guide you through the process.

1. Know the system

Think you know the superannuation landscape?  You might need to scrub up on your knowledge. Since 2017 a constellation of changes have been put in place, including new caps of $25,000 for before-tax contributions and $100,000 for after-tax contributions, and tougher financial penalties for SMSF trustees who breach the super rules.  As recently as this financial year, new rules apply for downsizers using the sale of their home to boost super as well as many other new additions. Our point? Knowing the rules is the critical first step to a successful SMSF, because breaking them will cost you.

2. Call in backup

SMSFs are time-consuming. From administration to tax management and implementing your strategy, it’s not a simple process. Doing it alone isn’t advised unless you really know what you’re doing.

We recommend calling in backup in the form of a financial advisor, or accountant, with specialist knowledge in this field. Having these experts in place can save you time and money in the long run, while potentially helping you grow your super in ways you might not have thought of before.

When looking for the right fit for you, be sure to ask questions about their experience and knowledge with SMSFs. Quiz them on the current rules, regulations and changes to make sure they’re up-to-date on their knowledge.

Another tip? Use an online administration solution to help manage your super and provide real-time reporting and data analysis, while also helping your advisory team work from the same platform alongside you.

3. Lay the foundations

Before setting up your SMSF, you need to appoint a trustee.  This could be your sole responsibility, or you could share responsibility with a spouse or other family members. But remember: the onus is on the trustee or trustees to keep their SMSF in check, so choose wisely.

Next, you need to get your legalities in order.  This involves signing a declaration and preparing a trust deed, which establishes the rules of operation for your fund – including the powers of the trustees and payment to members. It isn’t a simple process and seeking legal advice is highly recommended to ensure your fund is set up sufficiently.

Finally, it’s time to register your fund with the ATO.  You’ll also need to get an ABN and Tax File Number to complement your fund so you can file an annual tax return, pay levies and prepare annual audits.

4. Build your strategy

One of the legal requirements of an SMSF is to prepare and implement an investment strategy.  This requires assessing questions like what are the objectives of the fund, will your fund hold insurance cover, what is the risk tolerance of your fund and much more.  Again, it’s advised to seek professional help in building the strategy of your SMSF to ensure it’s working to your full advantage.

5.  Take action

The time has come for you to invest – the power now lies in your hands.  The key to a successful SMSF is to keep your portfolio nicely diversified. But perhaps most important of all is to regularly review your strategy to ensure it’s working for you and your current circumstances.

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Our response to limit the spread of COVID-19

  • As COVID-19 continues to spread, we would like to take a moment to let you know what Financial Spectrum is doing to respond.

    While we haven’t been directly affected with any confirmed cases, we are taking all reasonable precautions to remain safe.Our priorities are:

    1. Keep our staff and clients safe
    2. Stay fully operational in our service delivery and continuing to manage your financial affairs
    3. Play our part in minimising the impact on our community against the spread of COVID-19

    Financial Spectrum has the technology, infrastructure and systems to continue business as usual remotely and our staff will now be working from home.

  • You should notice no change to our service, with the exception that we are encouraging our clients to meet via video call, rather than face to face, unless requested. We will be contacting all clients with meetings booked over the next two weeks with instructions for a video call.This is an evolving situation and we will continue to monitor developments. We will keep you informed of any material changes to our approach.

    These are unprecedented times and we understand that many of you will be feeling unsettled about your finances. We would like to assure you that we are open for business and are here to help you. If you don’t have a meeting booked but would like one, or if you have questions, please contact us at info@financialspectrum.com.au or on
    02 8238 0888

Brenton Tong

Managing Director

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