Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 281

7 vital steps to compliance for your SMSF

Self-managed superannuation offers greater personal control but also entails a host of responsibilities. With the need to adhere to myriad rules and requirements, and the potential for severe penalties for non-compliance, here's how to achieve the perfect SMSF scorecard.

1. Set up the fund correctly

This is the foundation that the whole SMSF process hangs on. Getting the setup right gives you access to the tax advantages associated with contributions, investment income and benefits.

Here’s a list to consider as part of the setup process:

  • Determine who the members of the fund will be
  • Choose a trustee structure, either individual trustees or a corporate trustee
  • Choose and execute a suitable trust deed
  • Set up a bank account for the fund
  • Register the fund with the ATO
  • Obtain an electronic service address so the fund can receive employer contributions

2. Establish the fund’s investment strategy

The fund must have an investment strategy stipulating its investment objectives and allowable investment categories. It should be in writing and consider the personal circumstances of fund members, including their age and investment risk tolerance, and it should be reviewed regularly. Here are some points to consider:

  • Diversification – to what extent should the fund be diversified with regard to individual investments as well as asset classes such as cash, shares and property?
  • Liquidity – can the fund pay benefits to members and other expenses when required?
  • Insurance – should policies be held for fund members?
  • Ongoing relevance – does your fund continue to reflect its purpose and any changes in its members’ circumstances?

3. Manage the actual investments

Depending on its trust deed and investment strategy, your SMSF may have a wide range of permissible investments including public and private company shares, managed funds, private trusts, cash and term deposits, direct property, and even artworks and collectibles.

Where the investments are made at arm’s length to third parties on commercial terms there are few issues outside the norm that need to be considered. However, with investments involving related parties such as family companies or family unit trusts, restrictions may apply. As these rules can be complex, guidance from an SMSF expert can be useful.

Points to check when investing:

  • Is the investment permissible in the fund’s trust deed and investment strategy?
  • Is the investment on an arm’s length commercial basis?
  • If the investment involves related parties, does it meet the relevant regulatory provisions?
  • Have you kept copies of documents and other records concerning the investments, especially those involving related parties?

4. Manage your contributions

Contributions that may be accepted by the fund can depend on many factors, including:

  • Can the contribution be accepted by the fund because of the type of contribution, member’s age and work status?
  • Should the contribution be included in your fund’s taxable income?
  • Have you received an election from a member concerning the tax-deductibility of personal contributions?
  • Are the contributions counted against a member’s concessional or non-concessional contributions caps?

5. Pay an income stream

The main purpose of any superannuation account is the eventual payment of benefits. Before paying a lump sum or pension you need to ensure the member has met a condition of release such as retirement or reaching age 65.

Before an income stream can commence, some calculations are required which are based on the value of the member’s accumulation account and their age. Each year a minimum amount of the income stream is required to be paid. When commencing or paying an income stream from your SMSF, make sure:

  • The member’s account balance has been valued according to ATO ‘market value’ guidelines
  • The minimum amount of the income stream for the year has been calculated
  • A maximum pension amount has been calculated in the case of a transition to retirement income stream
  • The income stream is paid in accordance with the member’s instructions
  • The value of the income stream at the time it commences or is commuted is reported to the ATO for transfer balance cap purposes

6. Meet all reporting requirements

It is the responsibility of trustees to ensure formal reporting requirements are met. This includes the fund’s income tax and regulatory returns, PAYG information and transfer balance cap information. An auditor is required, and in some cases an actuary must provide a certificate for tax and solvency purposes.

As fund trustee your responsibility is as follows.

  • Arrange for the preparation of annual fund accounts
  • Arrange for the preparation of the fund’s annual income tax and regulatory returns
  • Appoint an auditor to the fund
  • Obtain an actuarial certificate from a qualified actuary if the fund is required to use the proportional basis to calculate its taxable and tax-exempt income
  • Value the fund’s assets at their market value
  • Make sure that the minimum pension amounts have been paid to members
  • Report debits and credits to the ATO for transfer balance cap purposes
  • Notify the ATO of changes to the trustees or directors of the corporate trustee
  • Notify ASIC of changes to directors of the corporate trustee
  • Retain the fund records

7. Wind up your fund (if or when the time comes)

There may come a time when you have to wind up a fund, whether due to a member’s death, loss of a member’s legal capacity or because the fund has served its useful life and run out of money.

When winding up your SMSF, consider these questions.

  • Have you read the fund’s trust deed and other documents to see what’s required to wind up the fund?
  • Have you accounted for any income the fund expects to receive and paid any expenses that are due for payment?
  • Have you paid out benefits to members or rolled them over to a fund nominated by the member?
  • Have you arranged for final set formal reporting – fund accounts, income tax and regulatory return, and the associated audit function?
  • Have you paid any outstanding expenses such as income tax on the fund’s income?
  • Have you closed the fund’s bank account after all liabilities have been satisfied and income has been accounted for?
  • Have you notified ASIC if the fund has a corporate trustee?

 

Graeme Colley is the Executive Manager, SMSF Technical and Private Wealth at SuperConcepts, a sponsor of Cuffelinks. This article is for general information only and does not consider any individual’s investment objectives.

For more articles and papers from SuperConcepts, please click here.

 

RELATED ARTICLES

Importance of updating your SMSF Trust Deed

SMSFs need care dealing with related parties

How do you change a two-member SMSF?

banner

Most viewed in recent weeks

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

Super crosses the retirement Rubicon

Australia's superannuation system faces a 'Rubicon' moment, a turning point where the focus is shifting from accumulation phase to retirement readiness, but unfortunately, many funds are not rising to the challenge.

Latest Updates

Investment strategies

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Superannuation

Meg on SMSFs: Indexation of Division 296 tax isn't enough

Labor is reviewing the $3 million super tax's most contentious aspects: lack of indexation and the tax on unrealised gains. Those fighting for change shouldn’t just settle for indexation of the threshold.

Shares

Will ASX dividends rise over the next 12 months?

Market forecasts for ASX dividend yields are at a 30-year low amid fears about the economy and the capacity for banks and resource companies to pay higher dividends. This pessimism seems overdone.

Shares

Expensive market valuations may make sense

World share markets seem toppy at first glance, though digging deeper reveals important nuances. While the top 2% of stocks are pricey, they're also growing faster, and the remaining 98% are inexpensive versus history.

Fixed interest

The end of the strong US dollar cycle

The US dollar’s overvaluation, weaker fundamentals, and crowded positioning point to further downside. Diversifying into non-US equities and emerging market debt may offer opportunities for global investors.

Investment strategies

Today’s case for floating rate notes

Market volatility and uncertainty in 2025 prompt the need for a diversified portfolio. Floating Rate Notes offer stability, income, and protection against interest rate risks, making them a valuable investment option.

Strategy

Breaking down recent footy finals by the numbers

In a first, 2025 saw AFL and NRL minor premiers both go out in straight sets. AFL data suggests the pre-finals bye is weakening the stranglehold of top-4 sides more than ever before.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.