What is a Self Managed Super Fund?

A Self Managed Super Fund is a form of trust. Its sole purpose must be to provide an income upon retirement for its members, or as a death benefit. A SMSF has its own Tax File Number (TFN) and Australian Business Number (ABN), and is required to have its own bank account. The members of the fund simply direct their superannuation contributions into the SMSF bank account, like you would with a retail super fund.

As a member/trustee of the fund, you are responsible for ensuring there is an investment strategy for the fund, and implementing investment decisions. Usually, you would discuss your investment objectives with an Investment Adviser and formulate your strategy together.

SMSFs have strict lodgement and administrative obligations, which require ongoing attention. These include keeping copies of all records, keeping minutes of Trustee decisions and preparing annual financial statements. A SMSF must lodge an annual tax return, and have the financial statements audited by an approved auditor to audit the operations of the fund for that period.


SMSFs are a way of saving for your retirement

The difference between an SMSF and other types of funds is that the members of an SMSF are usually also the trustees. This means the members of the SMSF run it for their own benefit and are responsible for complying with the super and tax laws.

If you set up a self-managed super fund (SMSF), you’re in charge – you make the investment decisions for the fund and you’re held responsible for complying with the super and tax laws. It’s a major financial decision and you need to have the time and skills to do it. There may be better options for your super savings.

An SMSF must be run for the sole purpose of providing retirement benefits for the members or their dependants. Don’t set up an SMSF to try to get early access to your super, or to buy a holiday home or artworks to decorate your house. These things are illegal.


Benefits of an SMSF

Investment choice

SMSFs provide more investment options than any other super fund. Trustees can access direct shares, high-yielding cash accounts, term deposits, income investments, direct property, unlisted assets, international markets, collectables and more.

Tax strategies

Like all super funds, SMSFs benefit from concessional tax rates. In the accumulation phase, tax on investment income is capped at 15 per cent; in the pension phase there is no tax payable, not even capital gains tax. Carefully considered tax strategies can help trustees grow their super savings and reduce tax payments as they transition to retirement.


SMSFs allow multiple members to run a mixture of accumulation and pension accounts. Trustees can adjust their investment mix as it suits them, allowing for a fast response to changes in market conditions, super rules or personal circumstances.


SMSFs offer significant transparencies that allow trustees to align their personal goals with their investment decisions. Whether you’re passionate about property, shares or sustainable and ethical investing, SMSFs allow you to better understand where your money is invested, with complete visibility over performance and tax treatment.


SMSF trustees must lodge an annual tax return and audit, and pay ATO fees (these are capped and not based on a percentage of your super balance). The more an SMSF grows, the more cost-effective it becomes, but the total cost of running an SMSF will depend on the related investments and any costs associated with engaging professional support.

Consolidate super assets

An SMSF allows a trustee to combine their super assets with up to three other members (such as partners or family members). Consolidating super accounts immediately creates a larger fund balance, which increases the fund’s assets and investment opportunities – with only one set of fees.


Is a self managed super fund (SMSF) right for you?

Key considerations for SMSF trustees:

1. Be prepared to take an active interest in your super

People wanting to operate an SMSF must be looking for a greater level of control to optimize their retirement wealth. They must also be confident in making appropriate investment decisions in the best interests of their fund. As a trustee, you need to invest time managing your SMSF. While this does not mean doing it all alone, you will be the person in control of its operation.

2. You will have legal and administrative responsibilities for your SMSF

Trustees are responsible for the administration, compliance and investment strategy of their SMSF and must adhere to strict rules. Failure to meet your obligations under super and tax laws could result in financial penalties or disqualification as a trustee. If you don’t feel comfortable managing these requirements yourself, it’s important to seek specialist advice and support; however, as trustee you are ultimately responsible for the operation and compliance of your SMSF.

3. You should have an appropriate minimum balance to operate your SMSF

For SMSFs to be cost-effective, generally you need a starting balance of at least $300,000 and an expectation that the fund will continue to grow. In addition to establishment costs, including a trusts deed and creation of a corporate trust (if applicable), some of the ongoing costs associated with running an SMSF include an annual tax return and audit, ATO fees and investment fees. You can also choose to pay for professional SMSF support services to help with the management and compliance of your fund.

4. You cannot receive statutory compensation for your SMSF due to theft or fraud

Unlike industry and retail super funds, which are subject to regulations from the Australian Prudential Regulation Authority (APRA), SMSFs are not subject to the same government protections. This means that in the event of theft or fraud resulting in financial loss, SMSF members cannot apply for compensation via the Australian Government’s Superannuation Compensation Scheme.

5. You must seek advice if you are planning to live overseas for an extended period

In order to establish and manage an SMSF you need to be an Australian resident. If you expect to reside overseas for extended periods (one to two years or more), it is best to seek professional advice. The Australian Taxation Office has strict rules and regulations regarding extended leave from Australia, and if you do not follow the guidelines implicitly your SMSF could be deemed non-compliant and incur heavy penalties.

6. Specialist support providers are available to help you establish and run your SMSF

It is a good idea to enlist help to establish and manage an SMSF. Even if you plan to do the majority of the work yourself, you will still require an independent auditor and possibly an accountant and actuary. Many trustees also look to professional SMSF support services for assistance with administration, compliance, accounting and investment advice.

7. Consider holding insurance cover with your existing super fund

It may be beneficial to hold total and permanent disability insurance and life insurance through superannuation. If you are considering switching to an SMSF, it may also be beneficial to maintain any existing insurance cover by not fully closing down or rolling over all your superannuation. If you are looking to replace your existing insurance cover, you will need to consider the costs and benefits.

8. You will need to be aware of complaints and dispute resolution mechanisms

Disputes and complaints may arise during the time you manage your SMSF. Although SMSF trustees do not have access to the Superannuation Complaints Tribunal (SCT), they are able to access the Financial Ombudsman Service (FOS) and the Credit and Investment Ombudsman Service Limited (COSL) for independent dispute resolution services.

9. The structure of your SMSF is your decision

If you decide to establish an SMSF, you will need to choose between setting up a corporate trustee or using an individual trustee. I


Advantages & Disadvantages of a Self-Managed Super Fund


The main advantages of a SMSF are outlined below:


Despite the many advantages, a SMSF is not appropriate for some people. Disadvantages of a SMSF are outlined below:


The final word

Again as I have mentioned this is quite a complicated and expense vehicle to operate if not used effectively. However, they can be of significant benefit in the approaching phases of retirement. Make sure you get the right legal, tax and accounting advice.

Get a recommendation for a broker and get references if required.

You can have a look at the MoneySmart website for more information.

Note: I do not have an Australian Financial Services License and can’t give advice on SMSF’s but have a great relationship with key partners in this area and happy to recommend them.