What is a Self Managed Super Fund (SMSF)?

When comparing your options for superannuation you may have come across the term ‘Self-Managed Super Fund’ (SMSF). We break down exactly what a SMSF is and what is required to be a trustee.

What is a Self Managed Super Fund?

A Self-Managed Super Fund (SMSF) is a superannuation fund designed for members (or trustees) to have direct control over their retirement savings and investments. It is an investment portfolio that differs from a normal super fund as the trustees decide how the fund operates and how to invest.

Because the super fund’s assets are controlled by the trustee or the members themselves, they are responsible for the overall investment strategy and all legal and statutory requirements.


“If you set up an SMSF you become a trustee of the fund. This means you’ll be responsible for managing your SMSF according to its trust deed and the laws and rules that apply to SMSFs. The key principle is that you run your SMSF for the sole purpose of providing retirement benefits to fund members.”  – ATO


How does a SMSF work?

A SMSF can have up to four members, all of whom are Trustees of the Fund. As Trustees, all members are personally liable for all decisions made by the fund. Unlike public offer funds (industry or retail funds), SMSFs are regulated by the Australian Taxation Office (ATO) and Trustees must follow a code of conduct or potentially face significant penalties.

The ATO has some excellent educative resources for SMSF Trustees here.

Why set up a SMSF?

In a speech given to the SMSF Professionals’ Association of Australia (SPAA), former Chair of the Super Review Jeremy Cooper outlined the following potential benefits of an SMSF:

  • SMSFs can pursue asset allocations that would be difficult to implement in an APRA regulated fund
  • SMSFs can have longer-term investment horizons (ie not chasing short-term performance driven by league tables and ‘peer risk’)
  • SMSFs can be run in a tax-efficient manner, particularly in transition to retirement and in managing assets supporting a pension
  • there is a better alignment of interests in an SMSF – members can make well informed decisions in their own interests with minimal agency costs
  • members are able to bargain directly for reduced prices for the various services they need (eg accounting, administration and broking).

You can find out more about the benefits of a SMSF here.

How are SMSFs regulated?

Unlike public offer funds (industry funds or retail funds), SMSFs are predominantly regulated by the Australia Taxation Office (ATO) who check compliance but remain removed from your investment choices. You may also deal with the Australian Securities and Investments Commission (ASIC) or Department of Human Services (DHA).

You can find out more about the regulations on the ATO’s website.

The pros and cons of self-managed super funds

An SMSF is one retirement investment option for people who want direct control over their savings and investments, as it allows the members to invest the SMSF money in the mix of assets they prefer. However, a SMSF involves the Trustees dedicating time to manage the asset selection, brokerage and legal compliance.

Advantages of SMSFs

  • Control: members have control and flexibility over what their superannuation money is being invested in.
  • Potential tax savings: all earnings and contributions are taxed at 15%. When members reach 65 years of age, all contributions, earnings and pension payments are tax-free.
  • Lower fees: an SMSF can be cheaper to maintain compared to other retail super funds.
  • Asset protection: assets within the SMSF are protected from creditors if the members go bankrupt.

Click here for more information on the potential benefits of having a SMSF.

Disadvantages of SMSFs

  • Time-consuming: after the initial setup, usually with an accountant, members need to devote time to acquiring and managing their investments as well as administering the fund. As Trustee, you are your own investment expert. Be prepared to commit your time to research and maintain your investments.
  • Compliance: an SMSF is required to prepare an audited financial statement and tax return each year.
  • Expensive: costs to maintain, administer, and audit an SMSF can run into several thousand dollars, so you need to ensure your investments are performing well to make an SMSF cost-effective compared to a regular super fund.

Compare SMSF savings accounts

If you’re interested in owning a SMSF, Canstar compare a number of SMSF savings accounts. Here is a snapshot of some funds on the Canstar database for someone living in New South Wales with a balance of $10,000.


Compare SMSF Savings Accounts

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