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What is an SMSF?

Learn what a Self-Managed Super Fund (SMSF) is, how it differs from other super funds, and explore its key structures and features. Understand your responsibilities and decide if an SMSF is right for you.

Couple reading about self-managed super funds

Thinking about becoming more hands-on with your retirement savings? A Self-Managed Super Fund (SMSF) might be worth exploring. While superannuation funds such as retail, industry, corporate, and public sector funds are professionally managed on your behalf, an SMSF allows its members to directly manage and make decisions about how their retirement savings are invested, whilst complying to certain rules and obligations.

What is an SMSF?

Superannuation is designed to help Australians save for retirement. SMSFs offer flexibility, allowing members to tailor their investment strategy to suit personal goals. You can invest in a wide range of assets, including:

  • Australian and international listed shares
  • Exchange Traded Funds (ETFs) and managed funds
  • Cash, term deposits and bonds
  • Property
  • Collectables and personal-use assets (with strict rules)

What makes an SMSF different?

All super funds aim to grow your retirement savings. The difference is in who controls the management of the fund. Some super funds give their members some choice about how their retirement savings are invested, like member-directed investment options, but someone else is in charge of deciding what options the fund’s members have to choose from. They’re also responsible for making sure the fund meets all the superannuation compliance rules. 

With an SMSF, you're in charge. That means you're responsible for choosing the fund's investment strategy and for making sure it meets all compliance obligations, e.g. reporting. If there are other people who belong to your SMSF, you'll do this together.  

SMSF structures

All super funds are a special type of legal structure known as a trust. Like all trusts, super funds involve one group of people (the trustees) looking after investments for someone else (known as the members or beneficiaries). An SMSF is unique in that the members and trustees are usually the same people. This is why having an SMSF puts you in control of managing your own retirement savings.

An SMSF can have up to six members. These members may also act as trustees (known as individual trustees), or the fund may appoint a company as the trustee (a corporate trustee), with members typically acting as directors of that company. In either structure, the trustees are responsible for the management and operation of the fund.

When you become part of an SMSF, you are legally responsible for making sure the fund complies with laws such as super and tax.

Key features of an SMSF?

SMSF members (trustees) :

  • Make all their own investment decisions with regard to their super
  • Are responsible for compliance, including reporting and administration
  • Usually engage professionals to help with their compliance obligations, but remain accountable
  • Arrange their own insurance, which is usually more costly than similar cover in a traditional or member directed fund

What are the risks?

While SMSFs can offer control, they also come with risks:

Trustee responsibility: As a trustee, you’re responsible for things like:

  • Deciding how your super is invested
  • Making sure the SMSF complies with super and tax laws

For the most up to date responsibilities refer to the ATO website.

Most people get help to run their SMSF (e.g. accountants, financial advisers, occasionally lawyers). In fact, an important part of having an SMSF is deciding what help you need and making sure you get it. But even if you have other professionals supporting you, you remain legally responsible for the fund’s decisions. Mistakes could lead to penalties.

While you have a lot of control, it’s not unlimited. As well as following all the rules, you still have to make sure you manage your SMSF solely with saving for retirement in mind.

Time commitment: Managing an SMSF can require a significant and ongoing time investment, with trustees responsible for overseeing compliance, administration, and strategic decision-making.

If you’re not able to stay actively involved, an SMSF may not be suitable.

Management costs can add up: SMSFs can be expensive to set up and maintain. Common costs could include:

  • Accounting and audit fees

  • Legal and financial advice

  • Insurance premiums

  • ATO supervisory levy

These costs can add up over time, making it important for trustees to assess whether their fund size justified these expenses.

Consumer protections are limited: SMSFs have different consumer protections compared to retail and industry super funds and are not regulated by APRA.

Complaints cannot generally be made to the Australian Financial Complaints Authority (AFCA) about the decisions or conduct of an SMSF trustee or the fund itself. However, complaints can be lodged with AFCA about third-party financial firms that provide advice or services to an SMSF.

As an SMSF trustee, you are responsible for managing the fund and protecting its assets, and may be held accountable for decisions affecting the fund.

Complexity in life events: Managing deaths, or relationship breakdowns within an SMSF can be complex. Similarly, leaving an SMSF is nowhere near as simple as leaving a retail or industry super fund public super fund. It’s important to know when you need help and to make sure you get it, as well as having an exit strategy and succession in place.

Next steps

If you’re ready to explore SMSFs, consider speaking with a professional such as a financial adviser, accountant or legal professional. They can help you decide if it’s the right fit.

Find out more from the ATO.

Is an SMSF right for you?

Read more

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Distributed by Commonwealth Bank

Things you should know

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