What is a Self-Managed Super Fund?
A Self-Managed Super Fund (SMSF) is a private superannuation fund that you manage yourself. Unlike retail or industry super funds, where investment decisions are made by professionals, SMSFs give you control over how your retirement savings are invested.
An SMSF can have up to six members, and each member must be a trustee or director of the corporate trustee. This means you’re legally responsible for the fund’s decisions and compliance with laws such as superannuation and tax.
Benefits of managing your own super
Greater control over your investments
With an SMSF, you can tailor your investment strategy to your goals, with the option to invest in a wide range of assets including:
- Australian and international shares
- Residential and commercial property
- Term deposits and bonds
- Cryptocurrencies (subject to restrictions)
- Collectables and personal-use assets (with strict rules)
This flexibility allows you to tailor your investment strategy to suit your retirement goals.
Tax strategy opportunities
SMSFs could provide opportunities to implement tax-effective investment strategies. However, these strategies depend on individual circumstances and require careful planning.
Pooling resources
You can combine super balances with other members of your SMSF. This can increase your investment power and improve cost-efficiency.
What are the risks and responsibilities
Here are some considerations you should be aware of.
You’re in charge
As a trustee, you’re responsible for things like:
- Developing and maintaining an investment strategy
- Keeping accurate records and lodging annual returns
- Ensuring the fund complies with super and tax laws
- Meeting the sole purpose test (providing retirement benefits only)
For the most up to date responsibilities refer to the ATO website
Even if you engage professionals (e.g. accountants, auditors, financial advisers), you remain legally responsible for the fund’s decisions. Mistakes could lead to penalties.
Time commitment
Managing an SMSF requires 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.
There is no safety net
Unlike other super funds, SMSFs may not be covered by compensation schemes in cases of fraud or theft. You should take extra care to protect your fund’s assets.
Complexity in life events
Managing exits, deaths, or relationship breakdowns within an SMSF can be complex. It’s important to have a clear exit strategy and succession plan in place.
