Self-managed super fund (SMSF)
Some people want the control that comes with managing their own
super, but taking control means being responsible for managing your
retirement funds which will involve significant time and
SMSFs can be suitable for people with a lot of super and
extensive skills in financial and legal matters.
You must understand your legal responsibilities and the
investments you make because even if you employ professionals to
help you, at the end of the day you are still the one
What is a self managed super fund
An SMSF is a private superannuation fund you manage yourself,
regulated by the Australian Taxation Office. SMSFs can have up to
four members. All members must be trustees (or directors if there
is a corporate trustee) and are responsible for decisions made
about the fund. If you have an SMSF, you are responsible for
managing it and complying with all relevant laws.
SMSFs are different from mainstream funds regulated by the
Australian Prudential Regulation Authority (APRA) which pool
members' savings and invest the money for them.
How self-managed super funds
SMSFs are a legal tax structure with the sole purpose of
providing for your retirement. SMSFs are regulated by the Australian Taxation Office
A self-managed super fund can have one to four members. Each
member is a trustee (or director if there is a
Running your own fund is complex. When you run your own SMSF you
- Carry out the role of trustee or director, which imposes
important legal duties on you
- Set and follow an investment strategy that ensures the fund is
likely to meet your retirement needs
- Use the money only to provide retirement benefits
- Keep comprehensive records and arrange an annual audit by an
approved SMSF auditor.
If you decide to set up an SMSF you are personally liable for
all the decisions made by the fund even if you get help from a
professional or another member makes the decision.
If you're running a self-managed super
fund you will typically need:
- A large amount of money in the fund to make set up and yearly
running costs worthwhile
- To budget for ongoing expenses such as professional accounting,
tax, audit, legal and financial advice
- Enough time to research investments and manage the fund
- The financial experience and skills to make sound investment
- To organise life insurance, including income protection and total and permanent
You can pay an adviser a fee to do the administration or help
with the investment decisions for your SMSF. However, make sure you
understand what your adviser is doing because you cannot pass on
the responsibility of being a trustee or director.
If your accountant provides advice about your self-managed
super fund, you should check they are licensed by asking for
their Australian Financial Services Licence (AFSL) number and
searching for their name on ASIC's financial advisers register to
check what products they are allowed to advise on.
Financial advisers register
Find out more about the licensing of accountants on
the ASIC website.
Video: SMSFs - You can't do it all yourself
Video about SMSF's.
SMSFs are often called 'do-it-yourself funds' but that isn't
really the case. Meet the people who you will have to work with or
who can help you meet your obligations as an SMSF trustee in this
Don't forget that your accountant must have an Australian
Financial Services Licence if they are advising you about your SMSF
from 1 July 2016.
SMSFs - You can't do it all yourself
Questions to ask about
Before setting up an SMSF, ask yourself these questions:
Have you considered other do-it-yourself (DIY) super
Many professionally managed super funds have DIY investment
options which let you choose which assets you'd like your super
invested in such as shares, exchange traded funds and term deposits. This gives you some
control over your specific investments without the legal and
administrative requirements of running an SMSF.
Have you considered other super funds or investment
If you're thinking about setting up an SMSF because you're not
happy with your current fund or the way your money is invested,
consider changing to another fund or investment option first. See
choosing a super fund.
Will your self-managed fund outperform your current fund?
Super funds use highly skilled professional managers to invest
your super money. Can you do better than the professionals?
Consider whether the investments you choose will perform as well as
your professionally managed super fund. Are you confident you can
accurately measure returns?
Have you considered the costs?
Like all super funds, your SMSF will have costs associated with
running the fund. These include the cost of investing, accounting
and auditing for your SMSF, which may be much higher than what you
are currently paying. These costs cut into your retirement
Will you lose valued benefits?
Super funds usually offer discounted life and disability
insurance. If you set up an SMSF you will have to purchase your
insurance separately. Make sure you look into your insurance
options before closing your current super account as age and health
issues can limit your ability to buy a new policy and increase your
Do you know enough?
Are you aware of all your legal responsibilities? Do you
understand the different investment markets? Can you construct and
manage a diversified portfolio of investments? Do you know
the tax implications?
Take our investing challenge to test your investment
What if your relationship with others in the fund changes?
If there is more than one member in your SMSF, have you written
a plan outlining what will happen in the event of ill health,
death, relationship breakdown, or waning interest?
If an SMSF member loses money due to theft or fraud they do not
have access to any special compensation schemes. Also, SMSF members
do not have access to the Superannuation Complaints Tribunal to
Having access to a broader range of investments is often a
reason for starting an SMSF. Through a self-managed super
fund you can invest in the usual investments such as
shares, term deposits, managed funds and property. You can also
hold alternative assets such as antiques and artwork in a
self-managed super fund.
The ability to choose your own shares may have been a driver for
setting up an SMSF, but unless you have a lot of money to invest,
you are unlikely to be as diversified as a fund manager, who has
the advantage of using pooled funds to buy a broad range of
Some people use their SMSF to invest in property. For
information on the rules around property investment within super
and the costs involved go to our SMSFs and property
Many SMSFs hold collectibles such as artwork, jewellery,
antiques, coins, stamps, vintage cars and wine. There are very
strict rules on holding these assets in your self-managed
These assets, when held within an SMSF, must be insured and they
cannot provide a present day benefit. This means that artwork
cannot be displayed in your home or business, you cannot drive a
vintage car, you cannot wear jewellery or drink the wine.
For more information, see the ATOs webpage on collectibles and
personal use assets.
Memory loss, dementia and
Many of us experience some form of memory loss as we age.
However, when you run your own super fund, the financial
consequences of significant memory loss, from illnesses such as
dementia, can be very serious.
As trustee of your SMSF, you should plan for the possibility
that some form of impairment could stop you from being able to
properly manage your fund. Waiting until your health deteriorates
before you make contingency plans is not a good idea. It is better
to make a plan while you are fully capable and able to make the
The first thing you will need to decide is what to do with your
super if you are not able to run your fund. Your options might
- Transferring your SMSF assets to a managed super fund
- Withdrawing your super assets and investing these elsewhere,
- Appointing a person you trust to take over your trustee
responsibilities as your legal personal representative
You might need to get professional financial advice or legal advice to
help make this decision.
If you decide to nominate another person to act as trustee on
your behalf, you will need to give them all the information
required to perform this role. This includes:
- Your SMSF documents,(such as trust deeds, bank account details,
- Passwords to access your SMSF accounts
- Contact details of any professionals you deal with, such as
your SMSF auditor or actuary
Visit our page on Memory loss, dementia
and your money for more information on what you can do now to
protect your finances in the future.
By law, if you or another trustee of your self-managed
super fund becomes bankrupt, that person can no longer
remain a trustee, director or member of the super fund. SMSFs have
a 6-month grace period to remove the bankrupt trustee and make
arrangements to deal with their super assets.
If you are the only member of your SMSF, a new director will
need to be appointed to manage the fund on your behalf while you
You should get legal advice about the actions you need to take
to deal with bankruptcy and your SMSF.
Be wary of people who approach you to set up
a self-managed super fund with the aim of
withdrawing some or all your super to pay off debts. These
arrangements are illegal.
See superannuation scams for more
SMSF courses and further
If you're thinking of running an SMSF, consider completing a
Managed Superannuation Fund Trustee Education Program designed
to assist trustees in understanding their role and
The ATO has a section about self-managed super funds
and a range of other useful resources listed below, that you can
download from their website or order a hard copy.
If you do get SMSF advice make sure you get it from an expert,
for example a member of the Self-Managed Super Fund
If you're thinking about setting up an SMSF you
need to be 100% committed. Before you make that decision, do some
research and ask yourself what the real benefit is.
Last updated: 12 Oct 2016