Self-managed super fund (SMSF)
Having the control of managing your own super comes with a lot
of responsibility and involves significant time and effort. A
self-managed super fund (SMSF) might be suitable if you have a lot
of super and extensive knowledge of financial and legal
You must understand your legal responsibilities and the
investments you make because, even if you employ professionals to
help you, you are still the one ultimately responsible.
What is a self-managed super fund
An SMSF is a private superannuation fund, regulated by the
Australian Taxation Office (ATO) that you manage yourself. 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 and compliance with relevant laws.
Set up costs and annual running expenses can be high, so it's most
cost-effective if you have a large balance.
How do self-managed super funds
An SMSF is a legal tax structure whose sole purpose is to
provide for your retirement. SMSFs operate under similar rules and
restrictions as ordinary super funds.
When you run your own SMSF you must:
- carry out the role of trustee or director, which imposes
important legal obligations on you
- set and follow an investment strategy that is appropriate for
your risk tolerance and is likely to meet your retirement
- have the financial experience and skills to make sound
- have enough time to research investments and manage the
- budget for ongoing expenses such as professional accounting,
tax, audit, legal and financial advice
- keep comprehensive records and arrange an annual audit by an
approved SMSF auditor
- organise insurance, including income protection and total and permanent
disability cover for super fund members
- use the money only to provide retirement benefits.
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.
A professional who is licensed to provide SMSF advice can help
you weigh up the pros and cons of running an SMSF and help you
decide whether it's right for you. They may also be able to help
with the administration and investment decisions for your SMSF. But
remember, you cannot pass on the responsibility of being a trustee
or director, so you must understand what your adviser is
Robo-advice and SMSFs
SMSF advice has traditionally been provided by an actual person
but could also be provided by a robo-adviser. Robo-advice is
financial advice that's delivered by a computer instead of a
physical financial adviser. It may be cheaper than seeing an
adviser however there are limitations to what robo-advice software
can do, and it may not be subject to the same quality controls and
monitoring that advice from a real person would be.
Ongoing SMSF advice
The type of ongoing advice you choose will depend on your needs.
For example, you might use a financial adviser or broker for
investment advice and an accountant for the financial management of
SMSF advisers must be licensed to provide this type of advice.
You can check by searching by their name on ASIC's financial
advisers register. You can find out more about the licensing of accountants on the ASIC
Find out what advice your adviser or accountant is licensed to
Financial advisers register
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 AFS licence if
they are advising you about your SMSF.
Adviser authority over cash management accounts
Most SMSFs will use some type of deposit account, such as a cash management account, to hold surplus funds and allow for
active management of investments. If you
are using a financial adviser, you may have given them authority to
view and/or make transactions on your account on your behalf. This
may be referred to as a 'third party authority'.
Types of adviser third party authorities
An authority that allows your adviser to operate your account
can be classified by the amount of access you give them:
- View access - your adviser can see the account
transactions but cannot operate the account
- Withdrawal access - your adviser can make
transactions, including withdrawals, on the account
- Complete access - your adviser can do all the
things that you can do with the account, including changing contact
details, changing or adding authorised signatories or closing the
The risks of granting an adviser third party authority
By allowing your adviser to operate your account (which may be
referred to as an 'adviser-operated account'), you are placing a
lot of trust in them. Some of the risks to be aware of include:
- your money being invested in products or schemes that may not
be in your best interests
- the possibility that your adviser could use their third party
access to commit fraud.
While the risk of fraud may be remote, it could have serious
consequences if it does occur.
Limiting the risks of adviser-operated accounts
These accounts may be convenient for your adviser, particularly
if they are actively managing your investments, but
there are steps you can take to limit the risk they pose to you.
- make sure you understand the extent of the authority you have
given your adviser and the risks involved
- get all the details of the account, including any authorities
you have provided, in writing
- ask to be notified each time your adviser makes a transaction
on the account
- make sure all correspondence relating to the account comes to
you, even if your adviser also receives the information
- check the account transactions regularly and speak to your bank
if something doesn't look right.
Questions to ask before
you set up an SMSF
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 specific assets, such as shares, exchange traded funds and
term deposits. This gives you some
control over your investments without the legal and administrative
responsibilities 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 professionals to invest your
money. Will the investments you choose perform better than your
professionally managed super fund? Are you confident you can
accurately measure returns?
Figure 1 compares the average returns for SMSFs with
APRA-regulated super funds over a 5-year period. On average,
APRA-regulated super funds achieved higher returns than SMSFs.
Figure 1: Average returns for SMSFs and APRA-regulated
super funds for financial years 2012 to 2016
Self-managed super funds: A statistical overview
Have you considered the costs?
Like all super funds, SMSFs have costs associated
with running the fund, including investing, accounting and
auditing. If these costs are high they could have a significant
impact on your retirement lifestyle.
Figure 2 shows the average total cost of running an SMSF as a
percentage of the fund's balance, known as the expense ratio. Most
SMSFs are paying a lot more in fees than the average APRA-regulated
The average expense ratio for APRA-regulated funds was 0.8% as
at June 2017.
Figure 2: Average cost of running SMSFs and APRA-regulated
super funds in 2016
Self-managed super funds: A statistical overview
Will you lose
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 may increase
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
Test your investment knowledge.
What if your relationship with others in the fund changes?
If there is more than one member in your SMSF, do you have a
written plan outlining what will happen in the event of ill health,
death, relationship breakdown or waning interest of a member?
If an SMSF member loses money due to theft or fraud, they do not
have access to any special compensation schemes or the
Superannuation Complaints Tribunal to resolve disputes.
What can you invest
your SMSF in?
Having access to a broader range of investments is a common
reason for starting an SMSF. Through a self-managed super fund, you
can not only invest in shares, term deposits, managed funds and
property, you can also hold alternative assets, such as antiques
and artwork in a self-managed super fund.
You may want to set up an SMSF so you can choose your own
shares. 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 shares.
Some APRA-regulated funds now allow you to choose your own
Some people use their SMSF to invest in property. For
information on the rules of property investment within super and
the costs involved, go to our SMSFs and property
SMSFs can hold collectibles such as artwork, jewellery,
antiques, coins, stamps, vintage cars and wine; however, there are
very strict rules around holding these assets in your SMSF.
The assets 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 the vintage car, you cannot wear the
jewellery or drink the wine.
For more information, see the ATOs webpage on collectibles and
personal use assets.
Some SMSF trustees have taken an interest in investing in
cryptocurrencies such as Bitcoin, Ethereum, Litecoin and Ripple.
While SMSFs are not prohibited from investing in cryptocurrencies,
as a trustee, you need to consider:
- the nature of cryptocurrencies - For a
detailed explanation on what they are and how they work, see our
webpage on cryptocurrencies
- cryptocurrency risks - Cryptocurrencies carry
additional risks, including fewer safeguards, values that can
fluctuate significantly over a short period of time and the risk
that your money could be stolen with little or no recourse
- SMSF regulatory requirements - There are
superannuation regulatory requirements that apply to investments
made by your SMSF. For more information about SMSFs investing in
cryptocurrencies, visit the
Be wary of services offering to establish an SMSF for you in
order to gain exposure to cryptocurrencies. Not only does operating
an SMSF involve significant time, skills and responsibility, you
may also be putting your retirement savings at risk.
You should seek independent advice from a licensed financial
adviser before undertaking any new type of
investment in your fund.
How SMSF trustees invest
SMSF trustees prefer different assets from those of
APRA-regulated super funds, which may impact returns. SMSFs tend to
invest more in cash, property and alternative assets while
APRA-regulated funds are usually better diversified.
Table 1 shows how SMSFs and APRA funds were invested at 31
Table 1: How APRA-regulated super funds and SMSFs are invested,
as at 31 December 2017
||All APRA-regulated super funds
||Self-managed super funds
|Shares in unlisted companies
1 Data on
infrastructure investments is not available for SMSFs.
investments for APRA funds include hedge funds. For SMSFs, 'other'
investments include listed and unlisted trusts, managed investments
Self-managed super fund statistical report - September
Memory loss, dementia and
Many of us will 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. It's better to make a contingency plan
while you're capable of making good decisions than waiting until
your health deteriorates.
If you're not able to run your fund, you could:
- transfer your SMSF assets to a managed super fund, or
- appoint a person you trust to take over your trustee
responsibilities as your legal personal representative.
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 adviser.
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 and consider getting advice
from an appropriately qualified professional before making these
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
Seek legal advice about the actions you need to take to
deal with bankruptcy and your SMSF.
Scams targeting people with
Be wary of people who approach you to set up
a self-managed super fund with the aim of
withdrawing some or all of 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
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 useful resources you can download from their website
or order a hard copy.
Seek information from industry bodies such as 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: 19 Apr 2018