Self-managed super fund (SMSF)
Do it yourself super
Some people want the hands-on control that comes with a
self-managed super fund (SMSF). Of course, with added control comes
added responsibility and workload.
SMSFs can be suitable for people with a lot of super and
extensive skills in financial and legal matters. You must be
prepared to research and track your super investments regularly if
you want to manage them yourself. Super is your investment for your
retirement, so don't rush in.
How SMSFs work
You can set up your own private super fund and manage it
yourself, but only under strict rules regulated by the Australian
Taxation Office (ATO).
An SMSF can have between one to four members. Each member is a
trustee (or director if there is a
corporate trustee). Running your own fund is complex.
When you run your own SMSF you must:
- Carry out the role of trustee or director, which imposes
important legal duties on you
- Use the money only to provide retirement benefits
- Set and follow an investment strategy that ensures the fund is
likely to meet your retirement needs
- 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 an SMSF 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
- Plenty of time to manage the fund
- Financial experience and skills so you are more likely to make
sound investment decisions
- Separate life insurance, including income
protection and total and permanent disability cover
You can pay an adviser a fee to do the administration or help
with the investment decisions for your SMSF. However, be sure you
understand what your adviser is doing because you cannot pass on
the responsibility of being a trustee or director.
Questions to ask
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, 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 professional managers to invest your super
money. Can you do better than the professionals?
Have you considered the costs?
There are running costs that go with having an SMSF. 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 will cut into your retirement savings.
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?
Do you know all your legal responsibilities? Are you on top of
the investment market? Can you manage a diversified portfolio of
investments? Do you know the tax implications?
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?
Find out how to get out of a self-managed super
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
SMSFs and investing in
Some people want to use their SMSF to invest in property. See
and property page to find out more.
Be wary of people who approach you to set up an SMSF with the
aim of withdrawing some or all your super to pay off debts. These
arrangements are illegal.
See superannuation scams for more
Do your research
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 your
research and ask yourself what the real benefit is.
Last updated: 02 Mar 2015
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