What is a Self-Managed Super Fund (SMSF)?

What is a Self-Managed Super Fund (SMSF)?

A Self-Managed Super Fund, (SMSF), is a do-it-yourself superannuation scheme which allows people to take direct control of their investments, strategies and retirement planning.

Superannuation is an investment portfolio set up to save funds for retirement which is usually managed by large Industry Funds and Retails Funds.  A Self-Managed Super Fund differs from a normal superannuation fund because the members, known as “trustees”, decide how the fund operates and in what to invest. The fund’s assets are controlled by the trustee, in most cases, the members themselves. Members are not only responsible for the overall investment strategy; they are also responsible for the legal and statutory requirements required to operate the funds.

The pros and cons of self-managed super funds


  • Members have control and flexibility over where their superannuation money is being invested.
  • Tax saving – all earnings and contributions are taxed at 15%.  When members reach 65 years of age, all contributions, earnings and even pension payments are tax free.
  • Lower fees –an SMSF can be cheaper to maintain compared with other retail super funds.
  • Asset protection – assets within the SMSF are protected from creditors if the members goes bankrupt.
  • The members of an SMSF are not just limited to individuals, spousal relationship and family members.  An SMSF can have up to four members, with no direct relationship to each other, other than the want and desire to pool their resources to leverage off each other into bigger and better investments.


  • After the initial setup, usually with an accountant or financial planner, members need to devote time to acquiring and managing their investments, as well as administering the fund.
  • Compliance – an SMSF is required to prepare an audited financial statement and tax return each year.
  • Costs to maintain, administer and audit the fund can run into several thousands of dollars, so you need a substantial amount money in superannuation before an SMSF option is a cost-effective alternative.
  • As trustee, you need to become the investment expert.  So be prepared to commit a lot of time to research and maintenance of your investments.

Why set up a Self-Managed Super Fund?

In a speech given to the SMSF Professionals’ Association of Australia (SPAA), former Chair of the Super Review, Jeremy Cooper, outlined the following potential benefits of a SMSF:

  • SMSFs can pursue asset allocations that would be difficult to implement in an APRA regulated fund;
  • SMSFs can have longer-term investment horizons (i.e. not chasing short-term performance driven by league tables and ‘peer risk’);
  • SMSFs can be run in a tax-efficient manner, particularly in transition to retirement and in managing assets supporting a pension;
  • there is a better alignment of interests in an SMSF – members can make well informed decisions in their own interests with minimal agency costs; and
  • members can bargain directly for reduced prices for the various services they need (e.g. accounting, administration and broking).

Click here for more information on the potential benefits of having a SMSF.

Who is suited to an SMSF?

An SMSF can have up to four members, all of whom are Trustees of the Fund.  As Trustees, all members are personally liable for all the decisions made by the fund.  In the government’s 2009 Super System Review, it noted that SMSF members are on average older, earn more and have larger superannuation balances than the average worker, with the average SMSF member balance being $456,000.  There is good reason for that; to quote Jeremy Cooper:  “On average, SMSFs with $200,000 or less had both higher proportional costs than would be charged in a public offer fund and did not perform as well as larger-sized SMSFs.”

How are SMSFs regulated?

Unlike public offer funds (industry funds or retail funds), SMSFs are regulated by the Australia Taxation Office (ATO) and there are several responsibilities that must be abided by the Trustees – with significant potential penalties for getting it wrong.  The ATO has some excellent educative resources for SMSF Trustees here.

Where can you find more information?


The SMSF Professionals’ Association of Australia (SPAA)

ASIC’s consumer website

Declan Hanratty  Managing Director

M: 0409 089 456  F: 03 9416 1916  ABN: 19 880 907 430  POSTAL:  PO Box 1551  COLLINGWOOD  Victoria  3066 MFAA Membership No.  50217  Australian Credit Licence No. 383120  Credit Ombudsman Service No. 412201