Thinking about setting up a Self-Managed Super Fund (SMSF)? An SMSF can give you greater control over how your retirement savings are invested, but it also comes with significant responsibilities.
Unlike an APRA-regulated super fund, where a professional trustee is responsible for managing the fund, an SMSF puts those responsibilities largely in the hands of its trustees. That means choosing an SMSF is not simply about investment choice. You need to consider the costs, administration, investment strategy, compliance requirements and whether managing your own super is appropriate for your circumstances.
What Is an SMSF?
A Self-Managed Super Fund is a private superannuation fund established for a small number of members. The members are generally also trustees, or directors of a corporate trustee.
- The key difference is control. SMSF trustees are responsible for making investment decisions and ensuring the fund complies with superannuation and tax laws.
- The ATO requires an SMSF to have an investment strategy before it starts investing. The strategy must reflect the purpose and circumstances of the fund and its members and must be reviewed regularly.
- This makes an SMSF quite different from simply selecting an investment option within an existing super fund.
Is an SMSF Right for You?
Before establishing an SMSF, consider why you want one. An SMSF may appeal to people who want greater control over their investments, have more complex investment needs or want to manage a broader range of assets within the superannuation rules. However, control also means responsibility.
As an SMSF trustee, you are responsible for ensuring investments comply with the law, maintaining records, preparing reports, arranging an annual audit and ensuring the fund’s investment strategy remains appropriate. The ATO makes it clear that trustees remain responsible for the fund’s investments even when professional advisers are used.
1. Look at the Investment Options
One of the main reasons people consider an SMSF is investment flexibility. Depending on the fund’s investment strategy and the superannuation rules, an SMSF can invest in assets such as shares, managed investments, term deposits and property. But greater choice does not mean every investment is permitted.
The ATO states that SMSF investments must be permitted under the fund’s trust deed and superannuation law, have clear legal ownership, be made on a commercial arm’s-length basis and satisfy the sole purpose test. There are also restrictions around transactions involving members and related parties. For example, the ATO states that, subject to limited exceptions, an SMSF generally cannot acquire assets from members or related parties, provide financial assistance to members or related parties, or use fund assets to provide a present-day benefit. Before investing, make sure you understand both the opportunity and the restrictions.
2. Have a Clear SMSF Investment Strategy
The ATO says an SMSF investment strategy should consider matters including:
- Diversification
- Investment risk and likely returns
- Liquidity
- The fund’s ability to meet expenses and retirement benefits
- The circumstances and needs of members
- Members’ retirement timeframes and risk appetite
Your investment strategy should be in writing and reviewed regularly. This is important because an SMSF should not be established simply to buy a particular asset. The investment strategy needs to explain how the fund’s investments relate to the retirement objectives of its members. This is important because where an SMSF is established with a particular investment in mind, trustees still need to consider whether that investment is appropriate having regard to the fund’s overall investment strategy and the circumstances of its members.
3. Compare SMSF Costs
Running an SMSF involves ongoing costs.
These can include:
- Establishment costs
- Accounting and tax return preparation
- Annual audit fees
- ATO supervisory levy
- Administration costs
- Investment advice
- Legal costs
- Brokerage and investment expenses
- Insurance where appropriate
The important question is not simply how much an SMSF costs each year. It is whether the benefits, flexibility and control justify those costs for your circumstances. For some people, the costs and administration of an SMSF may outweigh the benefits. For others, particularly those with more complex investment requirements, the additional control may be an important consideration.
4. Consider Your Investment Performance
Investment performance should be considered carefully, but it should not be the only reason for choosing an SMSF. Past performance does not guarantee future returns. If you are comparing an existing APRA-regulated super product with the potential benefits of an SMSF, make sure you are comparing like with like. Consider:
- Investment returns
- Investment risk
- Fees and expenses
- Diversification
- Liquidity
- Asset allocation
- Your investment timeframe
APRA conducts an annual performance test for certain APRA-regulated superannuation products. The test is designed to improve transparency and hold trustees accountable for underperformance. APRA also publishes broader product performance information covering investment returns, fees and performance-test outcomes. These resources can provide useful information when comparing an existing super fund with other APRA-regulated options.
5. Don’t Forget Insurance
Insurance is another issue to consider when deciding whether to establish an SMSF. Some super funds provide members with insurance options such as:
- Life insurance
- Total and permanent disability cover
- Income protection
If you move from an existing fund to an SMSF, you should check what insurance arrangements you currently have and whether transferring or replacing that cover could affect you. Insurance should be considered separately from the investment decision because losing existing cover can have important consequences.
6. Understand the SMSF Trustee Responsibilities
Perhaps the biggest difference between an SMSF and an APRA-regulated super fund is the level of responsibility placed on the trustee. SMSF trustees need to ensure the fund:
- Complies with superannuation legislation
- Maintains appropriate records
- Has and follows an investment strategy
- Meets tax and reporting obligations
- Arranges an annual independent audit
- Makes investments on an arm’s-length basis
- Complies with contribution and payment rules
The ATO also warns SMSF trustees about investment schemes that promise unusually high returns.Trustees need to understand what they are investing in and ensure every investment decision is consistent with the fund’s purpose and legal requirements.
7. Think About Property and Other Complex Investments
The Australian Taxation Office (ATO) has strict rules governing when a self-managed super fund (SMSF) can invest in property. Generally, the property must be acquired for the sole purpose of providing retirement benefits to fund members, rather than for personal use or benefit. An SMSF generally cannot acquire residential property from a member or related party, and residential property owned by the SMSF cannot be used by members or their relatives.
Different rules can apply to eligible business real property, including commercial property used in a business. Any property investment must also be consistent with the fund’s investment strategy and comply with the relevant superannuation rules. Recent changes have also affected the ability of SMSFs to borrow to purchase residential property.
From 10 August 2026, SMSFs are generally no longer able to enter into new limited recourse borrowing arrangements (LRBAs) to acquire residential property. Existing arrangements entered into before the change may be protected under transitional rules.
Importantly, the restriction does not extend to eligible commercial property, so SMSFs may still be able to use an LRBA to acquire business or commercial property where the relevant superannuation and borrowing rules are satisfied.
For anyone considering establishing an SMSF specifically to purchase property, it is important to understand these rules before setting up the fund or entering into a purchase contract. Professional advice should be obtained to ensure the proposed investment and funding arrangement comply with the relevant superannuation and tax requirements.
8. SMSF or APRA-Regulated Super Fund?
The decision does not have to be based simply on investment choice. An APRA-regulated super fund generally provides professional trustee oversight, investment options and administration without requiring the member to manage the fund’s compliance themselves. An SMSF provides greater direct control but places considerably more responsibility on the trustees. The right structure depends on your objectives, investment preferences, circumstances, costs and willingness to take on the responsibilities of being an SMSF trustee.
Final Thoughts
Choosing an SMSF is a significant financial decision. The attraction is usually greater control and flexibility, but those benefits come with additional administration, costs and legal responsibilities. Before establishing an SMSF, consider your investment objectives, the types of assets you want to invest in, the likely costs, insurance arrangements and the time and expertise required to manage the fund. The ATO provides detailed guidance on establishing and running an SMSF, including investment strategies and investment restrictions.
APRA also publishes performance information that can help consumers understand how APRA-regulated superannuation products are performing.An SMSF should be established because it is appropriate for your overall retirement strategy, rather than simply because it offers more investment choices.
FAQs About Choosing an SMSF
What is an SMSF?
A Self-Managed Super Fund is a private superannuation fund where the members generally act as trustees and are responsible for managing the fund and complying with superannuation laws.
How many members can an SMSF have?
An SMSF can have up to six members, subject to the relevant superannuation rules.
Do SMSFs need an investment strategy?
Yes.The ATO requires an SMSF to have an investment strategy and to review it regularly.
Can an SMSF invest in property?
Yes, an SMSF can invest in certain types of property, but strict superannuation rules apply.
The investment must be consistent with the fund’s investment strategy and satisfy the relevant legal requirements.
Are SMSFs regulated by APRA?
No. SMSFs are regulated by the Australian Taxation Office (ATO). APRA regulates most large superannuation entities, including APRA-regulated super funds.
What should I consider before setting up an SMSF?
Consider investment choice, costs, administration, insurance, compliance responsibilities, your investment strategy and whether you are comfortable taking responsibility for managing your own superannuation.
How Can We Help?
If you have any questions or would like further information, please contact Camden Professionals on:
Phone: 08 9221 5522
Email: info@camdenprofessionals.com.au
You can also arrange a meeting so we can discuss your requirements in more detail.
General Advice Warning
The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any person.
Any advice contained on this page and on this website is General Advice and does not consider any person’s particular investment objectives, financial situation and particular needs.
Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances.
The examples provided on this page and on this website are for illustrative purposes only.
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