What is a Self-Managed Super Fund?

Daniel Brown

Financial ExpertUpdated on August 2, 2022

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Want to set up a self-managed super fund (SMSF) but feel overwhelmed by the process?

Seeking professional advice on setting up an SMSF will arm you with the right information to get the best outcome for your SMSF.

Jump straight to…

What Is an SMSF?

SMSF is a private super fund that lets you manage your investments and insurance. With an SMSF, you are not just a member, you are a trustee. 

SMSFs provide financial benefits for members during their retirement – and for their beneficiaries upon the trustee’s death. 

Members should have an Australian business number (ABN), tax file number (TFN), and transactional bank account so they can make investments, receive contributions, and payout pensions and lump sums. 

All SMSF investments are controlled by the SMSF trustees and are made in the name of the fund. There are two trustee structure options: individual and corporate. 

An individual trustee set up appoints each member as a trustee of the fund, with a minimum of two administrators. In a corporate trustee arrangement, each member is a director, with the company acting as the trustee. 

Top 7 Benefits of SMSF

More Investment Options 

SMSFs offer more investment options than other superannuation funds. You can invest in virtually anything – like an investment property, and other asset classes provided the investment complies with the regulations and meets the sole purpose test. 

The sole purpose test means your fund must be maintained for the sole purpose of providing retirement benefits to your members or to their beneficiaries in an event where a member dies before retirement. 

More Flexibility and Control

Running your super investments allows you to invest in additional opportunities or quickly adjust your portfolio following market changes. 

Effective Tax Management

Though SMSFs have the same tax rates as other superannuation funds, SMSFs allow for tax strategies that benefit you the most. 


SMSFs let you know exactly how your investments perform, unlike in other large funds where investment performance is not released until months after.


SMSFs have become cost-effective due to competition among service providers and advancements in technology. The operational costs for managing an SMSF are also fixed. 

Protection From Creditors

Creditors cannot access an individual’s superannuation fund unless clawback laws apply, i.e., where someone has transferred their assets into an SMSF to escape creditors. 

Benefit Your Beneficiaries

The distribution of benefits in SMSF is flexible. The income stream can also become a pension when payments occur annually. Since this income source is account-based, you will be given a minimum amount for each year. 

As an SMSF trustee, you are in a fiduciary relationship with the beneficiaries of your SMSF. 

Your basic obligations are as follows:

  • Avoid conflict between self-interest and duty to the beneficiaries 
  • Do not profit from your position as a trustee  

SMSF: What Are the Risks? 

As an SMSF trustee of your superannuation, you must comply with super and tax laws. Before applying for an SMSF, here are the things you should consider:

Time and Money Needed to Manage Your SMSF

According to the April 2019 SMSF Investor Report, SMSF trustees spend eight hours a month on average running an SMSF in Australia.

Managing your own SMSF can be time-consuming, as there are things you need to complete throughout the year, such as:

  • Researching  investments
  • Setting an investment strategy
  • Keeping an SMSF auditor-approved audit every year 

The coronavirus outbreak affected the financial situation of many people in Sydney and other parts of the world. Many business owners felt hesitant to continue entrepreneurship in such uncertain times. 

Unprecedented events, such as a pandemic, could be intimidating, especially for small business owners. Still, with sufficient financial and legal knowledge, investment decisions can be made to mitigate the pitfalls involving property and equities.     

If you are still doubtful, consider seeking professional advice. Make sure to look at the disclaimer, financial product, financial services, and other relevant product disclosure statements on the website of your chosen SMSF specialist before doing business with them. 

Penalties for Non-compliance 

Professional super funds and SMSFs do not benefit from the same regulatory bodies. The Australian Prudential Regulation Authority (APRA) regulates professional super funds, while the Australian Taxation Office (ATO) regulates SMSFs. 

ATO-regulated funds cannot be applied to the government for compensation in the case of theft or investment fraud, unlike APRA-regulated ones. If your SMSF suffers a loss due to fraud, you will not be eligible for remuneration. 

Managing your superannuation means complying with the super rules. The ATO imposes harsh penalties and requires diversification for SMSFs. 

Lack of Access to Complaints Mechanisms

Members of an SMSF do not have access to dispute resolution mechanisms. To resolve a disagreement, members can either use alternative dispute resolution techniques or go to court at their own expense. 

Impact on Insurance

Life and disability insurance can also be harder to obtain for SMSFs than larger superannuation funds. 

When setting up an SMSF consider keeping an adequate balance in your larger super fund account to maintain your insurance. 

Setting Up SMSF

Now that you know the benefits of having an SMSF outweigh the risks, you can start setting up your SMSF. 

To set up an SMSF, you need to:

  • Visit the ATO website
  • Get help from a financial adviser with an AFSL (Australian Finance Services Licence)
  • Choose between becoming an individual or corporate trustee
  • Appoint your trustee
  • Create the trust and trust deed
  • Verify if your fund is an Australian super fund
  • Register your fund and get an ABN
  • Set up a bank account and know the interest rate and term deposits 
  • Have an electronic service address
  • Prepare an exit plan

When you have successfully opened your SMSF, you can start making super contributions. You can also do rollovers, in which you roll your current balance over into your new fund. 

How well you manage your SMSF can determine your quality of life upon retirement. Request a call from an expert to get financial advice and enjoy the benefits of a self-managed super fund.


The more we do to maximise and grow your super today, the more financial freedom you’ll have in years to come find out how a financial planner or adviser can help you with this and more

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