What Is A Self-Managed Super Fund (SMSF)?

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Most Australians make their retirement contributions to a super fund managed by a third party such as a large financial institution or an industry body. You can also manage your own super as opposed to putting it in a retail or industry super fund. This private super fund you manage yourself is called a self-managed super fund (SMSF).

An SMSF is set up for the sole purpose of providing retirement benefits for members or their dependents if any of the members pass away before retiring. Here's a look at what setting up an SMSF entails, and the benefits and drawbacks of the self-managed route.

Who can be a member of an SMSF?

First off, an SMSF can have no more than six members. All members run the fund collectively. Often, all members of an SMSF belong to the same family.

The members of an SMSF can serve as trustees or appoint a company as trustee (corporate trustee). A member cannot be the employer of another member unless they are a relative.

Members must be willing to carry out their trustee responsibilities and indicate their consent by signing a trustee declaration. This is a document declaring trustees legally responsible for ensuring their fund's compliance with superannuation legislation.

If you appoint a corporate trustee, you and every other member must be a director of the company. The company must be registered with the Australian Securities and Investments Commission (ASIC).

An SMSF trustee cannot be:

  • An individual who has been convicted of an offense involving dishonesty in Australia or overseas
  • Currently bankrupt or insolvent under administration
  • Previously disqualified as an SMSF trustee by a court, the ATO or ASIC

Benefits of an SMSF

Tax effective

The tax rate on earnings within a super fund is 15%. Super benefits are tax-free from age 60 onwards. If you start a super pension income stream, the earnings on the funds you transfer from your accumulation account to your retirement account are tax-free. Tax saving strategies can be applied to a complying SMSF. The assessable income includes employer and personal deductible contributions; net capital gains; and interest, dividends, and rent.

Greater investment choice

An SMSF offers more control than a regulated super fund over how you want to invest your money. You can invest in all the products available to regulated funds, including term deposits, shares, exchange-traded funds, and art. You can also invest in products unavailable to public funds. For example, you cannot directly purchase property via industry or a retail super fund. This is possible with an SMSF. As a small business owner, you can purchase a commercial property through your SMSF and lease it back to a member to use in the business. You will essentially be creating a rental income stream and the potential for capital gains in the property.


If greater visibility over your retirement savings is a priority, you're better off with a self-managed super fund. Given the size of retail and industry funds, reports on their investment performance aren't quickly available to you. With the right software, it's easier to track the performance of your SMSF as frequently as you would like. You have more flexibility and control to plan your investment and lifestyle decisions.

Self-managed super funds are not without their drawbacks. Ask yourself whether you can devote time towards understanding tax laws governing superannuation. Note that non-compliance can increase your tax rate to up to 47%. As your investment decisions will affect your retirement savings and assets in the fund, decide whether you can take on the responsibilities of running your super or hire a qualified professional to do the heavy-lifting for you.

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