SMSF’s: What is it all about?

An SMSF or self-managed super fund is a superannuation fund that has between one to four members and has elected to be regulated by the Australian Taxation Office (ATO). All members are trustees and all trustees are members, who jointly control and manage the fund. Single member funds need to add in a second trustee, where the fund operates as individual trustees, but the second trustee does not have to be a member. 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.


When running your own SMSF one 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.

Also when running an SMSF you will require:

  • A large amount of money in the fund to make set up and yearly running costs.
  • To budget for ongoing expenses such as professional accounting, tax, audit, legal and financial advisee.
  • 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

Benefits of an SMSF

For Australians SMSFs offer five major advantages which includes:

1. Investment control

Most superannuation funds will allow you to invest into shares, fixed interest and property via managed funds but often with strict restrictions. SMSFs however, offer a large range of additional investment options, including direct property, physical gold and other commodities, derivatives, and subject to various requirements, collectables such as art work. SMSFs also offer the flexibility of gearing with your investments, whereas APRA regulated superannuation funds generally do not offer gearing.

Many industry experts say that beyond choice, the real benefit a SMSF confers is the ability to have more sophisticated investment strategies working for you

2. Effective tax management

Control and flexibility over your SMSF investment decisions affords you the ability and means to consider tax when managing your fund’s investments.

The current SMSF tax rate on income at 15% is one of the lowest of any entity in Australia. This can potentially be reduced further as income from eligible pension assets are not taxed, and benefits can arise from the imputation credits connected with Australian shares. Further, you can also control exactly when to dispose of assets. This reduces the capital gains tax liability.

3. Greater investment flexibility

A SMSF structure also means you can roll your funds into an account based retirement pension or a pre-retirement transition to retirement pension and still exercise flexibility and control over your investments. Also, while you’re receiving your eligible account based pension, any income earned on those assets, or capital gain realized, should be exempt from income tax.

4. Capacity to pool your super with up to three other individuals

SMSFs provide you the ability to pool your resources with up to a maximum of four members. For many Australians, this has translated into a growing number of family run SMSFs. This increased investment pool allows you to potentially access lower administration costs as well as accessing investment opportunities that may  not be available to smaller investment amounts.

5. Estate planning flexibility

SMSFs offer greater flexibility with your estate planning needs. You can set up and leave tax advantaged income streams to dependent beneficiaries. SMSFs can also make binding death benefit nominations that do not lapse, unlike many public offer super funds, which tend to require binding death benefit nominations to be updated every 3 years.

Read more: life insurance.

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