Self-Managed Super Funds

A self-managed super fund (SMSF) is a type of superannuation fund that you establish and manage yourself. It can have up to six members, and each member is typically required to act as a trustee or director of a corporate trustee. 

As trustees, the members are responsible for every aspect of running the fund. This includes making all investment and insurance decisions, as well as ensuring the fund meets its tax, reporting, and compliance obligations. 

While an SMSF offers greater control over your retirement savings, it also comes with added complexity, time commitments, legal obligations, and the need for specialist knowledge. For this reason, it’s important to carefully consider all your options before deciding. 

One of the main considerations when establishing an SMSF is how much it will cost to set up and run the fund compared to other types of super. 

The set-up costs are for registering your SMSF and preparing the necessary documents to make your fund compliant, such as establishing the trust deed and investment strategy for the fund. Additional costs may be applicable if you wish to set up a company to act as trustee for the fund. Many people engage an SMSF administration service provider to help them with all this. 

On top of that, you’ll also have ongoing costs and expenses. This may include: 

• annual supervisory levy paid to the ATO 
• administration and accounting costs for your financial statements and tax return 
• auditing costs  
• investment or financial advice costs 
• insurance premiums 
• interest expenses 
• management and administration expenses, and
• legal advice costs if you have any specific legal requirements, such as complex estate planning requirements. 

The cost to set up and maintain an SMSF can vary substantially depending on the size of your fund, what the fund is invested in and how often you buy and sell assets. While an SMSF can be cost competitive with other fund types, they can also be more expensive, particularly if you only have a small balance to start with.

Generally, anyone can be a member of an SMSF. However, to be a trustee (or a director of a corporate trustee) of an SMSF, you must:  

• be at least 18 years old  
• not have a legal disability that makes you incapable of making your own financial decisions, and
• not be bankrupt, insolvent, convicted of an offence involving dishonesty, or meet one of the ATO’s other definitions of being a disqualified person 

If you elect to set up a company to act as trustee for your fund you will also need to be appointed as a director of the company and apply to be issued with a Director Identification Number. See the ATO website for more details.

One reason why some people want to set up an SMSF is to purchase a property through their fund. While this is possible, investing in property via an SMSF needs to be considered carefully. Diversification and increased investment risk should be considered, because most of the fund’s assets may end up tied up in just one asset. Factors to consider include whether the fund will have sufficient cash flow and liquidity to pay any expenses and whether the property’s expected rental yield and capital growth will line up with your retirement objectives. 

There are also a range of strict investment rules that you will need to keep in mind when owning something like a residential property via an SMSF.  

For example: 

• None of the SMSF members nor any of their related parties (such as their relatives) can live in or use the property for their private or domestic purposes, even if it’s just for a short period, such as a holiday  
• Your SMSF cannot generally acquire a property from any of the members of the fund or their related parties, unless the property is used wholly and exclusively in one or more businesses. 

While there are some concessions that can allow a member or other related party to lease a business premises from their fund, these rules are complex and we recommend you speak to a financial adviser about them.    

There are also strict conditions about borrowing money to purchase a property through your SMSF. You can read about these conditions and other SMSF rules on the ATO website. 

Closing an SMSF requires careful planning to meet legal and tax obligations. All trustees must agree to close the fund and notify the ATO within 28 days. You’ll need to review the trust deed, sell assets at market value, settle any outstanding liabilities or taxes, and complete and lodge any final reports, such as the fund's final annual tax and compliance return, with the ATO. An approved SMSF auditor must complete a final audit before you lodge your last annual return. 

If your SMSF had a corporate trustee, it generally must be deregistered with ASIC, and the ATO will cancel the fund’s ABN. Trustees should keep records in compliance with legal obligations after closing the fund. It’s recommended you seek professional advice as the process can be complex and errors may lead to penalties. 

Once everything’s finalised, the balance of your SMSF can be transferred to your chosen super account, such as FirstChoice Super. 

The above information should not be considered as legal, financial, tax or any other type of advice. This information may include general advice but does not consider your individual objectives, financial situation, needs or tax circumstances. You should read the relevant Product Disclosure Statement (PDS), Financial Services Guide (FSG) and Target Market Determination (TMD) carefully, assess whether the information is appropriate for you, and consider talking to a financial adviser before making an investment decision.