Self Managed Super Funds

Self-managed superannuation funds (SMSFs) are a popular option for investors seeking flexibility and greater control of their superannuation. But the decision to establish an SMSF should not be taken lightly. Whether an SMSF is suitable for you will depend on your needs and circumstances and whether you are willing to take on the duties and obligations of being a trustee.

What are SMSFs?

SMSFs are small superannuation funds which are established and operated by the members of the fund. Under the superannuation rules, the members of an SMSF are generally required to act as a trustee of the fund or as a director of the fund’s corporate trustee and are legally responsible for managing the fund in accordance with the relevant superannuation laws.

What are the advantages of SMSFs?

Because SMSFs are self-managed they can be more flexible and give members more control over how their super savings are invested and managed. For example, SMSFs can allow members to:

  • develop a tailored investment strategy that is specific to their needs and circumstances rather than having to invest via a pooled structure
  • be directly involved in making the investment decisions for the fund
  • invest in alternative asset classes not available in large funds
  • acquire certain business premises which can then be leased back to a related party, such as a member, to use in a business
  • gear their superannuation savings by implementing a limited recourse borrowing arrangement
  • pay retirement income streams tailored to their specific requirements
  • implement estate planning strategies tailored to their specific needs and circumstances.

SMSFs can also be more cost effective than large superannuation funds. However, this very much depends on how involved you want to be in managing your fund and whether your fund will be large enough to justify the costs associated with running an SMSF.

While cost is an important consideration there are a number of other important issues to consider before deciding that an SMSF is right for you.

Risks of an SMSF structure

There are a number of risks associated with SMSFs that you should be aware of. These include:

  • SMSFs are ineligible to apply to the Federal Government for a grant of financial assistance to compensate the members where the fund has suffered a loss due to theft or fraud
  • SMSF members and trustees do not have access to the Superannuation Complaints Tribunal to resolve disputes. Instead, members and trustees may need to take legal action to resolve any disputes which can be very costly and time consuming
  • significant tax and trustee penalties can apply for any breach of the superannuation or tax laws that apply to the fund
  • where members/trustees become non-resident the fund may fail to meet the definition of an Australian Superannuation Fund and incur significant tax penalties aa where a member becomes disqualified they are prohibited from acting as trustee which could result in the fund being wound-up. An example is where a trustee becomes bankrupt.

Before setting up an SMSF you should carefully consider the membership structure of your fund as any breakdown in the relationship between members could have a significant impact on the fund. Where the proposed membership structure is unusual, such as funds established by business partners, friends or siblings, you may need to consider how any risks could be mitigated, managed or avoided.

Is an SMSF suitable for me?

While SMSFs have a number of attributes that may make them attractive to some people, it is very important to understand that they are not suitable for everyone. Whether an SMSF will be suitable for you depends on a range of factors. These include:

  • whether the fund will have sufficient assets to justify the costs involved in running an SMSF
  • if you have the necessary investment skills and experience required to manage your own superannuation savings
  • whether you are happy to accept the responsibilities of being a trustee or whether you are disqualified from acting as a trustee of a superannuation fund
  • what you would want to happen with the fund if you or one of the other members died or became incapacitated.

If you are uncertain you should consult your financial adviser who can advise whether an SMSF would be suitable for you.

ATO SMSF Publications

The ATO publishes a number of guides in relation to the different aspects and obligations of running an SMSF. These guides are available on the Super Funds page of the ATO website at

  • setting up a self-managed superannuation fund
  • running a self-managed superannuation fund
  • how your self-managed superannuation fund is regulated.

Getting help

You may decide to engage a number of professional SMSF service providers to help you run your fund and invest the fund’s assets. These include:

  • an accountant that provides SMSF administration services
  • a specialist SMSF administration service
  • a financial adviser.

Contact Rowland Financial Advisory for more information.