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what is an SMSF?

So you’re new to SMSF and are looking to take charge of your super. Being in the driver’s seat gives you the control but also comes with responsibilities.

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Self-managed superannuation funds (SMSFs) have been the fastest growing segment of the finance industry, with more people taking control of their retirement savings.

Many investors want to take advantage of particular investment options not available in normal super funds, such as direct property, exotic investments and collectibles, such as stamp collections and art.


  • Greater control and flexibility than normal public offer (ie retail) and industry super funds.
  • Able to borrow to invest in property, other than cash, consistent with a fund’s investment strategy.
  • Able to invest directly in commercial property, residential property and collectibles.
  • May be an attractive structure in which small business owners can own their business premises.
  • May allow members to trade a wider range of shares than may otherwise be available in a retail fund.
  • Tax deferral – super funds generally deduct 15 per cent tax as soon as a contribution is received, whereas SMSFs don’t work out and pay their tax liability, if any, until sometime after the end of the financial year, allowing this money to work in the fund a bit longer.


  • As a trustee, there will be demands on your time for administration, monitoring and reviewing assets and their performance.
  • Auditing costs, supervisory levies, administration and valuation costs may be incurred.
  • Super is complex and ever changing and your responsibility is to remain abreast of laws and changes.
  • Personal use of investments is not allowed, eg using your own investment property, displaying art and collections in your home etc.
  • There are severe penalties if rules are breached, particularly personal use of fund investments (with the exception of business property).
  • An SMSF is not protected by the Australian Prudential Regulation Authority where there is fraud or loss of funds.
  • Where there is a dispute it will need to go to court instead of the Superannuation Complaints Tribunal.
  • It is difficult for an SMSF to make an ‘anti-detriment payment’ when a member dies. (These payments reimburse contributions tax paid by the deceased).

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What is an SMSF?

An SMSF is one where you, as a trustee and member, have responsibility over the management, investment and administration of your super fund. SMSFs are quite different from other super funds because they’re run by you, for you and any other members of your SMSF. SMSFs are established for the purpose of building retirement savings.

A super fund (except in the case of a single member fund) is an SMSF if all of the following apply:

  • the fund has up to four members
  • if the trustees of the fund are individuals, each individual trustee is a member
  • if the trustee of the fund is a corporation, each director of the corporation is a member
  • each member is a trustee of the fund or a director of the corporate trustee of the fund
  • no member is an employee of another member, unless they are related; and
  • no trustee of the fund (or director of a corporate trustee) is paid for services performed in relation to the fund, except in certain limited circumstances.

It is also possible for you to set up your fund with only one member.

SMSF structures can be quite simple or complex depending on your needs. There’s a lot to consider, but you can outsource aspects, such as administration or preparing the investment strategy, to save you time and free you up to focus on what’s important to you.

What are the benefits of having an SMSF?

The benefits of SMSFs include:

  • Greater control over your super, as you make the key decisions and you’re in charge of where you invest your money.
  • Flexibility and choice. You construct your fund’s investment strategy and enjoy more investment choice. The choice of investments in SMSFs is far greater than what other super arrangements can offer. You can invest in property, direct shares, cash, term deposits and more.
  • Costs. You are in control of what services you require and how much you pay for them.
  • Tax advantages. There are potential tax savings in SMSFs depending on your personal circumstances and investment strategy.
  • Pool your super with family or other members of the fund, for potential cost savings.
  • The potential to borrow to buy a property within your super fund.
  • Insurance can be included in your SMSF to protect your income and assets, for example life insurance, total and permanent disability (TPD) and income protection.
  • Planning for when you’re not around, by specifying who you want to leave your money to.

What type of investments can you make?

Common types of investments in SMSFs are:

  • Shares and other listed securities including exchange traded funds (ETFs).
  • Separately managed accounts – where a share portfolio is constructed and managed by a professional investment manager based on your needs.
  • Managed funds – covering most asset classes including Australian and international shares, property, alternative assets, fixed interest and cash.
  • Term deposits.
  • Direct property – including business, residential, commercial and retail property.
  • Other assets such as derivatives, unlisted shares and collectables (for example artworks).

Super law doesn’t specify the various types of investments for super funds, however the Superannuation Industry (Supervision) Act 1993 requires trustees to comply with a number of duties and obligations when making investment decisions.

What are your responsibilities as a trustee?

SMSFs give you full involvement in your fund’s operation and the opportunity to make decisions around how your super is managed. However, as an SMSF trustee, you’re also responsible for running the fund in accordance with your fund’s trust deed, as well as super, taxation and corporations law and other general rules such as trust law.

You will need to stay on top of your fund’s ongoing compliance requirements including tasks such as fund reporting, record maintenance and monitoring, meeting minutes, statutory obligations, tax, audit and actuarial reporting.

What’s the difference between an individual and corporate trustee?

An SMSF can have either individual trustees or a corporate trustee. In the case of individual trustees, each member of the fund is appointed as a trustee of the fund, while with a corporate trustee, each member of the fund is a director of the corporate trustee.

An SMSF may have individual trustees, however a company trustee may be a good option where:

  • there is only one fund member
  • membership of the fund may change, eg through divorce or children subsequently joining the fund, or
  • it’s envisaged that the fund will outlast the original members.

Choosing between an individual or corporate trustee structure may influence the way you manage your fund, so it’s important you choose the option that meets your needs.

What will your SMSF cost?

The costs of setting up and running an SMSF vary depending on, among other things, your circumstances, super balance, investment strategy and how you choose to manage your fund. The more complex you make it, the more it is likely to cost.

What do you need to consider before starting?

There’s a lot to consider before you decide to set up an SMSF. This includes, among other things, your super balance, the number of members joining the fund and their ages, how much time you have to spend on your SMSF, your retirement goals, investment preferences and your risk profile.

You generally need someone to help you set up your SMSF (such as a financial planning adviser, accountant or an SMSF administrator).

You generally need to have a reasonable amount of super, or be looking to build up your super quite quickly, to justify the costs of an SMSF. Everyone has a different view of ‘how much’ money is enough to start an SMSF, but as a guide the ATO’s suggests a minimum of $200,000 (that is, if the total balance of all members in the fund equates to $200,000 or more).

As an SMSF trustee, it is important that you are aware of and understand the duties, responsibilities and obligations of being a trustee. You will need to ensure that your fund operates in accordance with all applicable laws. You will also need to be aware of and follow the rules set out in your fund’s trust deed.

You need to be comfortable making investment decisions around when, where and how to invest or consider working with an adviser to help you. In particular, you should seek advice around borrowing if this is of interest to you. Depending on your circumstances, gearing in your super may not be appropriate.

You should consider discussing your situation with an adviser before deciding if an SMSF is right for you.

How do you set up an SMSF?

The general process of setting up an SMSF involves creating a trust deed, appointing trustees, completing ATO forms, setting up a bank account, rolling over your super, setting an investment strategy and so on. An ipac financial adviser or the ipac™ smsf administration service can help you with this process.

What happens after you set up an SMSF?

This is when you begin to take control of your super by setting up and implementing your investment strategy.

However, on an ongoing basis there’s a lot that needs to be done to maintain your SMSF and keep on top of the administration and compliance. The laws governing SMSFs are complex and can change – you need to ensure you stay on top of regulation changes and compliance.

This is where a quality support network is really important. An ipac adviser or the ipac™ smsf administration service can help you with your compliance responsibilities, as well as the day-to-day running of your fund, by keeping track of contributions, assets you purchase, income, expenses to be paid, taxation and other kinds of reporting requirements.

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is an SMSF right for me?
whether you are starting out or already have an SMSF, an ipac adviser can help, call 1800 626 881 or enquire online

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