A self-managed super fund is often referred to as an SMSF or “Do It Yourself” (DIY) super fund. Similar to other superannuation funds, self-managed super funds invest contributions made by members, provide benefits to members when they retire and provide death benefits to beneficiaries in the event of a member’s death.

The main difference between a self-managed super fund and other types of superannuation funds is that the members of an SMSF are also the trustees, or directors of a corporate trustee.  This means they are required to prepare and implement an investment strategy for their fund, accept contributions and manage the payment of benefits.

SMSFs also provide a broader investment choice than other super funds, with options including direct property and direct shares.

The trustees (members) of an SMSF must appoint approved auditors, and may also choose to involve tax agents, accountants and financial advisors as well as administrators. However, ultimately the legal responsibility for the fund’s ongoing compliance rests with its trustees.

While Self-Managed Super Funds (SMSFs) can provide significant advantages such as control over investment choices and potential tax benefits, there are a number of issues to be considered and a professional SMSF advisor should be used to help you manage the SMSF effectively. The main points to consider included:

1. Complexity: Managing an SMSF requires a thorough understanding of financial markets, legal obligations, and compliance with specific regulations. The administrative complexity can be overwhelming for some individuals.
2. Time-Consuming: Managing investments, keeping records, and fulfilling reporting requirements can be very time-consuming. The responsibility of running the fund effectively falls solely on the trustees.
3. Costs: While SMSFs can offer cost benefits in some situations, the setup and ongoing management fees, including auditing and legal compliance costs, can be high. These costs might not be justified for those with a lower balance.
4. Investment Risk: Without professional investment advice, there may be higher risks associated with investment choices. Lack of diversification or poor investment decisions can affect the fund’s performance.
5. Limited Access to Government Compensation: Unlike members of APRA-regulated funds, SMSF members do not have access to government compensation in the event of theft or fraudulent conduct.
6. Succession Planning Issues: There might be complexities in transitioning the SMSF upon death or incapacity of a member. Effective estate planning is essential but can be more complex with an SMSF.
7. Lack of Consumer Protections: SMSFs do not have the same level of consumer protection as other super funds, which might leave members more vulnerable to fraud or mismanagement.
8. Potential Conflicts: In an SMSF with multiple members, conflicts may arise between members regarding the investment strategy or management of the fund, leading to disagreements and potential legal disputes.
9. Regulatory Changes: SMSFs are subject to laws and regulations that may change, affecting the fund’s operation and benefits. Staying abreast of these changes can be challenging for the layperson.
10. Limited Access to Certain Investments: Some investment opportunities might only be accessible to larger funds, limiting the choices available to smaller SMSFs.

It’s essential to consider these points and consult with financial and legal professionals specialising in SMSFs to understand whether it’s an appropriate option for your financial situation and retirement goals.

If you want control over your superannuation assets and retirement plan, then self managed super is an excellent planning opportunity for families, but has the attendant regulatory requirements and responsibilities for trustees of managing their investments. An SMSF can offer advantages to small business owners as well as high net worth individuals. Our team can help to identify whether an SMSF is an effective tool for you.

As soon as we receive your signed self managed super documentation your super fund can be set up, however the roll over of funds from your current super fund may vary in time depending upon the fund, and ATO registration can take up to 28 days. To set up a self managed super fund click here and speak with our team.

Once you have signed the self managed super fund documentation, spoken with our super specialists and decided on the name of the super fund we shall complete all the necessary requirements for you, including:

In most cases, all members of the self managed super fund need to be a permanent resident of Australia and either a trustee or director of the trustee company, so it’s important to make sure all members are eligible to be trustees. Generally, anyone aged 18 years or over and not under another legal disability (such as  mental impairment) or a disqualified person (such as a bankrupt) can be a trustee.

Single member self managed super funds must have either two individual trustees or a corporate trustee.  Where the trustees are individuals, one trustee must be the fund member and the second trustee must not be the fund member’s employer, unless they are relatives. ,

Where the trustee is a company, the fund member must be the sole director or one of two directors.  If there are two directors, the fund member must not be an employee of the other director, unless they are relatives.

Self managed super funds with more than one member can also have either individual trustees or a corporate trustee. Where the trustees are individuals each member of the fund must be a trustee and each trustee must be a member of the fund. A member cannot be an employee of another member unless they are relatives. Some state and territory laws restrict the number of trustees a trust can have to less than six. Where the trustee is a company each member of the fund must be a director of the corporate trustee and each director of the corporate trustee must be a member of the fund. A member cannot be an employee of another member unless they are relatives.

Where a member is under a legal disability a member’s legal representative can act as trustee, or director of the corporate trustee.

In all cases directors of a corporate trustee need to have a director ID.

The duties of a self managed super fund’s trustees are governed by the Superannuation Industry Supervision (SIS) Act 1993, the fund’s trust deed and trust law.  They include a responsibility to:

• act honestly in all matters concerning the fund
• act in the best interests of all fund members when making decisions
• manage the fund separately from personal superannuation affairs
• know, understand and meet trustee responsibilities and obligations
• ensure that the SMSF complies with the laws that apply to it
• exercise the degree of skills and judgement of an ordinary prudent person when handling the financial affairs of another person
• maintain records and discharge ATO requirements (the ATO, and not APRA, is the regulator for SMSFs)
• comply with investment restrictions
• accept superannuation contributions and pay benefits according to superannuation and tax laws
• appoint an approved SMSF auditor each year
• review and update the self managed super fund’s trust deed and investment strategy

As a trustee of a self managed super fund, you generally cannot acquire non-cash assets from related parties, such as fund members, their families and partners and related companies and trusts. There are some significant exceptions including listed shares and securities and business real property (land and buildings used wholly and exclusively in a business).

A self managed super fund investment strategy sets out the fund’s investment objectives and how you plan to achieve them. It provides SMSF trustees with a framework for making investment decisions to increase member benefits for their retirement. There is no prescribed format for the SMSF investment strategy but it needs to be in writing to reflect the purpose and circumstances of the fund.

With self managed super you can invest in a broad range of investments, all of which must be held by the fund and purchased with the intention of providing benefits in retirement for the members.  Investments are subject to the super fund’s investment strategy and the laws which regulate what assets a self managed super fund can invest in.