Investing using a Self-Managed Superannuation Fund ("SMSF")

The Australian Superannuation Scheme has been a core focus of the Australian Government and finance sectors for decades.  Your superannuation fund will most likely be the primary vehicle for achieving your retirement goals and if managed properly, it should end up being one of your largest assets and hopefully, more than enough to support you as you enjoy your retirement. 

SMSF’s have gained popularity since favourable tax changes were implemented in 2007. According to latest estimates, in excess of 600,000 SMSFs are now in operation in Australia and control about a third (32%) of the total $2.3 trillion invested via superannuation funds. Those Australians taking an active interest in their superannuation are discovering the financial benefits offered by establishing their own superannuation fund by rolling over their industry fund balance into their own fund.  Employer contributions, currently 9.5% of salary, can continue to be made - to the new SMSF. 

The average balance for SMSFs exceeds $1.1 million (noting – an SMSF can have up to 4 members, but most common between husband & wife), which is considerably higher than most individual retail / industry super funds that members use to park their 9.5% employer contributions. Given that Australians rely on their super to fund their retirement, and many analysts believe that now a super fund balance of $1.1 million is not nearly enough for a ‘comfortable retirement’ – it’s no wonder that SMSFs are becoming a popular alternative to retail and industry superannuation funds.


Benefits of SMSF

An SMSF can be an attractive investment, primarily due to:

Greater Investment Choice & Flexibility– as trustees you decide what you want to invest in, such as shares, property funds or direct property and determine when your benefits are paid – in other words, SMSFs allows you to control your wealth creation strategy in super.


Low taxation rates – the Government’s low tax rates that are available for SMSFs deliberately encourages Australian’s to improve their ability to accumulate their wealth. This will ultimately reduce the financial burden we place on the Federal Government because of Australia’s aging population. Tax rates can be as little as 0%.


Insurance Options – similar to industry and retail funds, SMSFs can also be structured to include insurances such as life insurance, accident, sickness, permanent disability, death and other insurances within their framework.


Pooled Family Super – the family can pool assets together with other family members in one fund, while maintaining separate and individual member balances.


Borrowing – since 2007 SMSF have been able to use borrowed money to acquire assets such as a direct property. This structure has the potential to significantly improve wealth creation and the overall fund balance by the time you transition to retirement – in other words, gives you the ability to leverage for improved and faster accumulation of wealth.


Cost efficiencies – the larger the fund balance, the smaller percentage of the overall fees. The average cost is around .35% pa to run this type of fund whereas retail and industry funds can range from 1% - 2% pa.


There are of course, many more benefits to establishing your own self-managed superannuation fund. But watch out! SMSFs are heavily regulated by the Australian Taxation Office (ATO).

There are many rules and obligations that a trustee of an SMSF must be aware of, and comply with or risk the wrath of the ATO. There are many responsibilities and obligations for every trustee and member that comes with significant consequences if the fund is not managed and administrated according to legislative and compliance requirements. Consider using a full service administrator who can support trustees in all areas of administering the fund and help them meet the legal and compliance obligations.