Self-Managed Superannuation Funds

Self-Managed Superannuation Funds (SMSF’s) is now the largest superannuation fund sector in Australia.

The Facts

Since 1999, the sector has grown from around 200,000 SMSFs with $55 billion in assets to 600,000 SMSFs totalling $750 billion in assets in 2020. Today, SMSFs comprise nearly one third of Australia’s total $2.76 trillion retirement system and has over 1 million members.

Why have SMSF’s become so popular with Australians?

More and more Australians are embracing the flexibility, greater control and value that SMSF’s deliver and they are rapidly becoming the retirement vehicle of choice. The principal motivator for the shift to SMSF is the desire to gain control instead of leaving all the important decision making to other parties such as fund managers. Moreover, the ability of SMSF to borrow for the purpose of direct property investment has also been a major factor in its popularity

Who should consider a SMSF?

SMSF’s are generally more cost effective once the members combined resources reach $200,000. They are suitable for investors looking for control over their superannuation assets. SMSF’s are not for everyone, and you must be sure you understand your responsibilities before you go ahead and set one up. There are some useful publications by the ATO to help with your decision click here for ATO publications. SMSF clients may still be accumulating their superannuation or may have moved into pension phase

What are the benefits of having a SMSF?

SMSF’s give members unique control of their investments within the legal framework. Because of this, members feel more comfortable about having their money in superannuation. They are generally very cost effective and present opportunities for more meaningful integration of super into a member’s total investment portfolio and retirement planning. SMSF’s also offer excellent flexibility for tax and estate planning.

Other benefits include

  • increased flexibility in asset selection
  • can have between 1-4 members in the fund and allow the pooling of resources of other members with similar financial objectives
  • provide maximum flexibility in relation to the usage of pension streams
  • give you the ability to transfer personally owned shares and other listed securities directly into superannuation
  • give you the ability to own your business’ real property (but not operating assets) in the superannuation fund, assisting funding and cashflow problems for many businesses.

Responsibilities of SMSF Trustees

The decision to become a trustee of a self-managed super fund (SMSF) shouldn’t be taken lightly. As a trustee, the responsibility of running the fund and complying with the law rests solely with you.

As a trustee of a SMSF, you must act in accordance with:

  • the fund’s trust deed
  • the super laws
  • the company’s constitution and the Corporations Act, where you are a director of the corporate trustee

The SIS Act is a guideline for what is required of a trustee. It sets down the duties and responsibilities of a trustee. As a trustee, you are legally obliged to:

  • act honestly in all matters concerning the fund
  • act in the best interests of all the fund members
  • keep the fund money and asset separate from any other personal or business money and assets
  • develop and implement an investment strategy

These requirements have to be included in the trust deed of a fund.

You can seek advice and assistance from third parties, such as accountants and financial advisers. However, ultimate responsibility and accountability lies with you as the trustee.

Three most popular investment classes

Year in year out the three most popular investment classes for SMSF trustees are: direct shares, cash and direct property.


You can invest in shares through an SMSF, both domestic and international. In fact, shares are the most popular asset class, with 31% of all SMSF portfolios being made up of shares, according to the ATO’s 2017-18 annual report. Listed shares in SMSFs are worth almost $215 billion.

Shares are a popular investment choice among SMSF investors for a number of reasons:

  • They’re relatively inexpensive depending on brokerage;
  • They’re easily transferable, and can be bought and sold quickly with little admin;
  • They’re a pretty easy to understand product, especially if you’re buying an exchange-traded fund (ETF); and
  • They can come with several tax benefits, such as franking credits and capital gains tax discounts.

Shares tend to be one of the more volatile asset classes however generally they have stronger long term returns. It is important however to seek professional investment advice when structuring your share portfolio to ensure you consider your attitude to risk and the various direct and indirect share based investment options.

Cash and term deposits

You can also invest in cash and term deposits with an SMSF. In fact, this is the second most popular investment option, with over 21% of total SMSF portfolios being made up of this asset class according to the ATO’s 2017-18 data. That’s almost $159 billion.

Investing a portion of your portfolio in a term deposit or savings account can be suitable to conservative investors, as cash is generally the lowest-risk investment class. While cash generally has extremely low interest rates and generates lower returns compared to riskier asset classes, you know exactly what you’ll be earning throughout the entire term. During volatile periods, having a portion of your SMSF deposited in cash can help stabilise your losses.

Self-managed super fund property investment

Some Australians use their SMSF to buy an investment property that provides a regular rental income. According to ATO data, $20 billion was invested in residential investment properties via SMSFs in 2014. Come 2018, that figure was more than $36 billion. In total, property now accounts for 13% of the total assets held in SMSFs.

You can buy multiple investment properties through an SMSF, but it’s crucial to remember: You can’t buy a property through an SMSF if you intend to live in it. According to ASIC, you can only buy investment property through an SMSF if the property meets the following criteria:

  • It meets the 'sole purpose test' of solely providing retirement benefits to fund members;
  • It must not be acquired from a related party of a member;
  • It must not be lived in by a fund member or any fund members' related parties; and
  • It must not be rented by a fund member or any fund members' related parties

Investing in property through an SMSF, whether that’s by yourself or with up to four people in a trust, is attractive to many SMSF members because property is a tangible asset that can increase in value and provide a regular income stream.

Getting advice on setting up your own SMSF

Select Advice Financial Planning can assist you determine whether setting up a SMSF is right for you. After gaining a comprehensive understanding of your personal financial circumstances and retirement plans, we can advise you on how a SMSF can assist you achieve your goals. We will also outline the benefits, fees and responsibilities involved in setting up your own fund and how we can assist you with ongoing strategic advice.

If you decide that a SMSF is for you, we can arrange for our professional alliance partners to assist you with setting up the trust deed and other related documentation. We can also show you how easy it is to join the growing number of Australians who are enjoying the powerful benefits of investing in real estate within their own SMSF.

Make an Appointment

For more detailed information on any of the topics discussed in this section please contact us today and our Senior Financial Planner will meet with you to discuss setting up your own Self- Managed Super Fund.