An SMSF, or self-managed super fund, is a private superannuation fund that you oversee personally. Unlike industry and retail super funds, SMSFs give you the autonomy to manage your investments and insurance.

By directing your contributions into your SMSF instead of a retail or industry fund, you have the freedom to select your investments and insurance options.

An SMSF can have a maximum of six members, each of whom serves as a trustee of the fund or can opt for a corporate trustee. In both scenarios, members bear the responsibility for the fund.

While the idea of controlling your own super may be attractive, it requires significant effort and carries inherent risks.

Only establish your own super fund if you are fully committed and comprehend the associated responsibilities.

SMSFs take time and money

Operating a self-managed superannuation fund (SMSF) requires significant effort. Even with professional assistance, it remains a time-consuming task.

It is essential to allocate enough time for establishing the fund and managing ongoing activities, such as:

• conducting investment research

• staying updated on superannuation and tax law changes

• developing and evaluating an investment strategy

• handling accounting, record-keeping, and arranging an annual audit by an accredited SMSF auditor

On average, SMSF trustees dedicate over eight hours per month to managing their SMSF, totaling more than 100 hours annually (Source: SMSF Investor Report, April 2021, Investment Trends).

While some costs are tax-deductible, most SMSF expenses must be covered out of pocket.

Set-up costs

The set-up and running costs of an SMSF can be high. Ongoing costs can include:

• investing

• accounting

• auditing

• tax advice

• legal advice

• financial advice

• insurance premiums

Some costs may be tax deductible, but most will be out-of-pocket expenses for the SMSF.

You need financial and legal knowledge

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Having the necessary financial and legal expertise involves:

• establishing and overseeing an investment strategy that aligns with your risk tolerance and retirement goals

• adhering to tax, superannuation, and investment regulations

• organizing insurance coverage for members of the fund

• comprehending various investment markets, as well as constructing and overseeing a diversified investment portfolio

SMSF starting balance

When deciding to establish an SMSF, it is crucial to consider the overall suitability rather than solely focusing on the initial fund balance. 

An SMSF with a modest starting balance might be appropriate if, for instance:

• You are prepared and capable of handling most of the SMSF's administration and management on your own

• You intend to include a business property, inheritance, or funds from another superannuation account in your SMSF

There are situations where an SMSF with a higher starting balance may not be suitable due to not aligning with your goals, financial position, or requirements. 

For instance, you may lack the expertise, time, or experience to serve as an SMSF trustee. 

ASIC has developed case studies to assist you in determining the suitability of an SMSF based on your superannuation balance. 

When a SMSF might be suitable for you

There are certain signs that may indicate that an SMSF is a suitable option:

• If you are ready to actively participate in managing your financial matters

• If you possess a good understanding of your responsibilities as an SMSF trustee

• If establishing an SMSF will assist you in reaching your objectives and goals

• If setting up an SMSF would be a cost-effective choice for you

The ATO provides information on SMSF expenses based on fund size.