Are Self-Managed Super Funds Worth It? Explore the Pros and Cons Of An SMSF

is self managed super worth it

Are you considering a self managed super fund (SMSF) for your retirement savings? While there are potential benefits, it’s important to weigh up the pros and cons before deciding if it’s worth it for you.

On the one hand, SMSFs offer greater control over investments, potential tax advantages, and the flexibility to invest in a wide range of options. On the other hand, they require time and expertise to manage, and there are associated costs and risks involved.

In this article, we’ll explore the ins and outs of SMSFs, discussing the regulations, investment options, tax considerations, and more. By the end, you’ll have a better understanding of whether self managed super is worth it for you.

Key Takeaways:

  • Self managed super funds (SMSFs) offer greater control and flexibility over investments, as well as potential tax advantages.
  • However, SMSFs require time, expertise and come with associated costs and risks.
  • This article will explore the pros and cons of SMSFs, discussing regulations, investment options, tax considerations, and more.

What Are Self Managed Super Funds?

Self managed super funds, also known as SMSFs, are a type of super fund that gives its members greater control over their superannuation investments. Unlike traditional super funds, where investment decisions are made by professional fund managers, SMSF members have the ability to choose exactly where their money is invested.

SMSFs can have a maximum of four members, and each member is also a trustee of the fund. This means that each member has a say in the investments made by the fund, as well as the administration and compliance of the fund.

Some of the investment options available to SMSFs include shares, property, term deposits, and managed funds. SMSFs can also borrow money to invest in property, subject to strict borrowing rules.

It’s important to note that SMSFs come with greater responsibilities and administrative requirements than traditional super funds. SMSF trustees must comply with strict rules and regulations set out by regulatory bodies, including the Australian Taxation Office and the Australian Securities and Investments Commission.

Rules and Regulations for Self Managed Super Funds

Self managed super funds (SMSFs) are regulated by the Australian Taxation Office (ATO). These funds must comply with the relevant regulations to maintain their complying status, which is necessary for tax concessions and superannuation law compliance. The SMSF rules and regulations are designed to protect the interests of the members and ensure the fund operates in a sustainable manner.

The main rules and regulations for SMSFs include:

SMSF trustee structureEach SMSF must have at least one individual trustee or a corporate trustee with a minimum of two directors. All trustees must be members of the fund, and all members must be trustees or directors of the corporate trustee.
Investment restrictionsSMSFs must maintain an investment strategy that aligns with the retirement goals and risk tolerance of the members. The investments must be made for the sole purpose of providing retirement benefits to members. There are also restrictions on investing in related parties and acquiring assets from related parties.
Annual auditSMSFs must have their financial statements audited each year by an approved auditor. The auditor must be independent and not have any financial interest in the SMSF.
Reporting obligationsSMSFs must report annually to the ATO and provide information about the fund, its members and their contributions, and the fund’s investments. SMSFs must also report any events that may affect the fund’s compliance status, such as breaches of the superannuation laws or changes in the fund’s structure or membership.
Benefit payment requirementsSMSFs must pay retirement benefits to members when they satisfy a condition of release. The benefits can be paid as a lump sum or income stream, depending on the member’s choice and the fund’s rules. SMSFs must also comply with the minimum pension standards and ensure that the benefits are paid within the limits of the superannuation laws.

It is important for SMSF trustees to understand and comply with these rules and regulations to avoid penalties and maintain their compliance status. The ATO provides guidance and support to assist SMSF trustees in meeting their obligations and managing their funds effectively.

Pros And Cons Of Self-Managed Super Funds

The Advantages of Self Managed Super Funds

If you’re considering a self managed super fund (SMSF), it’s important to understand the potential benefits. While SMSFs require more effort and expertise to manage than traditional super funds, they offer greater control over your investments and the potential for higher returns. Here are some of the advantages of having a self managed super fund:

Greater controlWith an SMSF, you have greater control over your investments and the ability to tailor your portfolio to suit your individual needs and goals. This enables you to take advantage of market opportunities and potentially achieve higher returns.
Tax advantagesSMSFs offer a range of tax benefits, including concessional tax rates on investment income and capital gains, as well as the ability to claim tax deductions on contributions and insurance premiums.
FlexibilityAs an SMSF trustee, you have more flexibility in terms of investment options and can invest in a wider range of assets, including property and direct shares.
Cost savingsWhile SMSFs can incur higher costs in terms of setup and ongoing management, they can also be more cost-effective in the long run, particularly for those with larger super balances.

Overall, self managed super funds can offer significant advantages for those with the time and expertise to manage them effectively. However, it’s important to carefully weigh these benefits against the potential drawbacks and consider whether an SMSF is the right choice for you.

The Disadvantages of Self Managed Super Funds

While self managed super funds offer many benefits, there are also some potential downsides to consider. Here are some of the main disadvantages:

  • Time and effort: Managing an SMSF requires significant time and effort, from selecting investments to keeping up with regulatory changes.
  • Expertise: SMSFs require a high level of financial knowledge and expertise to manage effectively. This can be challenging for those without a background in finance or investments.
  • Costs: Self managed super funds can be more expensive to set up and maintain than other types of super funds, due to the associated fees and administrative costs.
  • Risk: With greater control comes greater responsibility, and SMSFs are not immune to the risks and volatility of the market.
  • Penalties: SMSFs must comply with strict rules and regulations, and failure to do so can result in significant penalties and legal consequences.

It’s important to weigh the potential disadvantages against the benefits before deciding whether a self managed super fund is right for you. Consider your personal financial situation, investment goals, and level of expertise before making a decision.

Self Managed Super Investment Options

Self managed super funds offer a wide range of investment options for trustees to choose from. Here, we explore the most popular investment options available for SMSFs:


Shares are a popular investment choice for SMSFs as they offer the potential for high returns. They can be purchased individually or through a managed fund. However, it’s important to note that share prices can be volatile, so it’s crucial to conduct thorough research and seek expert advice before investing in them.


Investing in property can be an attractive option for SMSFs as it offers potential rental income and capital growth. This can be done through purchasing a residential or commercial property directly, or through property trusts and syndicates. It’s important to remember that investing in property can also carry risks, such as property market fluctuations and potential vacancies.

Managed funds

Managed funds are professionally managed investment portfolios that pool money from multiple investors. They offer a diversified investment option, as the fund invests in a range of assets, such as shares, bonds, and property. Managed funds can also offer lower investment fees compared to purchasing individual investments.

Cash and fixed interest investments

Cash and fixed interest investments, such as term deposits and bonds, are lower-risk options for SMSF trustees. They offer regular income and are less vulnerable to market fluctuations. However, these investments generally provide lower returns compared to shares and property.

Overall, self managed super funds offer a range of investment options for trustees to choose from. It’s important to remember to conduct thorough research and seek professional advice before making any investment decisions.

Using Self Managed Super to Buy Property

One of the potential advantages of having a self managed super fund (SMSF) is the ability to invest in property. Utilizing your SMSF to purchase investment property can have benefits, but it’s important to consider the potential risks and restrictions before making the decision.

Benefits of Using Self Managed Super to Buy Property

Investing in property through your SMSF can have several advantages, including:

  • Potential tax benefits, such as claiming tax deductions on interest payments and depreciation
  • Rental income generated from the investment property goes back into the SMSF, potentially increasing your retirement savings
  • Increased diversification of your investment portfolio
  • Control over the property and the ability to make decisions regarding its management and maintenance

Considerations and Restrictions

However, there are also several limitations and considerations when using your SMSF to invest in property:

  • The property purchased must be solely for investment purposes and cannot be used personally by you or your family members
  • The SMSF cannot purchase the property from you or any related parties, nor can it borrow money from you or related parties to fund the purchase
  • The property must be purchased outright with no loan-to-value ratio allowed
  • The SMSF must have sufficient funds available to cover the costs associated with purchasing and maintaining the property, including property management fees, repairs, and insurance
  • It’s important to seek professional advice and conduct thorough research before making any investment decisions, including investing in property through your SMSF

Overall, investing in property through your SMSF can be a viable option for some, but it’s important to carefully consider the potential benefits and limitations before making the decision. Consulting with a financial advisor and a SMSF specialist can help you make an informed choice.

Self Managed Super Fund Borrowing Rules

Self managed super funds (SMSFs) are unique in that they have the ability to borrow funds for investment purposes. However, there are strict rules and restrictions in place governing these borrowing arrangements.

Firstly, any borrowing within an SMSF must be done under what is known as a ‘limited recourse borrowing arrangement’. This means that the lender’s rights to recover their funds are limited to the asset that was purchased with the borrowed funds. This is designed to protect the other assets held within the SMSF from being seized by the lender in the event of default on the loan.

Secondly, the terms of the loan agreement must be on an arm’s length basis. This means that the loan must be obtained from a commercial lender and the terms of the loan must be no more favorable to the SMSF than they would be for any other borrower. This is to prevent SMSF members from benefiting from favorable loan terms at the expense of the fund.

Thirdly, there are restrictions on what assets can be purchased using borrowed funds. The asset must be a ‘single acquirable asset’, which means it must be a single asset or collection of identical assets that have the same market value.

Finally, any asset purchased with borrowed funds cannot be improved or developed in a significant way. For example, if the asset is a property, it cannot be altered to the extent that it becomes a different asset.

It is important to note that borrowing within an SMSF can be a complex process and requires a thorough understanding of the rules and regulations. It is recommended that professional advice is sought before entering into any borrowing arrangement within an SMSF.

Self Managed Super Fund Insurance

When it comes to managing your self managed super fund, it’s important to consider insurance. While insurance is not a requirement for SMSFs, it can provide added financial protection for you and your beneficiaries.

There are several types of insurance to consider, including:

  • Life insurance: This type of insurance pays a lump sum to your beneficiaries in the event of your death. It can help to ensure that your loved ones are financially secure after you’re gone.
  • Income protection: Income protection insurance provides a regular income if you’re unable to work due to illness or injury. It can help to cover your living expenses and maintain your standard of living.
  • Total and permanent disability insurance: This type of insurance pays a lump sum if you become permanently disabled and are unable to work again. It can provide financial security and cover the cost of medical treatment and ongoing care.

It’s important to note that insurance premiums are not tax-deductible if paid from your SMSF. However, the benefits received from insurance policies held within an SMSF are generally tax-free.

When considering insurance for your SMSF, it’s important to seek professional advice to ensure that you choose the right policies and coverage levels for your individual circumstances.

Self Managed Super Fund Audit and Auditor Requirements

All self managed super funds (SMSFs) are required by law to be audited annually by an approved SMSF auditor. This audit is designed to ensure that the fund has complied with all applicable rules and regulations and that its financial statements are accurate and complete.

Under the Superannuation Industry (Supervision) Act 1993, SMSF trustees are responsible for appointing an approved auditor to audit the fund’s financial statements. The auditor must be registered with the Australian Securities and Investments Commission (ASIC) and meet the qualifications and experience requirements set out in the legislation.

It is important to note that the auditor is an independent professional who is not associated with the fund. They are responsible for providing an objective assessment of the fund’s financial position and compliance with superannuation laws.

What does the SMSF audit involve?

The SMSF audit involves a comprehensive review of the fund’s financial statements and compliance with superannuation laws. This includes:

  • Checking the fund’s compliance with investment restrictions, borrowing rules, and contribution caps
  • Reviewing the fund’s financial statements, including the balance sheet, income statement, and cash flow statement
  • Assessing the fund’s compliance with tax laws, including GST, PAYG, and capital gains tax
  • Assessing the fund’s compliance with record-keeping requirements
  • Providing an independent opinion of the fund’s financial position and compliance with superannuation laws

Once the audit is complete, the auditor will provide a signed audit report to the SMSF trustees. This report must be included in the fund’s annual return, which is lodged with the Australian Taxation Office (ATO).

What are the consequences of non-compliance?

Non-compliance with SMSF audit requirements can result in penalties and legal action. The ATO has the power to impose fines and disqualify trustees who fail to comply with audit requirements.

It is important for SMSF trustees to ensure that they appoint a qualified and experienced auditor to conduct the audit and provide accurate and complete financial statements. This will help to ensure compliance with superannuation laws and avoid potential penalties.

Tax Considerations for Self Managed Super Funds

When it comes to self managed super funds (SMSFs), it’s important to understand the tax implications and considerations that come with managing your own super. Here are some key things to keep in mind:


Contributions made to an SMSF are generally taxed at a concessional rate of 15%, which can be lower than the marginal tax rate for individuals. However, there are limits to how much you can contribute each year without incurring additional taxes or penalties. It’s important to stay up to date on these limits and seek professional advice if needed.

Investment income

Investment income earned by an SMSF is generally taxed at a rate of 15%, which can be lower than the individual income tax rate. However, there are also rules and restrictions around what types of investments an SMSF can make and how income from those investments is taxed. It’s important to understand these rules before making any investment decisions.


When it comes time to withdraw funds from an SMSF, the tax implications can vary depending on your age and other factors. For instance, if you’re over 60 years old and withdraw funds as a lump sum, you may be able to do so tax-free. However, if you’re younger than 60 or withdraw funds as an income stream, there may be taxes and other considerations to keep in mind.

Seek professional advice

Managing an SMSF can be complex, and the tax implications can be significant. It’s important to seek appropriate professional advice when making any decisions related to your self managed super fund. This can help ensure that you’re aware of all the tax considerations and are making informed decisions that align with your financial goals.

Closing a Self Managed Super Fund

Closing a self managed super fund can be a complex process, with a number of important considerations to keep in mind. Here are the key steps involved:

  1. Notify the ATO: Before you can close your SMSF, you must notify the Australian Taxation Office (ATO) using the appropriate form.
  2. Pay any outstanding taxes: Ensure you have paid any outstanding taxes and that your SMSF is up-to-date with all obligations.
  3. Distribute assets: You will need to distribute the assets of your SMSF among the members or roll them over to another super fund.
  4. Wind up the fund: Once the assets have been distributed, you can begin the process of winding up the fund. This involves cancelling the Australian Business Number (ABN) and notifying all relevant parties, including the ATO, your bank, and your investment providers.
  5. Final audit: Before the SMSF can be officially wound up, you must arrange for a final audit to be conducted.

It is important to note that the process of closing a self managed super fund can take several months, so be prepared for a potentially lengthy timeframe. Additionally, if you are uncertain about any of the steps involved, seek professional advice to ensure you are meeting all requirements and that the process is completed correctly.

Comparing Self Managed Super Funds and Industry Funds

When deciding on the best option for their retirement savings, many Australians consider both self managed super funds (SMSFs) and industry funds. While both options offer benefits and drawbacks, it ultimately depends on individual circumstances and preferences.

One of the main differences between SMSFs and industry funds is the level of control and flexibility. With an SMSF, members have greater control over their investments and can tailor their portfolio to their specific goals and risk tolerance. However, this also means more responsibility in managing the fund and ensuring compliance with regulatory requirements.

Industry funds, on the other hand, typically offer a range of pre-set investment options and a team of professional fund managers. This can be beneficial for those who prefer a more hands-off approach to investing and want the peace of mind of having experienced professionals making investment decisions on their behalf.

In terms of fees, SMSFs can be more cost-effective for those with larger account balances, as the fees are generally fixed and not based on a percentage of the balance. Industry funds, on the other hand, may charge higher fees but offer additional benefits such as insurance and other services.

Another consideration is the level of risk involved. SMSFs can offer higher potential returns but also come with higher risk, as members are responsible for making investment decisions and managing risks. Industry funds, on the other hand, may offer more stable returns but with lower potential for growth.

Ultimately, the decision between SMSFs and industry funds comes down to individual preferences and circumstances. Those who prefer greater control and flexibility may opt for an SMSF, while those who prefer a more hands-off approach may prefer an industry fund. It’s important to carefully consider the benefits and drawbacks of each option and seek professional advice before making a decision.


In conclusion, self managed super funds (SMSFs) offer both advantages and disadvantages that need to be carefully considered before making a decision.

The main benefit of SMSFs is the greater control over investments they provide, as well as the potential for higher returns and tax advantages. However, SMSFs also require significant time, effort, and expertise to manage, and can be associated with higher costs.

When choosing between SMSFs and industry funds, it’s important to consider the differences and weigh up the pros and cons of each option based on your individual circumstances and goals.

Is Self Managed Super Worth It?

Ultimately, the decision to establish an SMSF should be based on a sound understanding of the rules and regulations, investment options, borrowing rules, insurance requirements, audit and auditor qualifications, and tax implications associated with SMSFs.

If you are willing to take on the responsibility and have the necessary expertise, SMSFs can be a valuable option for those looking for greater control over their retirement savings. However, if you prefer a more hands-off approach, industry funds may be a better fit.

Whatever your decision, it’s important to seek professional advice and conduct thorough research before making any investments or changes to your superannuation strategy.


Q: What is a self-managed superannuation fund (SMSF)? 

A: A self-managed super fund is a private superannuation fund where the SMSF members manage and control the fund themselves, rather than using an industry or retail super fund.

Q: What are some pros and cons of self-managed super funds?

A: Pros of SMSFs include more investment control, wider investment choices, and consolidated finances. Cons include higher setup costs, more paperwork, and higher risk without professional help.

Q: How do you set up a self-managed superannuation fund?

A: To set up an SMSF, you need to apply for an ABN, establish a trust deed, appoint trustees from the SMSF members, open a bank account, and register with the ATO.

Q: What are the main steps for running an SMSF? 

A: Key steps include making contributions, filing annual returns, getting audits, monitoring investments, recordkeeping, paying benefits, and winding up the fund when required.

Q: What are some costs of running an SMSF?

A: Expenses include setup fees, annual auditing fees, regulated ATO levies, financial advice, insurance premiums, and administrative costs.

Q: What are some advantages of a self-managed super fund?

A: Advantages include more investment control, ability to hold a wider range of assets, consolidated finances, and potential cost savings long term.

Q: What are some disadvantages of a self-managed super?  

A: Disadvantages include higher setup costs, increased paperwork, higher compliance obligations, and lack of access to retail super resources.

Q: What assets can SMSF members hold in the fund? 

A: Allowed assets include cash, term deposits, listed shares, managed funds, collectibles, gold bullion, investment property, and some cryptocurrencies.

Q: How is an SMSF different from an industry super fund?

A: An SMSF is managed directly by fund members while industry super pools many members’ assets and is managed by the fund. 

Q: Do SMSFs have complete control over the investment path the fund will take?

A: Yes, SMSF members have flexibility to make investment decisions for the fund, but must abide by super and tax laws.

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