Guide to SMSF: Compliance and Restrictions

by | Apr 9, 2024

What is SMSF? 

An SMSF, or Self-Managed Super Fund, is a private superannuation fund that you manage yourself. It’s a way for individuals to save for their retirement, offering greater control over investment choices, such as stocks, real estate, and other assets. SMSFs must adhere to Australian Superannuation laws, ensuring the fund is maintained for the sole purpose of providing retirement benefits to its members. Compliance with these laws is essential for the fund’s legality and the financial security of its members. To know more about SMSF and how to grow it, read more here. 

What is a related party in the context of SMSFs? 

A “related party” broadly includes fund members, their families, and any entities (like companies or trusts) that these individuals control or influence significantly. Common related party transactions might involve the SMSF buying or renting property from a related party, lending money to related entities, or investing in related businesses. These transactions are closely monitored to ensure they comply with superannuation laws, maintaining the fund’s integrity and focus on providing retirement benefits. 

SMSF compliance restrictions 

The laws around SMSFs and related party transactions are meticulously structured to preserve the integrity and purpose of these funds. Here’s a more detailed look into these restrictions: 

Strict investment rules 

These rules are in place to ensure investments made by SMSFs are sound and align with the sole purpose of providing for retirement, minimizing risky or speculative ventures that could jeopardize the fund’s assets. 

Prohibition against lending or financial assistance 

This prevents the fund from lending money or providing financial support to related parties, which could lead to a conflict of interest or misuse of the fund’s resources. 

Arm’s Length requirement 

All transactions must be conducted as if the parties were unrelated, ensuring they occur at market rates and conditions. This is to prevent fund members from giving themselves or related parties unfair advantages that could harm the fund. 

These regulations aim to protect the fund from being exploited for purposes other than providing retirement benefits, safeguarding the members’ interests and the fund’s assets. 

What happens if you don’t comply? 

Non-compliance with SMSF regulations can lead to significant penalties for trustees, ranging from financial fines to disqualification, and may also result in the fund losing its concessional tax treatment. These consequences serve as a deterrent against mismanagement and ensure the integrity of the superannuation system, focusing on safeguarding members’ retirement benefits.  

To navigate compliance safely, you must stay up to date with superannuation laws and review and understand all your fund’s transactions. Keeping detailed records is also crucial.  

Seek advice from Chan & Naylor. Our team of accountants and SMSF advisors, are highly experienced in managing complex issues related to party transactions. Our expertise can help you navigate the legal requirements, avoid common pitfalls, and ensure your fund remains compliant. 

About Chan & Naylor  

Since 1990, Chan & Naylor has partnered with business owners and investors in managing their taxes and building a tax-effective wealth. Choosing Chan & Naylor means you’re not just selecting a service provider; you’re gaining a partner aligned with your financial goals. You’ll have access to a dedicated client manager supported by a team of accountants that specialises in business tax and investments. 


This guide serves as general advice and may not account for the unique circumstances of individual readers. For personalised and strategic solutions tailored to your specific situation, we invite you to seek professional advice from Chan & Naylor. Our highly experienced team is dedicated to helping you navigate the complexities of Australian taxation, ensuring that your financial strategies align with the latest regulations. Contact us today to embark on a path of informed and customised tax planning for your property investments.