Why More Australians Are Turning to SMSFs
In recent years, more Australians have been choosing Self-Managed Super Funds (SMSFs) to take control of their super and build wealth on their own terms.
With traditional super funds, you usually have little say in where your money goes. But with an SMSF, you call the shots — from investment decisions to tax planning strategies. You can invest in property, shares, managed funds, or a mix of all three, giving you investment flexibility that most retail or industry funds can’t offer.
According to the Australian Taxation Office (ATO), SMSFs now hold a significant portion of Australia’s total super assets — a clear sign that many people value control, transparency, and flexibility in their retirement planning.
This guide will help you understand what an SMSF is, how it works, and how you can use one to secure your financial future.
What Is an SMSF?
An SMSF (Self-Managed Super Fund) is a private super fund that you manage yourself. Just like any superannuation fund, its purpose is to provide retirement benefits to its members.
However, unlike traditional funds, an SMSF can have up to six members, all of whom are either trustees or directors of a corporate trustee. That means you’re not just a member — you’re also responsible for ensuring the fund complies with super and tax laws.
How an SMSF Differs from Other Super Funds
- You control investment decisions — not external fund managers.
- You choose the investment mix, such as property, shares, or cash.
- You manage compliance, with help from professionals if needed.
Running an SMSF gives you more freedom, but it also comes with more responsibility. You must follow ATO rules and act in the best interest of all members, not just yourself.
Setting Up an SMSF
Setting up a Self-Managed Super Fund involves a few key steps, and getting these right at the beginning will save you time, money, and headaches later.
Step 1: Decide on Your Structure
You can set up your SMSF with either:
- Individual trustees (each member is also a trustee), or
- A corporate trustee (a company acts as trustee, and members are directors).
Both are valid structures, but corporate trustees are often more efficient for asset ownership and succession planning.
Step 2: Create a Trust Deed
This legal document sets the rules for your fund — how it’s run, what it can invest in, and how benefits are paid. It must comply with superannuation laws and be signed and dated by all trustees.
Step 3: Register Your Fund with the ATO
- Get an Australian Business Number (ABN) and Tax File Number (TFN)
- Elect for your SMSF to be regulated by the ATO (this ensures tax benefits)
- Open a dedicated SMSF bank account
Step 4: Understand the Costs
Initial setup can range from $2,000–$5,000, depending on professional assistance. Annual costs (audit, accounting, ATO fees) may total $2,000–$3,000.
Tip: Always seek professional guidance before setting up an SMSF to ensure it aligns with your goals and capacity to manage compliance.
Contributions and Tax Rules
Contributions are the money you or your employer put into your SMSF. They can be concessional (before-tax) or non-concessional (after-tax).
Concessional Contributions
These include employer contributions and salary sacrifice amounts with a combined annual cap. They’re generally taxed at 15% inside the fund — a lower rate than most personal income tax rates.
Non-Concessional Contributions
These are made from after-tax income and are not taxed within the fund. They are subject to a higher annual contribution cap than concessional contributions.
Why Tax Planning Matters: Managing contributions correctly can help you grow your retirement savings faster and avoid penalties for exceeding caps. Always check the latest contribution limits on the ATO website.
SMSF Investment Strategies
Your SMSF must have a written investment strategy, a key compliance requirement under the ATO. This strategy outlines how you plan to achieve your investment goals, taking into account risk, diversification, and liquidity.
Common SMSF Investments:
- Shares and ETFs
- Property (residential or commercial)
- Term deposits or bonds
- Managed funds
- Cryptocurrency
- Gold and silver bullion
Buying Property with an SMSF
Yes, you can buy property through your SMSF, but there are strict rules. If borrowing is involved, it must be done under a Limited Recourse Borrowing Arrangement (LRBA). The property must also be held solely for the purpose of providing retirement benefits, not for personal use.
Case Example: An SMSF invests in a commercial property leased to the business of one of its members at market rent — a fully compliant strategy when structured correctly.
Managing Compliance and Reporting Obligations
Every SMSF must meet ongoing compliance requirements to stay regulated by the ATO.
- Annual Audit: Conducted by an independent SMSF auditor.
- Annual Market Valuation: For the fund’s assets and any related party charges.
- Annual Return: Lodged with the ATO, including financial statements.
- Record Keeping: Maintain minutes, investment decisions, and member statements.
- Sole Purpose Test: The fund must exist solely to provide retirement benefits.
Failing to comply can result in severe penalties, including loss of tax concessions or trustee disqualification. Partnering with an experienced SMSF accountant ensures your fund remains compliant and efficient.
Retirement: Pension Phase and Withdrawals
When you reach preservation age and retire, your SMSF can move from the accumulation phase to the pension phase.
- Investment income on assets supporting a pension can be tax-free.
- Members can draw tax-free income streams, depending on age and conditions of release.
It’s important to document this transition properly to maintain compliance and continue receiving tax benefits.
Working with Professionals
Running an SMSF doesn’t mean doing everything alone. In fact, the ATO encourages trustees to seek professional advice.
- Ensure your fund complies with the law
- Optimise your SMSF’s tax position
- Receive guidance on investment strategy and asset allocation
Common SMSF Mistakes to Avoid
Even experienced investors can make errors when managing their own super. Here are some frequent mistakes:
- Mixing personal and SMSF assets
- Missing annual lodgements
- Making prohibited investments (e.g. personal-use assets)
- Ignoring contribution caps
- Accessing super before meeting retirement or eligibility criteria
Avoiding these pitfalls helps protect your fund’s compliance and ensures your retirement savings remain secure.
Taking the Next Step Toward Financial Control
An SMSF gives you the power to take charge of your retirement and invest in ways that align with your goals. With the right guidance, it can be a powerful vehicle for wealth creation and tax efficiency.
If you’re ready to take control of your super, start by speaking with us at Chan & Naylor. We’ll help you structure, manage, and grow your fund with confidence.
This article is for general information only. It does not constitute financial product advice and has been prepared without taking into account any individual’s personal objectives, situation or needs. It is not intended to be a complete summary of the issues and should not be relied upon without seeking advice specific to your circumstances.
