Ensuring you have enough superannuation is crucial to securing your financial future once you retire.

While most people keep an eye on their superannuation funds to ensure they’re tracking in the right direction, others want to take a more hands-on approach when it comes to their retirement nest egg.

One way to do this is by setting up a Self-Managed Superannuation Fund (SMSF).

What is a SMSF and how does it work?

Most Australians rely on traditional third-party superannuation funds, including retail, industry and corporate funds, which invest and manage the contributions of countless individual members.

Self-Managed Superannuation Funds on the other hand, offer a private do-it-yourself option that gives individuals greater control over their retirement savings. This is a steadily growing segment of the market, with just under 1.13 million Australians now members of almost 600,000 SMSF (as of March 2019).

Funds have their own Tax File Number (TFN), Australian Business Number (ABN) and transactional bank account and can have between one and four members.

Each member acts as a trustee of the fund, responsible for investing the fund’s assets, paying benefits and meeting the administrative and compliance requirements which are set by the Australian Taxation Office (ATO). This includes maintaining fund records, providing financial statements, completing an annual tax return and organise an independent audit of the fund.

While self-managed superannuation is an increasingly popular option, there are a number of issues to consider before deciding if it is the right choice for you.


Total control

One of the key advantages is the ability to tailor the fund to meet members’ specific needs. As trustees of the fund, members have complete control over its investment strategy, mix of assets and ongoing management.

Keeping this control within such a small group of trustees also paves the way for greater agility and responsiveness toward opportunities or market changes, potentially allowing the investment mix to be changed in a more timely and efficient manner.

Investment flexibility

A SMSF allows its members to broaden their potential investment pool outside of the options commonly offered by traditional funds, such as cash, shares, term deposits and managed funds.to an investment in say direct property.

While investments in artworks, and collectibles are possible, the rules regarding these are quite restrictive and trustees must ensure they do not breech the sole purpose test, the legal requirement to maintain the fund for the sole purpose of providing retirement benefits to members, or to their dependants if a member dies before retirement.

Lower ongoing costs

There are costs involved with setting up and running a SMSF. But there are ways to reduce those ongoing expenses, including making sure you choose your investments carefully, which in turn can keep your transactions (and the fees associated with these) to a minimum.

Consolidating family members’ superannuation

For married couples or family members, pooling their superannuation under the one SMSF (of no more than four members) can have added advantages. Aside from taking control of your investment strategy, consolidating the various balances can open the fund up to different and more advantageous investment opportunities that an individual with a smaller superannuation balance might not be able to achieve.

Estate planning flexibility

Planning for the distribution of your estate once you die can be a complex issue. But while a person’s most obvious assets, including their home and possessions, are traditionally allocated via a will, what happens to the balance of their superannuation needs to be defined and assigned as part of your fund.

A member of a SMSF can prepare a binding death benefit nomination which will ensure their contributions are awarded to the specific beneficiaries they nominate.



Running a SMSF can be time-consuming. Aside from completing all the necessary paperwork and ensuring the fund is running in accordance with all relevant laws and regulations, members must also make the time to properly research their investment options. Not putting enough time into a SMSF will not only put your compliance at risk but could seriously affect the fund’s long-term performance, and therefore your financial security.

Expertise required

If you don’t have a thorough knowledge of investment strategies and an extensive understanding of financial, legal and tax matters – or the willingness and ability to obtain this expertise – running a SMSF can be a difficult task. Even if you employ professionals to provide you with assistance in these areas, as the trustee of the SMSF you are ultimately responsible for the decisions that are made and the resulting outcomes.

Higher costs

While a SMSF can work to your advantage in terms of reducing your long-term fees, setting up the fund in the first place can be a costly affair, and other unexpected expenses can also come into play depending on your investment choices.

According to the Australian Securities & Investments Commission (ASIC), a SMSF with a balance of $200,000 or less is unlikely to be competitive compared to a large super fund, based on the costs of establishing and operating it.

No access to compensation schemes

The Federal Government has the ability to compensate super funds for losses as a result of fraud or theft under Part 23 of the Superannuation Industry (Supervision) Act 1993.

SMSF are not eligible under these laws, so it is important for trustees to consider organising their own form of protection by purchasing insurance cover for your SMSF and its investments.

Compliance measures

Members of a SMSF need to ensure the fund remains compliant at all times by keeping accurate and up-to-date records and arranging an annual audit by an approved SMSF auditor. For this reason, many trustees use specialists to help manage their accounting, auditing and tax reporting, as well as provide financial and investment advice.

Making the right choice for you

There are many advantages – and disadvantages – to taking control of your retirement savings by setting up a SMSF, but sorting through all the information available can be a daunting task.

The Partners at HQB can help you weigh up all the pros and cons and ensure you make the best decision for your financial future. Please give us a call to get started.

This article is compiled as a helpful guide for your private information and is subject to copyright. We suggest that you do not act solely on the basis of material contained in this article because items are of general nature only and may be liable to misinterpretation in particular circumstances. We recommend that our advice be sought before acting on any of these crucial areas.

Some of Our Clients

Subscribe to Our Newsletter

Get all the latest news from HQB delivered direct to your inbox

Your Name (required)

Your Email (required)


Days left until the new financial year. Get your tax sorted today. Click here to get started.