What is a self-managed super fund (SMSF)?

Investing in superannuation is a requirement of all Australians. While many people have their super in industry or retail superannuation funds, an increasing number are looking to have more control and transparency over how their super is invested by setting up a self-managed superannuation fund (SMSF).

What is a self-managed super fund (SMSF)?

A self-managed super fund, or SMSF, is a private super fund managed by you. Unlike industry or retail funds where members have little to no control over how their super is invested, with an SMSF you have complete control over and responsibility for the fund's investment strategy. Play the brief video below to help explain.

If you would like to know more and have your own self-managed super fund, check out Stake Super.

How does an SMSF work?

Fundamentally self-managed super funds do the same job as industry or retail funds- they make and manage investment decisions for the purpose of providing retirement benefits. However, the way in which this happens is where they differ.

With an SMSF you as the member are also the SMSF trustee responsible for the investment strategy, reporting and compliance of the fund. Whilst the latter can seem like a daunting task, there are SMSF administrators who can help with the regulatory and compliance side of things- Stake included.

Setting up an SMSF

There are a few steps involved in setting up an SMSF. First, begin with registering the fund with the Australian Taxation Office (ATO), setting up a trust with either an individual or corporate trustee structure, obtaining & signing the trust deed, obtaining a fund ABN and setting up the fund's own bank account. Stake Super can manage this whole process for you, to get started sign up here.

Benefits of starting a SMSF

The number one benefit of setting up an SMSF is control. You have complete freedom to set the SMSF investment strategy in line with your own investing goals rather than predetermined investment strategies set by industry or retail funds that may not align with your values or investing objectives.

Discover our guide on the benefits of a SMSF to get a better understanding of all the advantages and disadvantages of starting your own fund.

What can an SMSF invest in?

With some limited exceptions, an SMSF provides you with the freedom to invest in almost anything. From cash, equities, managed funds and property to less common investments including v/c's, start-ups, collectables and much more.

The key considerations for what is an allowable investment within an SMSF is set out by the Australia Taxation Office (ATO). Those being:
- All investments are made on a commercial 'arm's length basis'
- The purchase and sale price of fund assets reflect true market value, and the income from fund assets reflect a true market rate of return
Further information can be found on the ATO website here.

Is an SMSF only for the over 50s?

No. Whilst historically SMSF trustees have skewed towards older demographics, this trend is shifting as a result of increasing financial knowledge, access to markets and reduced SMSF set-up and administrative costs from some providers (more on this below). In fact, in FY21/22 SMSF accounting provider Class found that 30% of new SMSFs were set up by fund members aged between 30-45 years old.

Can anyone set up an SMSF?

In short yes however an SMSF isn't right for everyone. Some important things to evaluate when considering an SMSF are:
- Investing knowledge: As you are responsible for the fund's investment strategy, fund members should have a good understanding of the markets and investing more broadly.
- Fund balance: Whilst there is no minimum balance, smaller fund balances should be mindful of SMSF set-up and administrative fees compared to industry or retail funds in order to understand the difference and determine if they are happy in order for them to have investment control.

How much money do you need to have an SMSF?

As mentioned, there is no official minimum balance and many people with larger super portfolios set up their own SMSF as a more cost effective way of managing their super. For people with smaller portfolio balances, price is more of a consideration given set-up and ongoing costs (annual accounting, auditing & taxation) which can be expensive among some providers- though not all.

For many SMSF providers, set up costs can be up to $1,500 depending on if the fund has an individual or corporate trustee structure and then ongoing management costs can be anywhere between $1,000-$3,000+. However for Stake Super, SMSF set-up and full ongoing administration starts at just $990.

How are SMSFs regulated in Australia?

SMSFs are regulated by the Australian Taxation Office (ATO) and Australian Securities and Investment Commission (ASIC) which differs to industry and retail super funds whom are regulated by the Australian Prudential Regulation Authority (APRA). While the compliance and reporting requirements of SMSFs sit with the fund trustee(s), SMSF administrators like Stake Super can do much of the heavy lifting to ensure all requirements are satisfied.