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

This article discusses some of the differences between a traditional super fund and a self managed super fund. A self managed super fund is not appropriate for everyone and there are different risks associated with an SMSF compared to an APRA regulated fund.

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

Investing in superannuation is a requirement of all Australians. A self-managed super fund, or SMSF, is a private super fund where you have complete control over and responsibility for the fund's investment strategy. Watch the video below for a quick overview.

How does an SMSF work?

Fundamentally, self-managed super funds do the same job as any other super fund- 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, including Stake Super, who can help with the regulatory and compliance side of things.

Setting up an SMSF

There are a few steps involved in setting up an SMSF however Stake Super can manage the whole process for you. The process begins with registering the fund with the Australian Taxation Office (ATO) and then 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.

Benefits of starting an 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.

Discover our guide on the benefits of an 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 FY22 SMSF accounting provider Class found that 30% of new SMSFs were set up by fund members aged between 35-44 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 determine if they are comfortable with them in order 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.

🎓 Learn more: Discover the SMSF auditing process→

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 the administrative requirements are satisfied.

Want to know more about Stake Super?

To learn more about out our SMSF administration service – inclusions, pricing and how we compare – head to our home page here.

This is not financial product advice, nor a recommendation that a self-managed super fund (‘SMSF’) may be suitable for you. Your personal circumstances have not been taken into account. SMSFs have different risks and features compared to traditional superannuation funds regulated by the Australian Prudential Regulation Authority (‘APRA’). Stake SMSF Pty Ltd, trading as Stake Super, is not licensed to provide financial product advice under the Corporations Act. This specifically applies to any financial products which are established if you instruct Stake Super to set up an SMSF. When you sign up to Stake Super, you are contracting with Stake SMSF Pty Ltd who will assist in the establishment and administration of an SMSF under a ‘no advice model’. You will also be referred to Stakeshop Pty Ltd to enable your trading account and bank account to be set up in order to use the Stake Website and/or App. For more information about SMSFs, see our SMSF Risks page.