Pros and Cons of a Self-Managed Super Fund: Is It Right for You?

  • Gareth LaneGareth Lane Ashwin RamdasAshwin Ramdas
  • Mate Checked

    This information has been reviewed by our SMSF Mates before it was published as part of our review process.

An SMSF, or Self-Managed Super Fund, is a type of private superannuation fund that members themselves specifically oversee. Unique in its structure, an SMSF permits a maximum of six members, all of whom typically assume roles as the fund’s directors or trustees. Their primary function, echoing the core objective of other superannuation funds, is to provide retirement benefits not only for themselves but also for their dependents.

Understanding the Private Superannuation Fund

Where an SMSF distinctly carves its niche is in the realm of investment opportunities. These decisions, crucial for fund growth and security, are singularly made by the members themselves.

This provides a tailored approach, allowing members to align the fund’s investments, which could range from commercial property to fixed interest investments, with their own retirement aspirations and risk appetites. However, with this autonomy comes responsibility.

It’s imperative to note that SMSFs fall under the purview of the Australian Tax Office (ATO), which meticulously oversees their rules and regulations. The ATO ensures that the fund’s operations remain compliant with super and tax laws, reinforcing the importance of diligent management and thorough understanding for all SMSF members.

Setting Up an SMSF

Establishing a Self-Managed Super Fund is not merely about the autonomy it offers; it’s a commitment to ensuring that the fund serves its primary purpose – retirement. To set up an SMSF, one is essentially creating a financial fund dedicated exclusively to post-retirement needs.

A vital aspect of this setup is comprehensive record-keeping. Meticulous records not only ensure smooth operations but also play an instrumental role during audits and regulatory checks by the Australian Tax Office. Alongside this, the selection of trustees is pivotal.

An SMSF allows for two trustee structures: individual trustees or a corporate trustee. The choice between them often hinges on factors such as fund size, member dynamics, and long-term plans compared to retail super funds.

The Foundations: Trust Deeds and Registration

Further, the process involves the creation of a trust deed, which is a legal document delineating the fund’s operations and member responsibilities. Subsequent to this is the fund’s registration, a step that officially marks its presence in the financial landscape.

If you’re interested in reading more on how an SMSF can lend money, find our blog on SMSF lending rules.

Financial Acumen and Risk Management

Financial acumen is an undoubted asset in this journey. Given that the members themselves will be at the helm of investment decisions, a solid grasp of financial principles facilitates informed choices. It’s also prudent for members to adopt a risk-tolerant investment strategy, cognisant of the fact that the market’s ebbs and flows can impact the fund’s growth trajectory.

Another aspect warranting attention is insurance. Evaluating and procuring appropriate insurance for the fund’s members ensures an additional layer of financial security. Coupled with this is the foresight of an exit strategy.

While the focus is primarily on growth and management, having a strategy for unforeseen circumstances or changes in intent provides a safety net, ensuring the fund’s sustainability and the protection of its members’ interests. This is especially vital considering the core objective of providing retirement benefits to members.

The Pros and Cons of SMSFs

Diving into the world of Self-Managed Super Funds demands a discerning analysis of their advantages and potential drawbacks. This ensures a robust understanding, allowing for informed decisions tailored to individual financial goals and circumstances.

The Pros of SMSFs

Broad Investment Options: SMSFs open the door to a diverse array of investment avenues. From securities and real properties to unique assets such as collectibles, art, and physical gold, members can tailor their portfolio to reflect their risk appetite and growth aspirations.

1. Quick Decision-making

SMSFs offer members the advantage of immediate control over their investments. This direct involvement allows for swift reactions to changing market landscapes. Where other funds might get bogged down in bureaucracy, SMSF members can act quickly, ensuring that they capitalise on emergent opportunities and maximise returns.

Their agile nature allows them to manoeuvre through financial waters with more dexterity, seizing profitable ventures when they arise. From the astute investor to the small business owner, and even those accustomed to managed funds, the flexibility of SMSFs offers a tailored financial pathway.

2. Tax Benefits

Compliant SMSFs benefit immensely from a favourable tax environment. Investment returns typically enjoy a tax rate of just 15%. But the incentives don’t end there. For members over the age of 60, the majority of distributions they receive are, in most cases, free from taxation.

As a result, during the crucial retirement years, members can reap maximum rewards from their investments without heavy tax deductions.

3. Estate Planning Flexibility

Estate planning with SMSFs provides an unmatched level of adaptability. Members have the prerogative to detail how their assets will be allocated upon their passing, ensuring their wishes are precisely honoured.

In essence, members can design an estate plan that reflects their specific desires, ensuring that beneficiaries receive assets in the intended manner.

4. Direct Accountability

The structure of an SMSF inherently promotes a culture of direct responsibility. As members themselves manage and oversee the fund, they are personally accountable for its performance.

This direct involvement ensures the fund’s operations and investments align perfectly with its goals, creating a tailored approach to superannuation management.

5. Cost Efficiency and Growth

As the assets within an SMSF grow, there arises an opportunity for economies of scale. Shared expenses can lead to reduced costs per member, and as the fund’s assets expand, members can witness enhanced cost efficiency.

Consequently, larger SMSFs can potentially offer better value for money, translating to more funds available for investment and growth.

6. Protection from Creditors

In specific scenarios, SMSFs offer an added layer of security by acting as a shield against creditors. If a member faces financial adversity, their retirement savings within the SMSF can remain protected.

Such protection ensures that members have a safety net, safeguarding their retirement funds from unforeseen financial challenges.

The Cons of SMSFs

1. Time Commitment

The very essence of SMSFs is rooted in personal management, which, while offering autonomy, also comes with an extensive time commitment. Members need to constantly monitor investments, ensure adherence to compliance standards, and stay abreast of regulatory changes.

This hands-on approach, although empowering, necessitates significant dedication, especially when aiming for optimal performance and grappling with the complexities of regulatory frameworks

2. Financial and Legal Risks

Exploring the SMSF landscape means traversing through a maze of taxation laws and legislative guidelines. Given the depth and breadth of these rules, even well-intentioned members might inadvertently stumble upon financial and legal consequences.

It’s essential to have a keen awareness and possibly seek expert advice, as missteps can lead to significant financial liabilities or legal complications.

3. Absence of Government Compensation

One pivotal distinction between SMSFs and certain other superannuation funds lies in the safety nets provided. While some funds might enjoy government compensation schemes in cases of loss, SMSFs do not have this fallback. This heightens the importance of meticulous and vigilant management.

Members need to be extra cautious, ensuring their investments are sound, and their management practices robust to safeguard their retirement nest egg.

4. Limited Dispute Resolution

The inherent private structure of SMSFs can occasionally become a double-edged sword. While it offers autonomy, it can sometimes lead to constrained avenues for resolving disputes amongst members.

These limited resolution mechanisms can, in certain situations, result in prolonged disagreements, which might escalate to legal proceedings, incurring significant costs and potential fund disruptions.

5. Knowledge Imperative

The world of investments is in a state of perpetual flux, with markets evolving, new investment vehicles emerging, and legislative landscapes shifting. This dynamic environment demands SMSF members to be perpetually informed.

A deep understanding of market trends, the principles of diversification, and staying updated with legislative alterations are not just beneficial but essential. Continuous education and perhaps collaborations with financial experts become paramount in this context.

6. Higher Insurance Costs

While SMSFs offer numerous advantages, they can sometimes come with heftier insurance premiums, especially when compared to public super funds. The personalised nature of SMSFs can lead to more individualised insurance evaluations, which might result in elevated costs.

Members need to weigh these costs against the benefits, ensuring they strike a balance between protection and cost-efficiency.

7. Cost Challenges for Smaller Funds

An SMSF in its early stages, with a relatively modest asset pool, might face pronounced cost challenges. The expenses associated with managing and maintaining the fund might be more tangible when distributed across a smaller asset base.

For these burgeoning funds, strategic financial planning becomes imperative to ensure sustainability and pave the path for future growth.

Linking SMSFs to Retirement Savings

An SMSF, at its core, is an instrument designed to bolster retirement savings, ensuring that post-retirement years are marked by financial security and comfort. Recognising its integral role in retirement planning requires an understanding of how such private superannuation funds complement broader financial objectives.

The very structure of an SMSF pivots on the objective of securing retirement benefits for its members and their dependents. This is distinct from other investment vehicles where immediate returns might be the focal point.

The long-term, future-centric approach of SMSFs ensures that investments are directed at generating sustained, compounded growth over the years, ultimately culminating in a substantial nest egg come retirement.

Mastering SMSF Management

However, this path, despite its promise, is not devoid of intricacies. Effective management of an SMSF requires more than just a basic grasp of investment principles. It necessitates a holistic approach that integrates quality investment research and an understanding of the unique dynamics that influence retirement savings.

Access to such knowledge can often be enhanced through collaboration with a financial adviser. Financial advisers can play an instrumental role in this landscape. While they bring to the table recommendations based on in-depth market analysis and experience, the final execution responsibility always rests with the trustees.

An informed trustee, guided by expert advice, can optimise the potential of the SMSF, ensuring that it truly serves as a bulwark for retirement, weathering market volatilities and delivering on its core promise of long-term growth.

The Role of Expert Guidance

The complexities of managing a Self-Managed Super Fund are many, and while they offer unparalleled control and flexibility, it’s paramount to recognise the weight of this responsibility. The success of an SMSF not only depends on strategic investment decisions but also on adherence to compliance and understanding the ever-evolving financial landscape.

Transitioning to or setting up an SMSF is not a decision to be made lightly. It’s more than just establishing a fund; it’s a commitment to actively manage and optimise it for the future. Given the intricate nature of SMSFs, this is where the expertise of seasoned financial planners becomes invaluable.

Harnessing Expertise for SMSF Success

A proficient financial planner can offer more than just advice on investment choices. They can guide members through the maze of compliance requirements, ensuring the SMSF remains in good standing with the Australian Taxation Office (ATO) and other regulatory bodies. Furthermore, their insight into market trends and legislative changes can be instrumental in safeguarding the fund against unforeseen challenges.

But beyond the technicalities, what an expert brings to the table is peace of mind. Venturing into the world of SMSFs can be daunting, especially when the stakes are as high as one’s retirement savings. Knowing that one has the backing of seasoned professionals can provide assurance that the fund is being managed optimally.

In essence, while the control and direction of the SMSF remain with the members, the guidance of financial experts ensures that this control is wielded with precision, expertise, and foresight. The collaboration between trustees and financial advisers can truly unlock the potential of SMSFs, ensuring they deliver on their promise of a secure and comfortable retirement.

Self Managed Super Fund Pros and Cons

Self-Managed Super Funds offer a tailored approach to retirement savings, presenting both enticing advantages and inherent challenges. While the allure of control and diverse investments is evident, the responsibilities and complexities cannot be overlooked.

The decision to embark on the SMSF journey is deeply individual and should be made with due diligence. Central to this process is the invaluable role of expert guidance, ensuring that each decision is informed and aligned with long-term objectives. In essence, while SMSFs provide a unique opportunity, they demand careful consideration and expert oversight.


General Advice Warning

Gareth Lane

Concise Digital

Gareth Lane is a successful entrepreneur, businessman, and owner of the digital marketing and web agency Concise Digital, based out of Perth, Western Australia. Concise Digital have solved over 60,000 digital / web problems for clients since 2005. Gareth is one of the founders of SMSF Mate.

Gareth is passionate about helping small businesses be more successful online by avoiding the pitfalls of digital marketing. He regularly runs live talks, workshops and meetups discussing Google, social media and all things digital marketing.

Gareth studied Business and Commerce at Curtin University, and has held board positions for a number of organisations, including serving as the President of the Western Suburbs Business Association and as a non-executive member of WA Business Assist. A true entrepreneur at heart, he started his first business at 13 and has created and run multiple successful businesses since.

Gareth enjoys good food, great wine and time in the sun when he’s not at his computer helping other businesses get ahead!

You can find out more about Gareth or connect with him on Linkedin here:

Or visit his websites here: or

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Ashwin Ramdas

Eventum Consulting

Ashwin is an accountant and educator based in Perth, Western Australia. He is passionate about helping family owned businesses and startups. He is one of the founders of SMSF Mate and you’ll regularly see him on our podcast!

Ashwin is a managing owner and director of Eventum Consulting, a multidisciplinary firm helping clients with finance, succession planning and their tax needs. He also served as a lecturer in taxation and small business at the Central Institute of Technology, and has worked as an accountant at a number of well-known tax specialists.

Ashwin studied a Diploma of Business Education and a Bachelor of Commerce in Financial Accounting, Managerial Accounting and Corporate Finance, both at Curtin University, WA.

Ashwin is passionate about technology, and sees it as an enabler for his clients to grow truly sustainable and profitable businesses.

You can find out more about Ashwin or connect with him on Linkedin here:

Or visit his website here:

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Kind words from Aussies managing
their own self funded futures

  • SMSF Mate is a unique website because it has ideas about how to approach SMSFs, insurance and other financial topics that come straight from first hand experience. It's much more useful than what you find on all the other financial websites that just offer generic info that you could easily get on the ATO's website. It's also nice to know there's no financial incentive behind the information, it's legitimately there to help people understand self-managed super funds and how to get the most out of them, not to get an affiliate commission from a broker or other financial services provider. The investment product information is also incredibly useful, I've never seen this kind of functionality on any other website that let's you look at such a wide range of products, sort by what info is most interesting or important to you, and subscribe to updates for different funds and financial products all in one place. Definitely worth checking out if you own or are considering an SMSF!

    David G, Self-Employed, SMSF Owner
  • SMSF Mate provides a unique insight into superannuation and financial topics in a way that is easier to understand than conventional websites. The colloquial nature of the site makes it easy to understand and they often speak about complicated topics in lamens terms so I can wrap my head around them. The investment product information is a great way to research funds that I am interested in investing in with my SMSF and there is a lot of helpful information on the site for better structuring my investment portfolio. In comparison to other websites which offer similar information, SMSF Mate excels as the information is free to access whereas many other sites charge a subscription fee for the same thing. Overall, I think SMSF Mate is a great resource for SMSF trustees and is worth looking at for a variety of super-related topics. Thanks.

    Tim B, Business Owner, SMSF Trustee