Self-Managed Super Funds – what you need to know before you commit

by 23 Sep 2019Superannuation

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Self-managed super funds can look like a good DIY option, but you can’t do it on your own

Self-managed super funds – what you need to know before you take the plunge

Self-managed super funds (SMSFs) are often talked about as Do-It-Yourself Super or DIY funds that offer greater flexibility and transparency in superannuation investments and decisions. All members (up to four) must be trustees of the fund and are entirely responsible for making decisions and ensuring the fund complies with relevant laws.
It’s all up to you.
At first glance, managing your own super might sound like a good idea, but like any financial decisions, there are risks involved. Before you commit, it’s important to know what you’re getting into, and why.

Self-managed super funds offer control and freedom

Many of us love the idea of being in charge of our own destiny. We want the freedom to choose what we do with our money and we want to get the best possible return on our investments. When it comes to our super, Self-Managed Super Funds seem to offer the benefits of greater control, flexibility and transparency about how and where our money is being invested.
When you manage your own super you decide what you invest in, and you have a broader range of options with regard to the kinds of assets you can hold, and if you have a particular stance on ethical investing, you can make sure you’re not putting money into industries or assets that contradict your values.
SMSFs can also be a great way to consolidate your assets with family members and create one large fund that pools your resources and enables you to invest at a higher level while reducing your fees to one account.

The benefits of self-managed super funds come at a cost

Setting up and maintaining a self-managed fund is expensive. The Australian Tax Office (ATO) has reported that the average annual cost of SMFS is $12,200, based on the average SMSF balance being $1.2million. This is why we advise at least $300,000 to invest before you consider a self-managed fund (this may increase to $500,000 if the recent Productivity Commission suggestions are adopted).
Do you love rules? SMSFs come with plenty of them. The ATO regulates all SMSFs and the laws and compliance requirements are as complex and rigorous as they are for government, industry, corporate and other funds.
The penalties for breaching those laws and regulations are steep, and it’s up to you as the trustee to know what you’re doing.

The myth of DIY in self-managed super funds

By now you might be thinking you’d need some help to manage an SMSF.
In June 2018, the Australian Securities Investment Commission (ASIC) conducted a review of the SMSF sector in which 38% of trustees said that running their SMSF took up more of their time than they expected.[1] There’s a lot involved, and even if you are experienced in financial management and investing, there will be times you’ll need other expertise, such as:

  • An independent, ASIC registered, self-managed fund auditor to complete your annual audit
  • And independent valuer to value your assets
  • A qualified actuary
  • A fund administrator
  • A tax agent
  • A financial planner
  • A legal or tax specialist

All of these services come at a time and financial cost, and if you have more than one member and trustee in your fund, you need to be sure everyone agrees on any advice you receive, and decisions you make.
It’s important to note that, in the case of Fraud, SMSFs are not covered by the same compensation arrangements available to other super funds. It’s important to know exactly who has operating access to your funds, and put systems and processes in place to protect your assets as much as possible.
[1] Australian Securities and Investment Commission (ASIC), June 2018, 18-192MR SMSF advice needs significant improvement, accessed 3 September 2019 at

All self-managed super fund holders need an exit plan

As with any financial commitment, it’s useful to begin with the end in mind, and plan as much as you can for the unexpected.
There are many reasons you might want to close your fund, for example:

  • All members/trustees have reached retirement and the fund has paid everyone
  • Your relationship with other fund members has broken down
  • Lack of time and resources, or
  • The fund isn’t performing as you’d hoped

Some of these situations will be more challenging and complex than others, but in all cases, you must:

  • Notify the ATO within 28 days of the decision
  • Ensure the fund has no remaining assets
  • Have a final audit conducted
  • Fulfil all of your reporting requirements

More importantly, before you go into a self-managed arrangement, make sure you prepare an exit strategy to guide you, especially in how you and any other members will deal with getting out of the fund if the worst happens and relationships break down.

Is a self-managed fund right for you?

If you’re still wondering whether a self-managed super fund might suit you, ask yourself these questions:

  • Do I want the control as well as the accountability for my investments?
  • Do I have investment knowledge, skills, and experience?
  • Do I have the time, energy, interest and commitment to keep informed and stay up to date with all the rules and regulations?
  • Do I have a large enough balance to make it worthwhile? (ASIC suggests a minimum of $200,000)
  • Do I understand that different rules apply to SMSFs in relation to acts of fraud?

If you’ve answered these questions and you believe an SMSF might be right for you, the next step is to seek financial advice. Self-managed funds aren’t for everyone, but they can and do perform well for those who are fully prepared for the responsibilities and have the right support.

This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication.
Creo Wealth Pty Ltd ABN 96 605 894 415 is a Corporate Authorised Representative (No. 1236172) of ClearView Financial Advice Pty Limited ABN 89 133 593 012 AFS Licence No. 331367 GPO Box 4232, Sydney NSW 2001


Over to you

We’d love to hear your thoughts and experience with self-managed super funds, so please share!
Other references:
Australian Securities and Investment Commission (ASIC), February 2019, Self-managed super fund (SMSF), accessed at
Money and Life, February 2018, What’s a self-managed super fund and should I have one?, accessed 3 September 2019 at[/vc_column_text][/vc_column][/vc_row]

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