Historically, self-managed super funds (SMSFs) have been seen as a direct way to take control of your retirement savings. By taking charge of your investment selection and asset allocation, there may be the perception that you could outperform your retail or other super fund by taking control over your choice of investments

Hence, when investment markets begin to fall, greater interest is taken around where your super is invested and the fees you may be paying to the super fund and investment experts managing your retirement savings.

Keep in mind, this doesn’t mean you can invest in anything, anywhere you like. You are still restricted to investing in assets allowed under the trust deed for your SMSF, the investment strategy of the SMSF, and what superannuation law allows (or prohibits) your SMSF to invest in.


Steps to taking control of your SMSF

In taking control, have you adequately considered all the factors unique to running your own SMSF? Have you given adequate consideration to how you plan to establish and operate your SMSF or the benchmarks against which you will judge your SMSF’s performance?

At its core, an SMSF is essentially a concessional tax retirement savings trust designed for the sole purpose of funding the retirement needs of the SMSF’s members. SMSFs operate under comparable rules to other super funds in the open market. However, they provide their members with an additional level of choice, control, and flexibility.

A well-run SMSF, where the members and trustees are engaged with the operation of their SMSF, shouldn’t contain any hidden costs. The biggest cost in running your own SMSF will likely come from not fully understanding, or tracking, where your costs are, or not having a large enough balance to justify the ongoing operations of your SMSF.


Selecting investments for your SMSF

Your investment selection may add a layer of cost complexity if you are not aware of all of the direct and indirect costs attributable to your holdings. This can often be the case with managed fund investments where underlying costs may or may not be monitored or they may be unclear and therefore are not considered by trustees, or the opportunity cost of having your retirement savings invested in underperforming assets, or perhaps not even investing your funds for an extended period of time.

Outside your SMSF’s actual investments, ASIC has consistently held the view that an SMSF with a balance below $200,0001 is difficult to justify based on both the direct and indirect costs of running a SMSF.

For example, each year you will likely incur annual operating expenses beyond investment considerations, which will include lodging the SMSF’s tax returns, completing financial statements and arranging an audit of your SMSF as part of ongoing compliance requirements.


Financial and other considerations for opening an SMSF

If you are considering starting an SMSF for the first time, the best time to open your SMSF will be after you have considered all of the relevant factors, such as the costs and responsibility involved in running your own SMSF, your investment plan and only then after you have arrived at the conclusion that an SMSF is the right retirement savings vehicle for you.

Start by making sure you understand the rules and regulations in the current superannuation landscape.

Make a decision around the pros and cons of how you may want your SMSF structured. Will you have a corporate trustee or individual trustees and how many members will be a part of your SMSF?

Your SMSF trust deed contains the rules for operating your SMSF, the powers (and restrictions) the trustees may have, and the conditions for investing the member’s funds and paying members benefits. Is there anything you specifically need accommodated in your SMSF’s trust deed?

It’s important that your SMSF’s trust deed is correctly drafted and meets the needs and plans you have for your SMSF, so consider professional advice in this area.


Factors critical to your SMSF’s success

Plan the way forward for your SMSF by preparing your SMSF’s investment strategy, putting it in place, and reviewing all factors critical to your SMSF’s success on at least an annual basis.

For example, are the SMSF’s members in the accumulation phase or will they soon be drawing pensions? Does the risk tolerance of the SMSF’s investments need to change? Are the SMSF’s investments within the target range of the investment strategy? And will you apply for or continue to hold insurance cover for the SMSF members?

While running your own SMSF may provide an increased degree of choice, flexibility, and control that is generally not available in retail funds, it comes with additional responsibility (and potential complications) in areas you may not immediately realise

What if over time your relationship with other members of the SMSF change? Unless your SMSF is a single member fund, most SMSFs will have more than one member and more than one trustee (or director of the corporate trustee company) running the SMSF.

Do you have a plan in place to cater for events such as a member falling ill, losing the capacity to undertake their duties, a relationship breakdown or someone no longer wanting to be a part of the SMSF?

Challenges may arise if the remaining trustees are unable to agree on the future direction of the SMSF, the investment management or how to deal with the members’ benefits.


SMSFs don’t always last the distance

With an average of over 14,000 SMSFs being wound up each year over the five financial years prior to 30 June 20182, you may choose to wind up your SMSF for any number of reasons, and if you do, it’s important you consider your role in this area carefully. Winding up your SMSF requires a number of tasks to be undertaken, which if not done correctly, may result in your SMSF staying open for an extended period of time resulting in additional operating costs.

Again, you will need to check your SMSF’s trust deed as it may require certain actions as part of the wind-up process. You will need written agreement and approval from all people involved in your SMSF, verification with the members on how they would like their benefits paid (or rolled to another super fund), and complete all of your tax and other compliance obligations.

If you’re a self managed super fund (SMSF) trustee, there are a range of sustainable managed funds which you can tap into.


Five top tips before opening an SMSF

  1. Understand the time which will be involved in running your SMSF and make sure you are happy with the level of commitment. Market research conducted by ASIC found that 38%3 of respondents running their SMSF found it more time consuming than expected.
  2. Understand the costs involved in running your SMSF. You will need to complete financial statements, audits and annual tax returns for your SMSF, so you should factor these costs in to the economic viability of running your SMSF. In addition, you may have investment costs such as brokerage, buy/sell spreads, and fund management costs, depending on where you invest.
  3. How will your SMSF perform?Retail funds use investment professionals to manage the money of SMSF members, so it’s important you have an investment strategy for your SMSF as well as a way to track the performance of your SMSF against your expected rate of return. ASIC also found that 33%4 of respondents didn’t realise that super law required their SMSF to have an investment strategy.
  4. Will you lose any benefits rolling your retirement savings out of your current super fund? Make sure you check any existing insurance you may have or extra contributions your employer may be making to your current super fund on your behalf.
  5. Are you happy with your level of knowledge?While you may employ the services of professional advisers, accountants and auditors, you still need to be satisfied with your level of knowledge and accept the responsibility which comes along with running your own SMSF.


ASIC – Advice on self-managed superannuation funds: Disclosure of costs

ATO – Self-managed super fund quarterly statistical report – March 2019

ASIC – SMSF advice needs significant improvement



Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.