How to Decide if an SMSF (Self-Managed Super Fund) Is Right for You



As an employee, you have two choices for how to approach your retirement savings. You can opt for a traditional superannuation program, or you can select a newer option called an SMSF or self-managed super fund. Each choice offers advantages depending on your level of aptitude for financial management. When properly managed, each option allows you to look forward to your retirement years with financial confidence. Learn more here about self-managed super funds and decide if this is the best option for your personal retirement planning.

Understanding the Traditional Superannuation Program

With a traditional superannuation program, your employer invests a certain percentage of your salary or hourly wages into your retirement, or superannuation, fund. Your employer is also responsible for managing your superannuation fund and offering you benefits such as life insurance and income protection. You can also contribute additional money to your retirement fund up to a certain percentage of your income, but this is not required. You must meet certain requirements before you can begin to withdraw your superannuation funds.

Understanding the SMSF Program

The SMSF program is designed to appeal to individuals who have more financial means at their disposal to invest and have a strong interest in managing their own investments. With an SMSF program, you will take over the private investment and management of your retirement funds. The Australian Taxation Office (ATO) strictly regulates the SMSF program. It is important to ensure that you understand the requirements of the program and can meet those requirements when you elect this approach to saving for your retirement.

SMSF Program Requirements

When you start an SMSF, the SMSF itself becomes a legal entity, of which you are just a trustee. The SMSF has certain privileges and powers, which most recently include borrowing to invest in assets on behalf of the SMSF. These are known as self managed superannuation funds. When you borrow on behalf of the SMSF, you acquire assets such as property as an investment for the SMSF. Beyond funds borrowing, current SMSF program requirements are as follows:

  • Select one to four trustees. You can have as few as one and as many as four trustees for your SMSF fund. Because you need a fairly substantial initial investment (nest egg) to harness the full power of the SMSF program, selecting more trustees is generally advisable.
  • Keep detailed records. As an SMSF trustee, you must keep detailed records of every investment and transaction and submit to an annual audit that you arrange privately with a qualified auditor. You must also keep detailed records of every audit.
  • Design an investment strategy. Your SMSF fund is what will take care of you and the other trustees during retirement. You must ensure that you and your chosen trustees are competent to design and oversee an investment strategy that will provide for each trustee’s financial needs upon retirement. If you do not feel personally competent to invest your SMSF funds, you can also hire a professional to do this for you.
  • Carefully track funds use. The SMSF funds can only be used for provision of retirement benefits back to the trustees according to the requirements for funds withdrawal. Use of the SMSF for any other purpose is not legally permissible.

Choosing Your Program

SMSF programs are growing in popularity. Here are the two essential facets to consider when choosing the retirement program that is best for you:

  • Financial expertise. With an SMSF program, you will need to either manage and invest your own retirement savings or hire a competent professional to do this for you and/or your fellow trustees. If you choose to hire a professional, make sure the administration and maintenance fees are reasonable given the size and growth of your SMSF fund.
  • Sufficient time. It simply takes more time to manage your retirement fund yourself, even if you hire a professional to invest the money for you. From complying with tax laws to tracking funds progress, you must ensure sufficient time to do a good job managing your own retirement funds.

If you feel confident that you have the expertise and the time, then you know that SMSF fund borrowing is the right choice for you.


About the Author: Paula Swan is a benefits analyst for a retirement planning practice. She chose to put her super savings into an SMSF with three other trustees 10 years ago. So far she is pleased with the fund’s performance.



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Written by Craig Daniel

Avid writer and Blogger, I love to watch sports and love travel! But my real hobbie is to play around with money!