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What is a Self-Managed Superannuation Fund (SMSF)?

A Self-Managed Superannuation Fund (SMSF) offers Australians a unique way to save for retirement, in a landscape typically dominated by what are known as “retail funds”. Unlike those traditional super funds, SMSFs offer the ability for up to six members to have direct control over their retirement savings, with the flexibility to choose where their money is invested. According to the Australian Taxation Office (ATO), as of December 2023, there were over 614,000 SMSFs managing a whopping $878 billion in assets, highlighting their popularity and significance in the Australian retirement landscape. So how exactly does a SMSF work, and what are the potential benefits and risks of managing your own super? Read on to find out…

How Does an SMSF Work?

An SMSF functions with a maximum of six members, who also act as trustees, thus bearing the responsibility for compliance and investment decisions. This structure demands adherence to the Superannuation Industry (Supervision) Act 1993 (SIS Act), focusing solely on retirement benefits. Members’ contributions, as well as their investment strategy, must align with the fund’s objectives and consider the varied risk profiles of its members. According to ATO data, the top five asset types held by SMSFs, making up 74% of all SMSF assets, are:

  • Listed Shares (28%)
  • Cash & term deposits (18%)
  • Unlisted trusts (12%)
  • Non-residential real property (10%)
  • Limited recourse borrowing arrangements (LRBAs) (7%)

What are the Potential Benefits of a Self-Managed Superannuation Fund?

The appeal of an SMSF lies in the control it grants over investment decisions, providing transparency and direct involvement in managing retirement savings. This can make as SMSF ideal for those with a keen interest in investing and superannuation and can potentially offering cost advantages for funds over $200,000. This personalised approach to retirement planning allows for tailored investment strategies that can closely align with individual financial goals and market opportunities.

What are the Potential Risks of a Self-Managed Superannuation Fund?

Naturally, the introduction of increased control comes with significant responsibilities. Trustees must navigate complex regulations and are personally liable for the fund’s compliance, facing stiff penalties for breaches. The management of an SMSF demands considerable time and effort, often necessitating the engagement of professional administrators (such as the SMSF team at McKinley Plowman). Furthermore, the viability of SMSFs is contingent upon having a substantial initial superannuation balance, as smaller funds may find the costs outweigh the benefits when compared to traditional superannuation options.

What Now?

For Australians contemplating the path to retirement, SMSFs represent a compelling, albeit complex, option. They do offer unparalleled control over investment choices, so can be a suitable choice for the financially savvy and those willing to dedicate the time to manage their fund. However, the responsibilities and risks involved underscore the importance of seeking professional advice in establishing and maintaining an SMSF. If you are considering whether it is right for you and your circumstances, it’s crucial to assess whether the benefits align with your financial situation and retirement goals, and whether you’re prepared to meet the ongoing obligations of fund management.

The SMSF Team at McKinley Plowman have helped numerous clients determine whether a SMSF is appropriate for their needs and undertake all of the necessary establishment and maintenance work required to keep everything compliant. If you would like to know more about how an SMSF might fit into your financial plan, please do not hesitate to reach out to us on 08 9325 2411 (Perth), 08 9301 2200 (Joondalup), or contact us via our website.

Please note the information provided within this article is general of nature and is not a personal advice recommendation. Prior to considering strategies discussed in this article we recommend you seek personal financial advice. Please be aware that, without the benefit of financial advice, you may be committing yourself to financial strategies or products that are not appropriate for your overall personal situation, needs and objectives.

Data and further reading: Self Managed Superannuation Funds – Dataset –

written by:

With her career in accounting spanning nearly two decades, Jojo brings to the MP+ Self-Managed Superannuation team extensive industry experience and a passion for industry-leading SMSF Services. Jojo and her team of accounting professionals manage clients’ self-managed superannuation fund affairs so they have the time to enjoy the things they would rather be doing! She enjoys giving clients peace of mind that their super is in the right hands, and has an excellent track record in turning complex superannuation situations into fantastic outcomes for her clients.

Outside of the office, Jojo loves travel, food, cooking, reading, movies, and a nice walk.

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