What is a SMSF?

In simple terms, a self managed superannuation fund (SMSF) is a small super fund that is managed by its members, with its primary purpose being to provide retirement benefits for its members, or a benefit to their dependants if a member dies before retirement.

In other superannuation funds, such as large retail, corporate or industry funds, there can be thousands of members but they are not the managers of the fund
– so they are not responsible for managing the fund’s investments or compliance with superannuation law.

SMSFs can provide you with greater control, flexibility, and transparency of
your super.

  • You control how to invest your superannuation money.
  • With an SMSF you can view your individual share holdings, see your term deposits, check your cash balance and keep track of rental income from your property.
  • You have the flexibility to pick and choose from a wider range of investments. These can include direct shares, term deposits, and even property.
  • You have greater visibility of the assets your super is invested in and how they are performing at any given time.
  • Since you are in control, you can choose to invest directly in shares for companies that you are familiar with or you can work with professionals to build a portfolio of shares that best meets your needs.

Running your own super fund means that you can monitor and control almost all of your fund’s transactions, which will give you a clearer picture of your fund’s running expenses. As many of these expenses may be fixed dollar amounts, the general rule is that the bigger your total fund size, the more cost effective it becomes to run a self managed super fund.While there is little doubt that an SMSF can provide you with greater control, flexibility, and transparency of your super, it must also be remembered that along with these benefits comes additional risk and complexity.


Self managed super funds are not for everybody.

Setting up a SMSF

When you are setting up an SMSF, there are 10 key steps to follow and
important decisions to make to set your SMSF on the right course.

  • Consider your personal circumstances

    You should consider your personal circumstances before deciding whether an SMSF is right for you. We can help you assess your situation and help you make a decision.

  • Work out how best to structure your fund

    When you set up your fund, you can choose for the fund to have either individual trustees or a corporate trustee. The structure you choose will in- fluence how you administer your fund, so it’s important you choose a structure that meets your needs. For example, some things to consider include how many members your fund will have and if you plan to invest in property within your super.

  • Create your SMSF and trust deed

    As your SMSF is a trust, you need to complete all the paperwork to set up the fund, including the trust deed. A trust deed is a legal document which establishes a trust (in this case, the SMSF) and sets out the terms of the trust.

    If you use a specialist SMSF service like us, it’s easy to set up your fund, simply provide us with the key details. We’ll take care of all the paperwork to help you set up your fund, including the legal requirements such as creating the fund’s trust deed and product disclosure statement. We’ll also help with the documents to appoint your fund’s trustees and members.

  • Register your SMSF with the ATO

    Once your fund is set up and the corporate trustee or individual trustees have been appointed, you’ll need to register with the Australian Taxation Office (ATO). We can register your fund with the ATO on your behalf. We prepare a notice of election to become a regulated fund and register your fund for an Australian Business Number (ABN), a Tax File Number (TFN) and for Goods and Services Tax (GST).

  • Set up a fund bank account and rollover your super

    Your super fund will need to have its own bank account to accept contributions or fund transactions and pension payments. We can also assist with transferring your existing super from other funds into your SMSF.

  • Prepare an investment strategy

    Your fund must have an investment strategy, which is like a mini business plan for your SMSF, providing a guide for your investment decisions. Your strategy must be in writing and take into account things such as your risk profile, as well as your fund’s investment objectives and cash flow. If you would like help, AMP SMSF specialists can help you prepare an investment strategy that’s right for you.

  • Consider insurance

    Under SMSF rules, you are required to consider the life insurance needs of the fund’s members as part of your SMSF’s investment strategy. We can help you with life insurance, total and permanent disablement (IPD) and income protection solutions.

  • Start investing

    This is where you begin to take control of your super and, guided by your investment strategy, decide how and where you will invest your super money. SMSFs generally have a mix of cash, term deposits, direct equities, managed funds and property. If you’d like advice in these or other areas, we can help you.

  • Manage your SMSF

    SMSF compliance can be complex and having a quality support team to help manage your fund can be helpful. We can help with the day-to- day running of your fund, which enables you to focus on investing and tracking your super balance.

  • Keep informed

    As a trustee (or a director of a corporate trustee), you have certain responsibilities and one of them is to stay on top of changes in superannuation and tax laws and regulations, as these changes may impact your trustee responsibilities. We can update you on key regulatory changes.

Benefits and risks of a SMSF

The benefits of a well-run SMSF can be both rational and emotional.


  • Control with an SMSF, you have greater control in deciding how to invest your superannuation money. You also have the ability to design your fund so that it better meets your specific needs eg to meet family and tax obligations or to have greater certainty when it comes time to paying  out your savings.
  • Investment flexibility you decide your SMSFs investment strategy and choose individual investments to suit the needs of the fund’s members. This could mean choosing specific company shares, specialist funds or investing in a property of your choice, provided that the investment satisfies the sole purpose test.
  • Lower costs could mean more money at retirement depending on how efficiently you manage your fund, how much super
    you have, the investments you make, and the extra services and support you want, your SMSF could cost you less than what you
    would pay to have your super managed by a corporate, retail or industry super fund.
  • Tax advantages Depending on your personal circumstances and the investments you choose for your SMSF, there are potential tax advantages to having an SMSF.
  • Insurance you can hold insurance cover within your SMSF.
  • Personal satisfaction many people who have an SMSF report a great sense of satisfaction in managing their own retirement savings program.


However, along with the benefits of managing your own super come possible risks and complexity, including:

Scenarios where your fund may cost more than a corporate, retail or industry fund. For example, when your fund has a low balance ie at the beginning and end of your SMSF’s life cycle. The ongoing trustee obligations to satisfy administration and compliance requirements.

The trustee:

  • Is ultimately responsible for all actions of the fund
  • Must act in accordance with all laws that regulate SMSFs,and the fund’s trust deed
  • Is required to lodge an annual tax and regulatory return, pay all liabilities as they fall due and arrange an annual audit of the fund

Considerations if you move, intend to move, or travel extensively, overseas. This may impact your ability to have an SMSF.

What to consider
before starting a SMSF

  • Do you have enough super savings for an SMSF to be a cost effective option right now?

    Unless you do, it might be advisable to wait. In keeping with guidance from the Australian Taxation Office, AMP generally recommends that an SMSF has
    at least $200,000 in super savings to be a cost effective option. That’s because, for amounts under $200,000, the fees on a typical retail, industry or corporate super fund are generally cheaper. You should check the fees charged on your existing super account to check whether this is true for you. That said, it’s important to remember that this recommended $200,000 balance relates to the total amount to be held in your SMSF. So, this includes your super savings as well as the super savings of any other fund members (eg your spouse or children).

  • Do you have time to manage your fund?

    You should be prepared to spend time setting up your SMSF and then managing it on an ongoing basis. It typically takes around six to eight weeks to set up an SMSF but can take longer depending on the parties involved e.g. other institutions you are rolling your super from. Some of the steps involved in completing the set-up of a new fund require some planning. This includes:

    • Applying for your fund’s ABN and TFN

    • Setting up a bank account for your fund

    • Deciding on your fund’s investment strategy

    • Requesting rollovers from your existing super fund

    • Setting up insurance through your fund

    • Keeping on top of administration to ensure your fund complies with the law.

    We can help make setting up your fund easy. How much time you spend managing your fund will depend on your circumstances. However, research by Investment Trends, shows that a self-managed super fund trustee spends on average approximately eight hours managing their own administration, compliance, reporting, and investment research each month. Some of the main tasks include:

    • Managing your investments

    • Managing your fund’s administration, and

    • Staying up-to-date with relevant super and tax changes, as well as other issues that affect your fund, like changes in interest rates and market conditions.

    The amount of time required to manage your fund’s investments may depend on your investment strategy and personal interests. For example, some people enjoy buying and selling shares, which generally involves monitoring the share market regularly. Other people prefer to invest in assets that don’t generally require such frequent attention, like an investment property.

    Compulsory administrative tasks that you’ll have to stay on top of include record keeping, tax and audit documentation People who have an SMSF often look for ways to minimise the time spent on fund administration and compliance because it doesn’t directly contribute to the returns of the fund. This is where SMSF specialists, like AMP SMSF Solutions, can help. They can reduce the time you need to spend on ongoing fund administration tasks, by providing services and tools to help with your fund’s administration, compliance, and paperwork, so you have more time to focus on what’s important to you.

    However, it is important to remember that, ultimately, you (and the other fund members) are responsible for your fund’s ongoing compliance. And, if things go wrong, there can be significant penalties.

    You must also act in the best interests of all fund members. This means you need to stay on top of any changes to relevant super and tax rules, as well as the changing needs of your fund’s members.

    To make the most of investment opportunities, you should be aware of the broad economic trends that might impact the fund’s investments e.g. being aware that, as interest rates drop, so may the returns on the fund’s cash assets

  • Do you feel confident setting and managing your own investment strategy?

    This is a key consideration for people who are considering setting up their own SMSF. The general process when designing an investment strategy involves

    • Determining the investment needs of each fund member, including their investment time horizon and appetite for risk

    • Identifying the investment building blocks you need to meet members’ needs e.g. cash, property, direct shares, managed funds, or other investment assets, and

    • Selecting the individual investments you want to make, and considering the insurance needs of fund members, and determining whether it is appropriate for you to hold insurance within the SMSF.

    Once you have prepared your investment strategy, you should regularly review your strategy and monitor your fund’s investments to ensure they are on track. We can refer you to a financial planner if you would like help setting up your fund’s investment strategy.

Frequently Asked Questions

  • How long does it take to set up a SMSF?

    Setting up an SMSF generally takes at least six to eight weeks. The key steps involved are:

    • Setting up the fund and trust deed
    • Registering the fund with the Australian Taxation Office (ATO)
    • Setting up a fund bank account and arranging to rollover your super
    • Considering the insurance needs of fund members, and
    • Preparing your investment strategy so you can start investing

  • How many members can a SMSF have?

    You can have up to four members in an SMSF. However, over 90% of SMSFs have only one or two members, with the majority having two members.*

    Importantly, all SMSF members must also be trustees of the fund or, if the fund has a corporate trustee, they must all be company directors of the corporate trustee. Special rules apply in relation to these trustee requirements where an SMSF has only one member.

  • Who can be a SMSF trustee and what are the responsibilities?

    In order to be a trustee of an SMSF, you need to be 18 or older and eligible to be a trustee.

    Under superannuation law, you may not be eligible to be a trustee in some circumstances – such as if you are bankrupt, mentally impaired, or if you have certain criminal convictions

    The Responsibilities of an SMSF Trustee

    Every member of an SMSF must either be a trustee of the fund or a director of a company that is the trustee of the fund. Your responsibilities under either option are broadly the same and include:

    Managing and investing the fund’s assets in accordance with your fund’s investment strategy

    • Complying with various superannuation and tax laws
    • Acting in the best interests of fund members
    • Keeping SMSF assets separate from the personal assets of the fund’s members
    • Keeping all appropriate records for the fund, which includes creating and retaining official minutes (eg about trustee decisions)
    • Arranging an annual independent audit of your fund
    • Lodging an annual tax return, and
    • Paying the annual supervisory levy to the ATO.

    Being a trustee is an important responsibility. But, you can get help. We can help keep your fund on track and look after the paperwork including record-keeping, tax returns, and the annual audit. We can also keep you up-to-date on any changes in superannuation laws.

  • What types of property can my SMSF buy?

    You can use your SMSF to buy residential or commercial property. However, any property held by your SMSF must meet the sole purpose test of providing retirement benefits to fund members, or a benefit to their dependants if a member dies before retirement.

    • Residential property: there is nothing to prevent an SMSF from investing in residential property as long as the property is not acquired from a related party of a member.
    • However, the family home cannot be owned by your super fund. Nor can you rent a residential property owned by your SMSF to a fund member, or to their related parties.
    • However, you can buy an investment property of your choice that you rent out to tenants who are not fund members or their relatives.
    • Commercial property: you can also hold commercial property, including your own business premises, in your SMSF.

    While the property still needs to meet the sole purpose test, when dealing with commercial property, an SMSF can generally purchase the property and lease it back to a member or a related party of the fund – including the member’s business. An arm’s length sale price and lease arrangement will be particularly important when acquiring and / or leasing property to a member or related party of the fund.

  • Can I borrow to invest in property in my SMSF?

    Yes. However, there are strict rules governing how the loan and subsequent property purchase is structured when using borrowed money inside an SMSF.

    Borrowing through an SMSF for property investment purposes must be done under what is referred to as a limited recourse borrowing arrangement. These arrangements can be quite complicated and may require professional advice. For example, under these arrangements, the property must be kept separate from the fund’s other assets.  This ensures that if the fund defaults on making loan repayments, the bank and any interested parties will only have recourse over the property, but not to other fund assets. In order to achieve this, the borrowing rules require you to establish a security trust which will recognise the beneficial interest of the SMSF in that property and the rights of the lender. The trustee of this security trust holds the property in trust with the SMSF as the beneficial owner.

    Another important factor when borrowing to invest in property is that loan conditions in an SMSF are different from those for regular housing loans. The maximum loan amount relative to property value will generally be lower and a range of conditions and risks need to be considered.

  • Can I invest in property through my SMFS?

    You can invest in property through many retail, corporate, or industry superannuation funds or through a self-managed super fund (SMSF). However, the options for investing in property vary across different types of super funds.

    In a retail, corporate, or industry super fund, you may be able to invest in property indirectly. Many of these funds allow investments in listed property trusts or as part of a large diversified portfolio that makes investments in certain types of property such as infrastructure or commercial property.  These indirect property investments can be accessed in an SMSF too.

    In an SMSF, investments can also be made directly in residential and commercial property using your super. For example, a fund can buy business premises or an investment property. As trustee of your SMSF (or a director of the corporate trustee of the SMSF), you have greater control over which property (or properties) your fund is invested in. You choose which property to buy, manage the rent and any expenses, and determine when it is time to sell.

    Before buying property within an SMSF, it is important to understand superannuation law and other relevant laws in this area. Importantly, the SMSF’s trust deed must enable property to be purchased and property must form part of your fund’s investment strategy. There are also restrictions on who you can buy the property from and who it can be rented to.

    Some questions to consider include:

    • What types of property can an SMSF buy?
    • Can I borrow to invest in property in my SMSF?
    • What are the benefits of investing in property?

  • What are the benefits of investing in property

    There could be several benefits of buying property through an SMSF and these include:

    • Tax savings: if you buy and hold property within your SMSF until you retire and start taking a pension from your fund, it will generally be exempt from capital gains tax when the fund sells the property.  Also, any income received by your fund (i.e. rent received) while you are drawing a pension will be completely tax-free.  Before you start to draw a pension from your SMSF, any rental income generated will be taxed at a maximum of 15%. And, if the fund sells the property after holding it for at least one year, your fund will also only pay capital gains tax on the sale of the property of up to 10%.  Comparatively, if you were to buy the same property in your own name, rental income would be taxed at your personal tax rate (which could be as high as 46.5%). This would also apply to any capital gains tax payable on the sale of the property (albeit after receiving a 50% reduction if the property was held more than one year).
    • You may not be able to afford to buy property in your own name: however, you, and other members of the fund, might have a reasonable amount of combined super saved inside your fund. Buying property in your fund might be a good way to achieve your goal of owning an investment property or owning your own business premises.
    • Benefits for business owners: if you own your business premises through your super fund, and you lease it to your business, you will need to pay rent to your superannuation fund which is generally tax-deductible to your business. Given the relatively low concessional contribution limits that are currently available, paying rent to your super fund could be a great way to accelerate your retirement savings without going over the contribution limits.
    • Asset protection: assets held in a superannuation fund (including property) are generally protected from creditors in the event of bankruptcy. However, before you decide to invest in property through your SMSF, there are several things you should consider. These include:
    • Investment strategy: any investment made by your SMSF must align with its investment strategy.
    • Diversification: property generally has a significant value and may reduce diversification in your portfolio,    depending on the value of your fund’s other investments and what asset classes those investments are in.
    • Liquidity: the nature of property could make it difficult to dispose of quickly. You should check whether your fund is sufficiently liquid and able to pay expenses and benefits as and when the need arises without having to sell the property at short notice.

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