Self-managed super funds (SMSF)
Understanding the responsibilities, risks and costs before you switch.
We understand that some members are interested in taking more control of their super by setting up a self-managed super fund (SMSF). While an SMSF can offer flexibility for some, it is a major financial decision that comes with significant responsibility, risks and costs.
It is important to carefully assess what is involved before deciding whether an SMSF is right for you.
The potential benefits
For some sophisticated investors with large balances, an SMSF may be a suitable option, depending on their individual circumstances. People sometimes see the potential benefits as including:
Control: You decide exactly where your money is invested. For sophisticated investors, this can be a plus – but it can be a double-edged sword for those with less investment knowledge or understanding.
Investment choice: An SMSF may be able to invest directly in certain asset classes not commonly offered through large APRA-regulated funds, such as direct property, subject to superannuation law requirements.
Tax planning: You may have more flexibility in managing tax outcomes for your specific situation.
Your responsibilities as a trustee
If you set up an SMSF, you (and the other members) usually become the trustee(s) either as individuals or through a trustee company (as a director of the company). This means you are responsible for the fund’s decisions and for complying with the law. The ATO is responsible for the regulation of SMSFs.
As a trustee, you must:
Comply with laws including tax, super and corporations laws. The penalties for getting this wrong can be severe and can be levied on you and/or your trustee company, not the fund.
Act in the best interests of all members at all times.
Formulate and review an investment strategy regularly. While you may have more ability to direct how you invest, there are limitations in super laws that you will need to understand when formulating and reviewing your investment strategy and selecting your preferred investments.
Keep comprehensive records and arrange an annual audit by an approved SMSF auditor.
Value the fund’s assets at market value every year.
The ATO has detailed information describing all of the responsibilities you have as a trustee of an SMSF Click here to view them.
Possible issues to consider
Before deciding whether or not to establish an SMSF, you should consider the 'cons' alongside the 'pros'. You can get help from a financial adviser to make this assessment but note that a recent report by the corporate regulator, ASIC (Report 824), highlighted significant concerns about the quality of advice people receive when setting up SMSFs.
It's not "set and forget": Managing an SMSF takes time. It’s estimated that trustees spend over 100 hours a year managing their fund1.
Loss of protections: Members of SMSFs do not have access to the government financial assistance mechanism that may be available in limited circumstances to members of APRA-regulated funds.
Insurance issues: You will not have access to insurance through group life insurance policies held by many APRA-regulated funds (sometimes with limited or no underwriting, for eligible members). This means you’ll have to organise your own individual insurance policy. Insurance cover through a group insurance policy may be cheaper and easier to obtain than through an individual policy (depending on circumstances such as your age, medical history etc).
1 Based on ‘SMSF Investor Report, April 2021, Investment Trends’ – noted on the Moneysmart website
The true cost of running an SMSF
Running your own super fund is not free – an SMSF involves set-up costs and accounting, auditing and other fees (such as legal fees) borne by you and other members of the SMSF (if any). Unlike Vision Super, where we use our scale to help keep costs low for all members, the size of an SMSF means the impact of running costs may be significant.
What the data says
According to an ATO statistical overview, the median total cost of running an SMSF was approximately $9,874 for the 2023/24 financial year2. If your balance is under $500,000, these fixed costs can eat significantly into your retirement savings compared with the fees you would pay in an APRA-regulated fund.
If you need expert advice to help with your SMSF’s investment strategy and the selection of investments, additional fees will apply.
2 Based on data collected by the ATO. Expense calculations for SMSFs aren’t necessarily the same as for APRA-regulated funds.
Thinking of closing your SMSF?
If you have an SMSF and are finding the costs too high, the administration too time-consuming, or you simply want a less stressful retirement, you can transfer your super to an APRA-regulated fund like Vision Super and close your SMSF.
Steps to wind up your SMSF
Winding up an SMSF can be complex, and you must follow the correct process to avoid penalties.
1. Check your trust deed: review your deed for any specific wind-up instructions.
2. Sell or transfer assets: you will need to sell the fund’s assets (like shares or property) or transfer them out of the fund.
3. Pay all outstanding expenses: ensure all tax, audit, and accounting fees are paid.
4. Calculate final balances: determine the final balance for each member.
5. Rollover your super: transfer your super balance to another fund using the SuperStream standard.
6. Final audit and return: you must have a final audit completed and lodge a final SMSF annual return with the ATO.
7. Close the bank account: once all liabilities are settled and money rolled over, close the SMSF bank account.
Ready to bring your super back to an APRA-regulated fund?
If you’d like to transfer your SMSF super balance to Vision Super, our team can help guide you through the process.4 Give us a couple of details and we’ll be in touch shortly, or just call us during normal business hours on 1300 300 820.
3 SMSF trustees spend on average more than 8 hours a month managing an SMSF. That's more than 100 hours a year.
4 You should consider whether it is appropriate to your needs and circumstances. You should obtain and read the relevant Vision Super Product Disclosure Statement and Target Market Determination available at www.visionsuper.com.au before acquiring any financial product. We suggest you seek professional advice to make the best choice for your circumstances. Where tax information is included you should consider obtaining tax advice. Vision Super Pty Ltd ABN 50 082 924 561 Australian Financial Services Licence 225054, is the Trustee of the Local Authorities Superannuation Fund ABN 24 496 637 884.