Is a self-managed super fund actually right for you?

8 min read · General information only

Self-managed super funds get talked about a lot — often by people selling something. Stripped of the sales pitch, an SMSF is simply a structure that puts you, rather than a fund manager, in charge of investment decisions and trustee obligations. That control is genuinely valuable for some people. For others, it's an expensive way to end up somewhere they could have got to more simply.

What you're actually taking on

As a trustee, you (or you and your co-trustees) are legally responsible for running the fund — investment strategy, compliance, record-keeping, insurance considerations, and lodging an annual return. Most people engage an accountant or administrator to help with the compliance side, but the legal responsibility still sits with the trustees, not the accountant.

• Time. Even with an administrator handling paperwork, you need to actively engage with investment decisions, review your strategy, and understand what you're signing.
• Cost. Between accounting, audit, and any advice fees, running a small SMSF typically costs more per year in percentage terms than a retail or industry fund would charge on a modest balance — the economics generally improve as the balance grows.
• Compliance risk. Breaches of super law (even unintentional ones) can carry penalties, and the ATO has increased its focus on SMSF compliance in recent years.

Where an SMSF genuinely earns its keep

• Direct property ownership — including, for some business owners, buying their business premises inside the fund.
• Larger balances where the fixed costs of running the fund become a smaller percentage of assets, and where more sophisticated investment strategies can justify the extra control.
• Combining balances with a spouse or family members (up to six members are now permitted), which can improve the cost-per-member economics and allow shared investment strategies like a jointly-owned property.
• Specific investment preferences not well served by retail or industry fund options — direct shares with particular tax-loss or franking credit strategies, for example.

Questions worth answering honestly

• Do I actually want to spend time on this, or do I just like the idea of control?
• Am I comfortable with the trustee responsibilities — including if my co-trustee (often a spouse) becomes incapacitated or the relationship changes?
• Is there a specific investment I want that I can't access another way — or would a lower-cost fund with more investment options solve the same problem?
• Have I compared the ongoing cost of an SMSF, in dollar terms, against what I currently pay in my existing fund?

None of this means SMSFs are a bad idea — for the right person, with the right balance and the right reason, they can be an excellent structure. The mistake is setting one up because it sounds sophisticated, without weighing the ongoing time and cost against what you're actually trying to achieve.