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

What is an SMSF?


It seems like everyone these days are talking about Self-Managed Super Fund’s (SMSF).

You hear about it on the news, and even some of your family and friends might have one. When you talk to these people, a lot of them will be quick to tell you that their SMSF gives them a better return than other Super Funds and that it’s the best choice for your future.

But the problem is, how do you know an SMSF is actually right for you? What does having an SMSF actually mean?

Succes Stories:How an SMSF can provide tax-free income

What is Superannuation?

Let’s start with the basics. What is superannuation, why do we have it and what is a Super Fund?

In Australia, your employer must pay money into an account in your name. This money is your Superannuation. The current rate of Super is 9.5% of your employment income.

The aim of Superannuation is to have money put aside during your working life that will build up and provide you with a regular income once you retire.  With the average Australian needing to account for at least 20 years of retirement, Superannuation is a necessity.

The Super Fund is the company that hold the account in your name that your employer deposits the superannuation contributions into. The Super Fund then takes these contributions and invests them to build up the value of your Super over time.


What is a Self-Managed Super Fund?

A lot of other Super Funds are more “set and forget”. You set it up initially, you may choose how you want your money invested (most people don’t bother with this).

These Super Funds have professional licensed Trustees who are responsible for the management of the fund. You receive yearly statements of how your Super is growing, any costs incurred and you don’t really need to think about it much until you retire.

With an SMSF there are up to 4 members only, who run the fund and make the decisions relating to it. This means you have more control over the investment of your super and how the fund is managed.


How Does a Self-Managed Super Fund (SMSF) Work?

An SMSF has its own Tax File Number (TFN)Australian Business Number (ABN)  and bank account. The bank account is used to receive contributions, make investments and pay out pensions. All SMSF investments are made in the name of the fund and controlled by the trustees.


What is a Self-Managed Super Fund (SMSF) Trustee?

As a Trust, an SMSF requires a trustee and there are two types of trustee structures for SMSF’s.

You can choose to have a Corporate Trustee, where a company acts as the trustee and each member is a director.  Alternatively, your SMSF can be run with an Individual Trustee structure Individual Trustee structure. This means that each member of the SMSF is a trustee.

No matter which structure you choose, the Trustees are responsible for the decisions and administration of their fund.

This means that even if they employ an SMSF adviser to help manage the accounting, taxation, and auditing of the fund, at the end of the day, the Trustees are held accountable for the fund complying with Superannuation Laws.



How Do I Set Up a Self-Managed Super Fund (SMSF)?

There are a lot of important things you need to do as an SMSF Trustee when setting up and managing an SMSF. Some people choose to employ SMSF advisers to assist in the process and make sure everything is done right.

But if you and the other Trustees of your SMSF are confident, you can manage the fund without specialist’s assistance.

You need, however, to make sure all of the following things are taken care of:

  • Decide on fund members and the trustee structure
  • Establish the Trust and Trust Deed for the Fund
  • Register your SMSF with the ATO
  • Set up a Bank Account for contributions, investments and pension transactions
  • Create and update your investment strategy
  • Consider insurance for members annually
  • Have a plan for when your SMSF will end.
  • Roll over members’ existing Super
  • Organising employer contributions
  • Accept contributions within limits
  • Make investments without breaking Super laws
  • Document and maintain records for up to 10 years
  • Yearly asset valuations
  • Yearly preparation of accounts and financial statements
  • Appoint a registered SMSF auditor
  • Lodge an annual return
  • Pay the SMSF levy
  • Pay any Tax that is due
  • Ensure minimum pension payments are met each year
  • Appoint an actuary
  • Withhold tax
  • Give payment summaries to members as well as the ATO


As you can see, deciding to change to an SMSF is not a small decision. There is a lot involved, and if not done correctly it can be a costly experience.

However, when it is done right, it can give you the ability to have more control and transparency in how your Super is invested for the successful growth of your nest egg.

If you have decided an SMSF is the right choice for your future, book a Free Initial Consultation with the SMSF advisers at Quarles who will be able to answer any questions you may have.

Secure your future with this FREE 10-page SMSF Guide.