An SMSF (Self Managed Superannuation Fund) is a private superannuation fund that you manage yourself. It is a legal structure that is regulated by the Australian Taxation Office (ATO) and the Australian Securities and Investments Commission (ASIC). It must be set up for the sole purpose of providing for your retirement.

If you set up an SMSF, you can decide on your SMSF investment strategy. However, like ordinary super funds, you must comply with relevant laws when making those investment decisions, as well as when setting up and administering your SMSF.

Whether an SMSF is a good choice for you depends on your situation, including:

  • Your age
  • The super funds you have available
  • How much spare time do you have available to manage your SMSF
  • What type of assets do you want to invest in
  • Your financial goals

What are the advantages of an SMSF?

A low tax rate

An SMSF has an income tax rate of 15% on concessional contributions. Concessional contributions are those made before tax, such as employer contributions and those made from a salary sacrifice arrangement. Earnings on assets in the fund are taxed at 15%.

There is no other legal structure in Australia that has such a low flat tax rate as superannuation. Further, SMSF benefits received after you have retired and are over 60 years of age are tax-free. And earnings on assets in the fund when it is in pension mode are also tax-free.

Given the current high-income tax rates, the low tax rate of an SMSF is very attractive for tax planning purposes.

Asset protection

An SMSF is a very good asset protection structure However, it doesn’t provide as much protection against family law claims.

Control over your investments

An SMSF allows you more freedom to invest. Essentially, you can invest in many of the investment products available to large superannuation funds. You can also invest in assets that are not available to most public industry and retail super funds.

For example, with an SMSF you can invest directly in residential or commercial real estate, rather than being limited to a product such as a public property trust.


Depending on the number of funds in a self-managed super fund, the cost of running it can be an advantage or a disadvantage. Generally, once you are above a minimum amount, the higher the level of funds in an SMSF, the more will be saved in administration costs compared to a public superannuation fund.

Public funds usually charge a fee of between 1-2% of funds under management.


What are the disadvantages of an SMSF?

Your funds may be inaccessible for a long time

Generally, you can only withdraw your superannuation if you satisfy a condition of release. The conditions of release are:

  • Reaching your preservation age and retiring
  • Reaching your preservation age and starting a transition-to-retirement pension (TRIP)
  • Ceasing employment between the ages of 60 and 64 years
  • Reaching the age of 65
  • Ceasing employment and having certain pre-1999 super benefits
  • Severe financial hardship
  • Compassionate grounds
  • A terminal medical condition
  • temporary resident permanently leaving Australia Permanent disability or permanent incapacity
  • Temporary incapacity
  • Death
  • A decision to take your super benefit as a lifetime pension or annuity
  • Having a preserved amount of less than $200

The most common superannuation condition of release is retirement, provided you have reached your preservation age. This age depends on your date of birth, as outlined in the table below:

Date of birth Your preservation age
Before 1 July 1960 55
From 1 July 1960 until 30 June 1961 56
From 1 July 1961 until 30 June 1962 57
From 1 July 1962 until 30 June 1963 58
From 1 July 1963 until 30 June 1964 59
On or after 1 July 1964 60

Regulatory changes

Since the introduction of compulsory superannuation in Australia in 1992, there have been many changes to the rules. The super system (like the tax system) reflects government policy changes over the years.

Given that there will be an increasing demand for funding for age pensions in the future due to our ageing population, it’s not likely the government will significantly alter the basics of the superannuation system. However, it seems that governments can’t resist the urge to tinker with it.

Knowledge and time to administer

Several rules must be complied with when running an SMSF. Since the sole purpose of superannuation is to provide for retirement, there is a strict prohibition on accessing super funds unless a condition of release is met (see above).

As a result, precise financial records must be kept, and there are restrictions on how self-managed super funds can be invested. It will take you time to learn the rules and ensure compliance.


There are costs involved with setting an SMSF up, running it, and winding it up. Set-up costs include professional advice and fees (e.g. legal expenses). Ongoing costs include investment, accounting and SMSF audit fees to comply with SMSF legislation. SMSF insurance is another optional but common annual cost incurred. Wind up costs include further professional advice and fees, paying out or rolling over any SMSF member benefits as well as any outstanding tax obligations of the fund.

This begs the question – what is the minimum amount you need to make setting up an SMSF worthwhile? It may not be in your best interests to start an SMSF if your superannuation balance is currently less than $200,000. This is because the setup and ongoing costs of the fund generally won’t make it the most cost-effective way to build your retirement nest egg until you reach that $200,000 threshold.

However, if you do have less than $200,000 in your super, there can be circumstances where setting up and running an SMSF can still be viable. This includes situations where:

  • You are willing to undertake much of the administration and management yourself as an SMSF trustee.
  • Where you will soon (i.e. within the next few months) receive a large asset (such as an inheritance or business property) that can be transferred into a newly created SMSF.

The larger your SMSF balance, the more cost effective it is likely to be for you.


This article is general information only and does not provide advice to address your personal circumstances. To make an informed decision you should contact an appropriately qualified professional.