Advantages and Disadvantages of a Self Managed Super Fund (SMSF):

There are many advantages and disadvantages that need careful consideration when looking to establish a Self Managed Super Fund (SMSF). We have listed some basics as per below for your consideration. For more comprehensive information, please download our free SMSF Starter Kit or contact us on 03 9802 2533...

Advantages of a SMSF:

Greater Investment Choice: 

A Self Managed Super Fund (SMSF) can offer great flexibility to invest in a wide range of assets. Self Managed Super Funds can invest in almost any asset, from listed and unlisted Australian and overseas shares and trusts, options, bonds and like products, managed funds etc. Self Managed Superannuation comes into it's own, with the flexibility to own residential property and business real property.
The flexibility with business real property is you, as a member and trustee of the Self Managed Super Fund can buy a business real property (from a third party or from yourself or a related entity), operate your business out of it, and have the business pay rent to your Self Managed Fund. Members can also transfer (contribute in specie) listed shares and business real property into the fund which they personally (or a related entity) own.

Full Control: 

You as trustee, take responsibility for managing the Self Managed Super Fund. Investment decisions, timing of investments, management decisions, the ability to take advantage of your knowledge and experience and the ability to attend to the investments daily if required, may give you comfort that your money is being safely invested.


The fee structure in Self Managed Superannuation should deliver substantial savings if you have more than $250,000 in super, compared with other retail funds. This is as the fee size doesn't grow with your super balance. If you have over $800,000 you are likely paying 0.8% to 1.5% of your total funds in fees. That is around $8,000. 

Tax Planning: 

With your tax advisor and financial planner, Self Managed Super forms part of your whole investment portfolio and can be use as a tax planning tool, given it's flexibility and low barriers to make things happen (ie. limited red tape). If a new change in tax or super legislation occurs, you and your accountant / financial adviser can take advantage with immediate effect - no need to wait and see what your super provider will allow. A SMSF gives you the ultimate flexibility.

Succession Planning: 

Death benefits can be passed onto the next generation with flexibility and in a tax effective manner. A SMSF is a fantastic tax planning tool, especially when it comes to succession planning. Potentially, you could leave carried forward tax losses to the next generation (which they can then soak up with any gains they may make). The ease of simply being able to revert your pension on death to your spouse, makes a SMSF a great vehicle. Imagine the hassle of your spouse trying to fill out the paper work with an industry super fund, trying to prove their identity and the like. With an SMSF, you and your spouse will control the cheque book, simply inform your accountant and ask for advice and the rest will be taken care of.

Access to SMSF Professionals:

With a SMSF, you should have a greater access to SMSF professionals. Accountants, financial planners, solicitors etc. Professionals who you will have a relationship with and will not only answer your questions and provide options to these, but should be proactive in looking after your SMSF. I think people underestimate the comfort in having a key professional advisor, who they can pick the phone up and talk to about their situation, who knows their situation and can provide solutions straight away. Our opinion is advice must be harder to come by in a larger super fund.

Disadvantages of a SMSF:

Trustee Responsibility: 

A great deal of responsibility is place on the trustees of a Self Managed Super Fund. The buck stops with you. All decisions, operations and compliance rests on your shoulders. Obviously, having a great administrator (like Rogerson Kenny) who can assist you with your trustee duties and responsibilities takes the worry out of it. See Trustee Duties.

Extra Fees: 

If you have less than $250,000 in super, a Self Managed Super Fund may be too costly to justify. Accounting and Audit fees are typically not based on how much you have in super, so you could be paying out a large percentage of your fund in fees (typical fees are between $2,500 to $4,000). Keep in mind though, if you think you can out perform the market and take into account the fees, you can go for it. There is no minimum account balance required. 

Expertise and Time Required: 

Some level of investment expertise will be required when running your Self Managed Super Fund. Even when you give control to a financial planner, you still need to keep abreast of what is occurring with your investments as at the end of the day, it is your responsibility. The time required to manage your SMSF can also be a burden if you are time poor.

It's not for everyone: 

It's ok. Just because your friend has one, or they seem popular at the moment - doesn't mean you need a Self Managed Super Fund. A person who isn't committed to the performance of their Self Managed Super Fund can lose money quickly. If you don't have expertise or time, don't have a lot in super - then it's probably not for you. You also need an adequate level of knowledge with regard to the relevant legislation. It's best to have a chat to a professional and get some advice on what you should do.

Is a Self Managed Super Fund right for you?:

  • Do you have more than $250,000 in super? (this is not a requirement)

  • Do you have a good knowledge of investments?

  • Do you need flexibility with investments and the ability to take control of your whole portfolio?

  • Are you ok with the extra responsibility?

  • Are you a high net worth individual or do you own your own business?

  • Will the benefits outweigh the costs?

These are some questions you need to ask yourself. It is best to seek professional advice before you make any decisions.

If you would like to inquire about establishing a Self Managed Super Fund, please click here

To Download our free SMSF Starter Kit (for those who are considering starting a SMSF), please click here



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