Set your SMSF up for success

A guide to SMSF management at every stage of life

Around 5% of Australians manage their own super through a self-managed superannuation fund (SMSF) – but they control a significant 26% of Australia’s super assets.1

SMSFs are popular for those wanting more control of and flexibility with their retirement savings – as well as greater choice over the assets they can invest in. And the proportion of younger SMSF members is growing. In 2020-21, the median age of members establishing a new fund was 46, compared to 2012, when it was 50.2

Before you decide whether an SMSF is right for you, it’s important to understand the obligations involved. As an SMSF member, you will also be a trustee, or director of a corporate trustee, and be responsible for meeting a range of compliance requirements – from setting up your fund to ongoing management.

This guide will step you through the most important considerations at each stage of your SMSF life cycle.









Is an SMSF right for you?

The primary motivation for setting up an SMSF is a desire for control – which investors define as being involved in investment decisions concerning their retirement savings. They want to choose specific assets and have a direct influence on asset allocation.3

Do you have the financial knowledge to manage your own super?

One of your responsibilities will be to document an investment strategy – and then manage your investments in line with the strategy – so it’s important to have a certain level of knowledge and experience in investing. You’ll also need to be aware of the upfront and ongoing regulatory requirements, and be prepared to spend time managing the fund as SMSF trustees typically spend more than eight hours a month managing their SMSF.4

Kris Kitto, Founder and Director of SMSF administrator Grow SMSF, says most trustees he works with have a good understanding of how to manage investment risk, diversification and cash flow – and urges caution for less experienced investors.

“In my experience, an SMSF is not the best place to learn how to invest. The more experience you have, the better – there is nothing wrong with waiting a few years,” he says.

Is there a minimum balance required to set up an SMSF?

SMSF expenses can include annual ASIC and audit fees, ATO levies, administration fees, and investment and broking fees. If your SMSF also has property within its asset portfolio, you may also incur additional costs such as property management fees. Does your current balance make these costs worthwhile?

Research commissioned by the SMSF Association found SMSFs with $200,000 or more are competitive with both industry and retail funds on a cost basis, and those with higher account balances are more cost-efficient than traditional super accounts of the same value.5

An SMSF can have up to six members, but the most common scenario is two members. Pooling super assets between two or more members can make your SMSF more cost-effective. 

Are you looking for a wider range of investment options?

Managing your own super gives you the flexibility to choose investment strategies that might be more tax-effective for your situation, and access a wider universe of assets. For example, you can invest in international shares, commercial property, managed funds or derivatives – options which may not typically be available in traditional super funds.

It’s important to note there are serious penalties if you ‘misuse your super.’ For example, you cannot use it to buy a holiday house for personal use, or a residential property for family members to live in.

Learn more about the pros and cons of setting up an SMSF.









Setting up your SMSF

Before you start this journey, it’s a good idea to seek advice from your specialist SMSF A-team. For specific decisions, you may need support from a financial adviser, lawyer, accountant or SMSF administrator, estate planning adviser and insurance broker.

Here are five questions to consider during your SMSF set up.

1. What is the right structure for your SMSF?

When establishing an SMSF you will need to choose between having individual trustees (usually each member as trustee) or a corporate trustee (usually with each member as a director).

While it may seem more cost-effective to set up an individual trustee structure, you’ll need to consider other factors, like the difference in administrative penalties for each trustee structure, the ease of administration for a change of trustee/director should a member join or leave the SMSF and the need to keep the ownership of personal and SMSF assets separate.

2. What do you need from your SMSF bank account?

When you sign the trust deed, your SMSF will also need a bank account to hold a nominal amount until you transfer your super across. Kitto says choosing the right bank account is an important decision – look for secure authorisation controls, competitive rates, good app and online functionality and reporting, and seamless transfers.

Macquarie’s Cash Management Account (CMA) is one of Australia’s most popular SMSF bank accounts, with close to 1 in 3 SMSFs choosing it as their SMSF bank account.6 Olivia McArdle, Head of Payments & Deposits with Macquarie Bank, says it’s possible to open a CMA with Macquarie online, provided you’re able to supply the required information, and make that first deposit the same day.

“With an important investment like your super, you want to be confident your SMSF cash hub is secure, competitive and makes managing your fund as easy as possible,” she says.

Kitto says third party authority for adviser-initiated payments can also be valuable. “It’s good to have another set of eyes on a major transaction like a property deposit, with the account holder still in control of authorisation,” he says.

3. Should you transfer all your super into your SMSF?

You may have valuable insurance or defined benefits in your current super. In some cases, it may be worth keeping a small amount in a retail or industry fund. Seek professional advice before you act and if you want to close your current super account.

4. What should your investment strategy consider?

Legally, you must document a strategy setting out your fund’s objectives and the types of investments your fund can make. Your SMSF’s sole purpose is to provide retirement benefits, so consider risks and likely returns, diversification and liquidity.

5. Providing insurance through super to members

This is also an important consideration when planning your investment strategy. Your SMSF can make premium payments for life, total and permanent disability (TPD) and income protection insurance policies, and you can tailor these policies to meet individual member needs.

Learn more about setting up an SMSF









5 tips to make the most of your SMSF

Once your SMSF is up and running, you will need to manage a number of regulatory obligations and regularly review your investment strategy. You can outsource many administrative tasks to an SMSF administrator or accountant, but it’s worth keeping these five tips in mind.

1. Keep accurate records

Your SMSF must be audited every year. You need to document the reasons for your investment decisions and ensure tax and transaction account records are maintained. Your SMSF bank account should help you save time with reporting by giving you real-time data and greater visibility over your transactions.

2. Optimise your cash on hand

As the lifeblood of your SMSF, your bank account needs to have sufficient funds to meet regular expenses such as fees, levies, insurance premiums and tax payments. McArdle says SMSF trustees need to weigh up whether to lock cash away for 30 days or more in a term deposit, or if they would prefer to access it on call through a high interest account like Macquarie’s Cash Management Accelerator Account.

“Your SMSF bank account is your one-stop shop for making investments, receiving distributions, paying expenses. Then when you retire, you can start drawing that cash out as your pension,” she says.

3. Review your investment strategy at least annually

SMSF investors monitor their portfolios regularly – more than half check them at least weekly, according to ASX research.7 It’s also important to adjust your SMSF investment strategy in response to major external shifts or changes in your member base.

Kitto says SMSFs are inherently flexible, and it’s common for one member to be transitioning to retirement while the other is still working and accumulating super. This may require a shift in investment strategy and close attention to meeting minimum pension requirements.

4. Seek specialist tax advice when necessary

As an SMSF trustee, you have more flexibility to choose the assets that have taxation characteristics that suit your SMSF’s objectives and greater control over certain taxation events, such as the realisation of capital gains from selling investments.

5. Be prepared for life events

A common SMSF membership structure involves a married couple. So what happens in the event of separation or divorce? Or if the primary trustee falls ill and feels unable to keep managing the investment strategy? Having the right structures and advice in place can prove invaluable during a challenging time. It’s also important to include your SMSF in estate planning.

Learn more about managing your SMSF









Transitioning your SMSF through retirement

You don’t need to wind up your SMSF as soon as you retire. The choice, flexibility and control benefits of an SMSF can continue as long as you have the right structures and advice in place.

Kitto says he sees a lot of older members keep more in super than they need to once they retire, as it can be hard to find the right balance between conserving your retirement savings and living beyond your means. And that’s why, even if you’ve been a self-directed investor until this point, it’s worth engaging a financial adviser to help you transition to retirement.

Once you reach your preservation age and retire or turn 65, you can start drawing an account-based pension from your SMSF. Your fund’s earnings in pension phase are tax-free as long as you draw the minimum payment amount each financial year and meet the other regulatory requirements.

Your SMSF cash account plays an even more important role during this phase of life. Instead of receiving super contributions and investment earnings, it will start paying out – as a regular income stream or lump sum payment. This makes liquidity a primary investment strategy consideration.

McArdle suggests keeping a close eye on your changing spending habits and having enough cash on hand for unexpected expenses such as medical bills.

Learn more about planning for retirement with your SMSF










1. Successful SMSFs require time and investment experience

Managing your own super through an SMSF can be very rewarding and give you more flexibility, choice and control over your investments. If you don’t have enough time to manage it effectively, you can outsource tasks to specialist advisers – but first compare any additional costs with your current super fund.

2. An SMSF bank account is the lifeblood of your SMSF

Throughout the lifecycle of your SMSF, this account will manage all the incoming and outgoing funds related to your retirement savings. Make sure it gives you the reporting, security and visibility you need, as well as real-time transfers, third-party payment authorisation and competitive interest rates.

3. Tap into your SMSF advice team

The right advice can make all the difference to your retirement lifestyle, even if you‘re a confident investor. An SMSF administrator or accountant can take care of the paperwork for you (and ensure compliance), while specialist advisers can step in at major life milestones. That includes legal advice to set up the right trustee structure and estate planning, insurance broking to ensure your members are adequately protected and financial advice during your transition to retirement – so you can live the lifestyle you’ve worked so hard for.

Additional Information

1 ASX Australian Investor Study 2023; APRA June 2022 Quarterly Superannuation Performance Statistics, 23 August 2022

2 ATO SMSF quarterly statistical report - March 2023 and ATO SMSF quarterly statistical report - 2017

3 Investment Trends. 2023 SMSF Investor Report: Industry Analysis

4 SMSF Investor Report, April 2021, Investment Trends

5 Cost of Operating SMSFs 2020 Report, SMSF Association and Rice Warner

6 Source: Macquarie Bank Limited data, ATO Self-managed Super Fund Statistical Report.

7 ASX Australian Investor Study 2023

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The information in this article was finalised on 25 August 2023.