There are many benefits to establishing your own superannuation fund (SMSF) but it also comes with a commitment of time and energy. There are also some pitfalls that you should be aware of.

Superannuation funds are maintained for the sole purpose of providing retirement benefits. They are not for subsidising lifestyles or providing loans to members and their relatives. There are strong penalties for breaching the rules.

Sometimes people look at their annual superannuation fund statement and say to themselves “I could do better than that” without realising how difficult and time-consuming the process of setting up and managing their own fund can be.

There are a number of benefits and things to consider when deciding to set up your own SMSF.


Control: You decide what assets to buy and when to buy them. You also decide when to sell assets. Your fund must have an articulated strategy that you follow. This strategy should be reviewed regularly to ensure it is appropriate and continues to meet your requirements.

Flexibility: You control the asset mix in your fund and can change this as required. You have the flexibility to hold many different types of investment assets including, direct shares, ETFs, managed funds, bonds, cash and in some cases (subject to strict rules) direct property. When reaching retirement age an SMSF also offers great flexibility to establish income streams and pension arrangements.

Pooling: Your fund can have up to four members that allows you to pool assets and buy more expensive assets. Having more members can be more cost efficient to run.

Tax advantages: There may be tax advantages in running your own fund, particularly in relation to timing and estate planning. SMSFs follow the same tax rules and arrangements that apply to other types of superannuation funds.

Business owners: Business owners often do not have the ability to join a company scheme and need to provide for their own retirement away from the everyday risk in running their business. You may be able to include some business assets inside the fund which could provide asset protection, tax effectiveness and succession planning.

Cut costs: It is generally perceived that it is only worth running a SMSF if the balance is above $200,000 but this may not always be the case. The cost effectiveness will depend on a number of factors including the level of work undertaken by the trustees/members themselves and the types of assets (investments held). If the fund is above that amount there could be considerable cost savings as the administration costs are relatively fixed.


An SMSF gives you control over your retirement planning but also comes with responsibility. It is not for everybody. Tax and superannuation law can be complicated and it is always recommended that you seek professional advice before establishing an SMSF.

The costs of establishing an SMSF: There is an initial cost in establishing an SMSF to cover things such as the trust deed (legal document that provides the rules under which the SMSF will operate), general advice to help establish the SMSF, and ATO application costs. If a corporate trustee is required, then additional costs in establishing the corporate trustee will be involved.

An SMSF takes time and skill to manage: As well as establishing the fund you need to create an investment plan, monitor investments and complete tax, accounting and audit requirements. You will need to stay on top of important deadlines, and stay up-to-date with ever-changing legislation that will affect your responsibilities as the trustee.

Some of the administrative burden can be outsourced to an accountant, financial adviser or specialist SMSF administrator. Many service providers offer services (in addition to the basic requirement of compliance administration). These services can include investment accounting, access to online investment platforms and investment analysis and reporting.

The annual costs of running an SMSF: The annual costs to run an SMSF can be onerous if you only have a small superannuation balance. There are a range of costs that are necessarily incurred in operating an SMSF.

Annually an SMSF will need to pay for an independent audit and the supervisory (ATO) levy. Most SMSFs also pay for additional help, such as:

  • preparing the SMSF annual return
  • valuations of the SMSF’s assets
  • actuarial certificates for SMSFs paying income streams (pensions)
  • financial advice
  • legal fees, for example if the trust deed needs to be amended
  • assistance with fund administration
  • insurance for members.

While costs can vary, it is generally accepted that you will need around $200,000 in superannuation to justify the costs of establishing and running a fund yourself.

Creating and monitoring an investment strategy. This can be a difficult task for those without investment knowledge and skills. If this is the case it is advisable to seek external advice and to schedule regular meetings to update strategy, review investment performance and perhaps alter the investments themselves.


You might also be interested in:

What is an SMSF?

Setting up an SMSF

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