Self-managed super fund (SMSF) basics

Saving for retirement is vital for all people and in Australia it is mostly done via a superannuation fund. Superannuation funds operate under specific laws and with specific, concessional tax treatment to encourage long-term saving and investing.

Most people save by using large, pooled superannuation funds managed by some of the biggest fund managers in Australia but investors that want to manage their own retirement savings can establish a self-managed superannuation fund (SMSF).

What is an SMSF?

According to APRA, there are approximately 577,000 SMSFs currently established in Australia, representing over $621 billion in accumulated savings (30 June 2016). SMSFs can be established for both the accumulation phase (pre-retirement) and for managing retirement savings post-retirement.

Similar to retail superannuation funds, industry superannuation funds and corporate sponsored superannuation funds, SMSFs are used to accumulate and manage savings for retirement.

A self-managed super fund (or SMSF) is a private superannuation fund that can have up to four members. While the maximum number of members is four, typically an SMSF has a single member or two members (couple).

An SMSF must pass the ‘sole purpose’ test, which means that it can only be used for the sole purpose of providing retirement funding.

All the members of the SMSF are responsible for making decisions about the fund (including investment decisions) and for complying with all relevant laws. SMSFs are not regulated by APRA, but rather by the ATO. Importantly, SMSF members are personally liable for all decisions made by the fund.

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