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Self-Managed Super Fund (SMSF) or Super Fund

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What is a SMSF?

A Self-Managed Super Fund (SMSF) is a private superannuation ‘fund’ that you manage yourself, giving you direct control over how your retirement savings are invested.

An SMSF can have up to six members, and generally each member is either:

  • a trustee of the fund, or

  • a director of a corporate trustee

This means members are directly involved in making decisions about the fund.

Unlike industry or retail super funds, where you typically choose from a menu of diversified investment options managed by professional fund managers, an SMSF gives you the ability to choose and manage your own investments. That said, it’s important to note that some retail and industry super funds also offer direct investment options, which allow you to invest in more specific assets giving greater control — without needing to set up an SMSF.

Key differences of SMSFs with other funds

Super fund
SMSF
Low levels of personal admin required
High levels of time required for admin. Knowledge of SMSF regulations also required
You choose your investment options, which are managed by professional fund managers and supported by the trustee
You’re responsible for marking investment decisions and meeting all legal, tax and reporting requirements. At your discretion, some of these functions can be outsourced to specialists like accounts, advisers or lawyers.
The fund handles administration, compliance and investment management for the options you select
Costs, risks and responsibilities generally sit with you and can be higher depending on how the SMSF is run

Is an SMSF right for you?

It depends on how hands-on you want to be with your super and how much time, understanding and interest you have in managing it yourself.

An SMSF could suit you if:

  • you have the financial knowledge and interest to manage complex rules and investments,
  • you’re able to commit time to paperwork, compliance and record-keeping,
  • your balance is large enough to make the higher costs worthwhile.

For most people, the costs, risks and admin can outweigh the potential benefits. That’s why many Australians prefer the simplicity of a regular super fund.

If you already have an SMSF, you can also move your balance into a regular super fund if that ends up being a better fit.

Benefits of a super fund over an SMSF

Most Australians choose a regular super fund (such as an industry or retail fund) because it offers access to professionally managed investment options with far less time, administration and responsibility. You choose the investment options or portfolios that suit you, while the fund takes care of investment management, administration and compliance.

This allows members to invest and diversify without the additional costs, risks and obligations involved in running their own SMSF.

Some of the benefits of using a regular super fund include:

  • generally lower fees (depending on account balance) and simpler management,
  • investment experts manage your options,
  • a range of professionally managed investment choices to suit your needs,
  • easy access to your savings in retirement,
  • access to educational resources and events
  • expert guidance,
  • less admin and paperwork.

You can explore options like Future Saver, a Retirement Transition account, or a Retirement Income account to see what suits your stage of life.

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How to close an SMSF and roll into a fund

Thinking about switching from an SMSF to a super fund? Rolling over can take time and planning, and we're here to help.

Our team can explain your options, help you make the switch and connect you with an adviser if you’d like additional advice and support. You can request a callback or explore your advice options.

 

What if I'm already retired?

Depending on your situation, moving from an SMSF to a super fund for retirement could be a simpler way to manage your savings, with less paperwork and more flexibility.

Opening a Retirement Transition account or a Retirement Income account can help you manage regular income payments and withdrawals, while still keeping your savings invested. If you’re not sure which option is best, a financial adviser can help you explore the choices through our retirement accounts and services.

Super helpful tips before closing your SMSF

Before you close your SMSF, it’s worth talking through a few key points with your adviser:

  1. Why you’re closing it and what you want from your next fund.
  2. Understanding the financial implications of closing your SMSF – including tax impacts, insurance changes, and any costs – before making a final decision.
  3. How to notify your SMSF trustee and plan the next steps.
  4. What paperwork you’ll need to complete (e.g. ATO forms).
  5. How to manage or transfer your SMSF’s existing investments.
  6. How Aware Super can support you through the process.

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FAQ

A self-managed super fund (SMSF) is a super fund you run yourself, with up to six members. As a trustee, you make all the investment and compliance decisions, giving you full control but also full responsibility.

An industry or retail super fund is a large, professionally managed fund run by a trustee for many members. You get a wide range of investment choices and the benefit of professional oversight, but with less direct control.

The choice comes down to whether you want the responsibility of managing everything yourself, or the convenience of a professionally managed fund.

The main disadvantages of an SMSF are the time, cost and responsibility involved. As a trustee, you’re personally responsible for compliance and all investment decisions, and penalties can apply if you don’t meet the rules.

SMSFs can be more expensive to run for smaller balances, and they may not offer the same protections as large funds. You may have less protection against fraud or theft, and moving from a retail or industry fund could mean losing access to some insurance cover and the Australian Financial Complaints Authority (AFCA).

The 5% SMSF rule, also called the in-house asset rule, limits an SMSF from holding more than 5% of its total assets in “in-house assets.” These are investments, loans or leases involving members or related parties.

Trustees must test the value of these assets at the end of each financial year. If the 5% limit is exceeded, they must create and implement a plan to bring the level of in-house assets back under the cap.

Visit the ATO for more information on SMSF investment restrictions.

It depends on your circumstances.

An industry fund is usually simpler and lower cost, especially for smaller balances. Your money is professionally managed, you can choose from a wide range of investment options and there’s very little admin for you.

An SMSF gives you more responsibility and a broader set of investment choices, but it also comes with higher costs, more complexity and strict compliance rules. It’s generally only suitable for people with larger super balances who have the time, financial knowledge and resources to manage it themselves.

Yes. You can roll your SMSF balance into a regular super fund, but the transfer must be in cash. This means any non-cash assets in your SMSF, such as property or shares, need to be sold before the rollover, and there may be taxation impacts and other costs involved in that process.

We can guide you through the steps and help make the transition smoother. It’s a good idea to get help or advice before you make a decision.[AD1][AD2]

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[AD1] Advice provided by Aware Financial Services Australia Limited (ABN 86 003 742 756, AFSL 238430), wholly owned by Aware Super. 

[AD2] Members can get advice about their Aware Super accounts at no extra cost, or advice on their broader needs for a fee.