A SMSF is a small super fund with no more than six (6) members that is managed by its members who are also the trustees of the fund. A SMSF's sole purpose is to provide benefits to members upon their retirement, or to a member’s beneficiaries in the event of their death. 

​

SMSF’s differ from public offer (retail, corporate or industry funds), as members of those funds are not responsible for managing the fund and complying with the law.

​

SMSF’s are a great way to save for your retirement. Listed below are some of the advantages and disadvantages of running a SMSF. 

 

SOME ADVANTAGES OF A SMSF

​

• Control and Flexibility:

  • Trustees have direct control over the investment decisions.

  • Flexibility to choose from a wide range of investment options such as property, shares, and other assets.

​

• Tailored Investment Strategies:

  • Ability to create personalised investment strategies to suit individual or family goals.

​

• Cost Efficiency:

  • Potential for cost savings, especially for larger funds, as fixed administrative costs are spread over a larger asset base.

​

• Estate Planning:

  • Greater control over the distribution of assets upon death.

  • Ability to implement specific estate planning strategies.

​

• Tax Benefits:

  • Potential for significant tax benefits through strategic planning and compliance.

  • Ability to control the timing of tax events.

​

• Pooling of Assets:

  • Families can pool their superannuation assets into a single fund, potentially achieving better investment outcomes.

​

SOME DISADVANTAGES OF A SMSF 

​

• Time and Effort:

  • Significant time and effort required to manage the fund effectively.

  • Trustees are responsible for all investment decisions and compliance requirements.

​

• Complexity:

  • Managing an SMSF involves navigating complex regulations and compliance obligations.

  • Potential for costly mistakes if not managed correctly.

​

• Costs:

  • Higher setup and ongoing administrative costs compared to retail or industry funds, especially for smaller funds.

  • Professional fees for accountants, auditors, and legal advice can add up.

​

• Risk:

  • Investment risks are directly borne by the trustees.

  • Poor investment decisions can significantly impact retirement savings.

​

• Compliance and Penalties:

  • Stringent compliance requirements with severe penalties for breaches.

  • Risk of fund being deemed non-complying, leading to substantial tax penalties.

​

• Lack of Consumer Protections:

  • SMSFs do not have access to some of the consumer protections available to members of APRA-regulated super funds.

  • Limited recourse in case of fraud or theft.

​

• Limited Insurance Options:

  • Difficulty in obtaining competitive insurance within the SMSF compared to retail or industry funds.

​

​

While SMSFs offer significant advantages in terms of control, flexibility, and potential tax benefits, they also come with substantial responsibilities and risks. It is crucial for individuals considering an SMSF to carefully weigh these pros and cons, seek professional advice, and ensure they have the necessary time, expertise, and commitment to manage their fund effectively.