6 August 2024
Thinking about a Self-Managed Super Fund (SMSF)? While managing your super independently may seem appealing, it’s important to consider all the factors involved.
Taking charge of your super
We all like to feel in control of our lives – from managing how we spend our time and effort, to how we make decisions. The same can apply to super.
Your super is your money, invested for your future. So choosing how you manage your investments is your decision. That could mean leaving your super’s admin and investment decisions to AustralianSuper’s experts, taking a more active role in choosing your investments through AustralianSuper’s Member Direct investment option, or choosing to establish an SMSF.
What is a Self-Managed Super Fund (SMSF)?
An SMSF is a private super fund that you manage yourself. You choose where the money is invested, what insurances you need (if any), and generally run every aspect of the fund including all the administration requirements. Setting up an SMSF requires creating a trust with 1 to 6 members, so they are often established by an individual or family. All members of an SMSF are either trustees or directors and are actively responsible for investment decisions and compliance with super and tax law. An SMSF must be run for the sole purpose of providing retirement benefits for the members.
Is an SMSF right for me?
Opting for an SMSF is another way to take the reins of your retirement savings, from investment decisions to retirement payouts. However, the complexity of SMSFs shouldn't be underestimated.
Financial and legal expertise
SMSFs cater to those with a robust understanding of financial and legal matters. If you have specialised financial or legal knowledge, managing your own SMSF can be rewarding. You might appreciate the opportunity to use your personal expertise.
Yet, without the time or know-how, an SMSF might not be the best fit. You might prefer to keep your super with an industry or retail fund for their expertise. AustralianSuper's investment team has hundreds of professionals, using their deep sector knowledge and experience to manage members’ retirement savings.
Fees and running costs
Running an SMSF incurs various annual expenses which affects the returns you can expect to generate. These may include audit fees, reporting costs, asset valuation fees, insurance (if you have any), legal fees, brokerage, financial advice, and transaction costs, among others. The Australian Tax Office (ATO) reported the annual total expenses of an SMSF averaged $16,314 and a median of $9,104 in the 2021-22 financial year1.
Professional super funds also charge fees to cover the cost of managing members’ super and investments, but their size and scale means these costs are distributed across more members.
LEARN MORE: AUSTRALIANSUPER’S FEES AND COSTS
Managing an SMSF
You’ll need to put in more time and effort with an SMSF, even if you outsource the day-to-day management. Some people thrive on the increased responsibility, while others find it hard to keep up. In a survey of 317 people with an SMSF, two thirds said they’d consider switching back to an industry or retail super fund2.
Trustees must stay up to date on SMSF regulations and reporting requirements. Even if you delegate tasks, ultimate responsibility still rests with the SMSF members. As the trustee or director, you’re responsible for ensuring the SMSF adheres to all legal requirements and mistakes can have severe consequences, including fines.
What you can invest in
Some people choose an SMSF to invest in different asset classes. For example, SMSFs can include your own selection of real property, art, collectibles, and physical gold. However, it's crucial to remember that the SMSF’s sole purpose is to provide for retirement. It’s illegal to use an SMSF to access your super before retirement, such as buying a holiday home or artworks to decorate your house.
The ATO reported an estimated average SMSF asset return of just 0.6% in the 2021-22 financial year3.
Different regulations and protections
While professional super funds are regulated by the Australian Prudential Regulation Authority (APRA), SMSFs are regulated by the Australian Tax Office (ATO).
This means there are different processes and protections if things go wrong. For example, in case of fraud or theft, APRA-regulated funds can apply to the government for compensation but SMSFs cannot. If you lose money through your SMSF because of fraud or theft, you’ll have to pursue this on your own and at your own expense.
Using your SMSF in retirement
For retirees, you’ll also want to consider making provisions for your SMSF to pay you a retirement income stream (such as an account based pension). You can also choose to wind up your SMSF and roll it into a fund like AustralianSuper for ease and support.
READ MORE: HOW TO WIND UP YOUR SMSF
Why Warwick switched back from an SMSF
AustralianSuper member Warwick and his wife initially set up an SMSF because they thought it would work well with their property investments. But, even as a qualified accountant, Warwick found it complicated, and he struggled to keep up with the ever-changing regulations and rules.
Then he made a loss through his SMSF. That was when he decided to join AustralianSuper. He found that managing the SMSF wasn’t worth the effort, and he wanted to allow expert investors to manage his super for him4.
LISTEN TO WARWICK’S FULL STORY ON THE MOMENTS THAT COUNT PODCAST
Other ways to take control of your super investments
You can create and manage your own super investment strategy with AustralianSuper’s Member Direct investment option. Member Direct lets you choose from S&P/ASX 300 shares, and selected Exchange Traded Funds (ETFs), Listed Investment Companies (LICs) and term deposits. You also get access to detailed company and market information, independent company research from third party specialists, and investment tools including watchlists through the Member Direct online platform. There’s less paperwork than an SMSF and no set-up costs. An additional ongoing portfolio administration fee applies based on the level of access you select, and brokerage fees will apply on share, ETF and LIC transactions.
Member Direct isn’t your only investment option with AustralianSuper. You can choose another approach with PreMixed or DIY Mix options. PreMixed is the most hands-off, with AustralianSuper’s global investment team choosing how your super is invested. DIY Mix enables you to pick asset classes, giving you increased control without the day-to-day management.
Each PreMixed investment option is developed by our team of experts who actively take an investment approach designed to outperform inflation. AustralianSuper manages over $335 billion in assets on behalf of 3.4 million members5. As Australia’s largest fund6, we use our size, capability and global reach to help us access the best investment opportunities for members.
You can choose one option or a combination of options across PreMixed, DIY Mix and Member Direct.
LEARN MORE: YOUR INVESTMENT OPTIONS
The benefits of financial advice
Super is all about the long term. And decisions about how your super is invested can have a big impact on your future. That’s why it’s important to get the best information and advice possible for your needs - including how you choose to invest or whether an SMSF might be right for you. AustralianSuper has tools and advice options7 to help guide you in making informed decisions.
Professional financial advice can also help. Members can access simple personal advice about their AustralianSuper account over the phone8 or comprehensive financial advice through a qualified financial adviser7. Consider seeking advice on your situation to understand what options will work best for your super.
Beware of scams:
Scammers are targeting super and may contact you about setting up a new SMSF account. Protect yourself, find out more about current super scams.
References:
- Source: ATO self-managed super funds statistical report 2021-22 financial year (refer to Table 25) - the latest copy is available at https://data.gov.au/data/dataset/self-managed-superannuation-funds/resource/20ca1dd6-bdf3-4464-9cac-74d272ec9184
- Source: ATO Self-managed super funds annual statistics overview 2021-22, published February 2024.
- Nature, AustralianSuper Brand & Market Tracker, Q1 SMSF Deep Dive, 2022
- The views expressed are those of the member based on their particular circumstances, reproduced with their continuing consent.
- AustralianSuper has a total of 3.4 million members and $335 billion in member assets as at 31 March 2024.
- APRA Quarterly fund-level superannuation statistics March 2024. Released 20 June 2024.
- Personal financial product advice is provided under the Australian Financial Services Licence held by a third party and not by AustralianSuper Pty Ltd. Some personal advice may attract a fee, which would be outlined before any work is completed and is subject to your agreement. With your approval, the fee for advice relating to your AustralianSuper account may be deducted from your AustralianSuper account subject to eligibility criteria.
- There’s no charge for general advice about your super account. The financial advice you receive will be provided by Link Advice Pty Limited ABN 36 105 811 836, AFSL 238145 and will be their responsibility. Personal product advice provided may attract a fee, which will be outlined before any work is completed and is subject to your agreement.
This may include general financial advice which doesn’t take into account your personal objectives, financial situation or needs. Before making a decision consider if the information is right for you and read the relevant Product Disclosure Statement, available at australiansuper.com/PDS or by calling 1300 300 273. A Target Market Determination (TMD) is a document that outlines the target market a product has been designed for. Find the TMDs at australiansuper.com/TMD.