Self-managed super funds: What you need to consider

Having control of your retirement savings helps you move into the next stage of your life with confidence. 
For some people, having a self-managed super fund (SMSF) rather than being with an industry or retail fund, gives them this control. But, while managing your superannuation independently may seem appealing, it involves a lot work and expertise and can come with some risk.

Important information

Scammers are targeting super and may contact you about setting up a new SMSF account. Protect yourself, find out more about current super scams.


SMSFs generally require a high level of financial expertise, so if you’re thinking of starting one, it’s important to be aware of the level of effort required. Many super funds will offer a ‘hands-on’ investment option for members, which can offer the ability to customise your investments, without the hassle and extra costs. For AustralianSuper members this option is called Member Direct.

Setting up and managing a successful SMSF can be a complex and expensive process. For many, it’s more of a headache than a financial advantage. Get the SMSF basics now and seek advice on your situation to understand what options will work best for your superannuation.  


What is an SMSF? 

A self-managed super fund (SMSF) is a type of private super fund (a trust) that’s created and managed by yourself. Compared to a professionally managed fund, such as an industry or retail fund, which manages your super for you.

With an SMSF, any contributions you receive from your employer or make yourself, go into your own super fund, rather than a professionally managed super fund. You choose how to manage your fund. Including, where the money is invested, what insurances you need (if any), and generally run every aspect of the fund yourself including all the administration requirements. If you’re retired or approaching retirement, you may also need to consider making provisions in your fund for the payment of a retirement income stream (such as an account based pension). You can also choose to wind up your SMSF and roll it into a professionally managed fund such as AustralianSuper.  



The regulatory differences between SMSFs and professional super funds

While professional super funds are regulated by the Australian Prudential Regulation Authority (APRA), SMSFs are regulated by the Australian Tax Office (ATO). This means they don’t benefit from the same regulatory oversight.

How does this impact you? Well, for example, in cases of investment fraud or theft, APRA-regulated funds can apply to the government for compensation (which is funded through an industry levy), but SMSFs cannot. This means if you lose money through the fund, for example because of fraud or theft, then you’ll have to pursue this on your own and at your own expense.

In addition, SMSFs fall outside of the Australian Financial Complaints Authority (AFCA), where disputes over issues such as who receives a death benefit can be resolved at no cost1.


Financial expertise needed to successfully manage an SMSF

There’s a lot of thought and expertise that goes into making sure your super is invested wisely and ensuring it delivers you the best possible returns. In most cases, successful investment decisions require a high-level of financial expertise and a strong knowledge of how to manage investment risk. At AustralianSuper, we have an in-house investment team dedicated to making the best investments possible, while managing risk for our members.

The Australian Securities and Investments Commission (ASIC) recommends that SMSFs are not an appropriate investment option for people who want a simple superannuation solution, particularly if you have a low level of financial literacy or limited time to manage your own financial affairs2. SMSFs are only for those who have a lot of super and an extensive knowledge of legal and financial matters. This is something to consider when choosing an adviser or considering managing your own fund. A financial adviser who specialises in tax, finance and SMSFs is the best place to start with any questions, and the ATO can also help provide some key points to consider.      



How to set up an SMSF

An SMSF can be set up in 2 ways:

  1. You can opt for an individual SMSF trustee structure; or
  2. You can choose a corporate SMSF trustee structure.

These differ from each other in several important ways, so you’ll need to understand each structure in detail before making a decision.


If you do decide to set up an SMSF and take on the role of Trustee, you’re ultimately responsible for:

  • Ensuring your fund complies with all the super regulations and tax laws
  • Making investment decisions for the fund – either directly or through an adviser.

Trustees can be held accountable if their fund breaches the law. Penalties may include fines and even jail time.

There are strict rules related to the management of an SMSF. For example, it’s illegal to use an SMSF to access to your super before you’re eligible, buy a holiday home or buy artworks to decorate your house3. Generally, members of an SMSF can only access the money in the fund when they have reached their Preservation Age  – just like a professionally managed super fund.



Costs involved in managing an SMSF

There may be significant annual costs involved with managing, running and reporting on your SMSF, as well as costs related to how you invest the money in the fund.

For example, some costs related to running an SMSF include:

  • Audit fees of an independent SMSF auditor registered with ASIC.
  • Reporting fees to prepare your SMSF’s annual return report. 
  • Fees related to the valuation of your SMSF’s assets.  
  • Insurance and legal fees.  
  • Broker and financial advice fees.

The fees and costs that you incur running and managing your SMSF (and the transaction costs that you pay each time you buy and sell your investments) have a direct impact on the returns you can expect to generate. Data from the Australian Tax Office (ATO) shows that for SMSFs with balances under $2 million  reported a negative average return on assets (refer to table).

The average annual total expenses and average return on assets by SMSF fund size in 2020.
SMSFs - 2019-20 Average expense ratios and average return on assets by fund size~
Fund size Average expense ratio* Average total expense ($) Average Return on Assets (%)
$1–$50,000 17.6% $4,390 -22.0%
$50,0001–$100,000 7.9% $6,027 -10.9%
$100,001–$200,000 6.8% $10,447 -5.9%
$200,001–$500,000 3.8% $12,854 -1.9%
$500,001–$1 million 1.7% $12,493 -0.9%
$1,000,001–$2 million 1.0% $14,518 -0.4%
$2,000,001 and higher 0.7% $28,583 0.5% to 3.3%

~Source: SMSF Statistical Overview 2019-2020
 * Expense ratio includes total expenses and operating expenses.. 


Managing an SMSF

Costs aren’t just measured in money. Before setting up an SMSF, it’s important to consider whether you have the time and know-how to manage your fund. There’s an increased level of effort needed on your part compared with the average super fund account, even if you use an adviser or outside service to administer and manage your fund. Some of the common activities you’ll need to take on include:

  • Researching investments. 
  • Creating and monitoring your investment strategy.       
  • Staying up-to-date with SMSF laws and your responsibilities as a Trustee.
  • Reporting requirements.


Self-manage super fund (SMSF) – key points to consider
  • Make sure you fully understand the investment risks involved, including fraud and theft
  • Consider your level of financial expertise and the impact it could have on your retirement savings
  • Understand all of the costs involved in setting up and managing an SMSF4
  • Think about whether you have the time it takes to manage an SMSF

Direct investment option vs. SMSF

If you want to take control of your super with a more ‘hands-on’ approach, there’s a number of alternatives to an SMSF including direct investments options within a professionally managed super fund. It gives you the option to choose how your super is invested, without a lot of the complexity that can come with SMSFs, such as management and compliance costs.

AustralianSuper’s direct investment option is called Member Direct . It offers you greater control and choice in the investment of your super or retirement income. Member Direct differs from an SMSF because the administration, tax, compliance and reporting responsibilities are carried out by AustralianSuper, which means you can focus on managing your investment portfolio.   

How does Member Direct work?

Member Direct lets you tailor your investment strategy to meet your needs. You can choose to invest in shares, Exchange Traded Funds (ETFs), Listed Investment Companies (LICs), term deposits or cash, and you have the option to combine your investment choices with AustralianSuper’s standard investment options.




Find a financial adviser 

Member Direct requires a confident approach to investing. Consider speaking to qualified financial adviser before making any decisions that might impact your retirement savings.



  1. The Australian Financial Complaints Authority replaced the Superannuation Complaints Tribunal, and started to receive complaints from 1 November 2018.
  2. ASIC urges consumers to question whether SMSFs are right for them
  3. Retirement benefits -
  4. Advice on SMSF – disclosure of costs

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 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 Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.


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