Superannuation is an essential part of planning for retirement in Australia. For most people, it quietly grows in the background through employer contributions and investment earnings.
But did you know there’s more than one way to manage your super? While most Australians are in a conventional super fund, others choose to take more control with a Self-Managed Super Fund (SMSF).
So, what’s the difference – and how do you know which one is right for you?
What is a Self-Managed Super Fund (SMSF)?
An SMSF is a private super fund that you manage yourself. It’s run by up to six members, and each member is typically also a trustee. That means you’re responsible for making investment decisions and ensuring the fund stays compliant with tax and super laws.
Unlike conventional super funds – where a professional fund manager decides how your super is invested – an SMSF gives you complete control. You can invest in a broader range of assets, including property, shares, collectibles, term deposits, and even some business assets (within strict rules).
But with greater control comes greater responsibility. SMSFs require time, financial literacy, and a solid understanding of superannuation rules.
Key Differences Between SMSFs and Conventional Super
- Control
- Conventional Super: Managed by a superannuation provider. You can choose from a range of investment options, but decisions are mostly out of your hands.
- SMSF: You make all the investment decisions – and wear the consequences (positive or negative).
- Investment Choice
- Conventional Super: Limited to pre-set investment portfolios (e.g., conservative, balanced, growth).
- SMSF: Can invest in residential or commercial property, direct shares, gold, artwork (under certain conditions), and more.
- Costs
- Conventional Super: Usually a percentage of your balance (e.g., admin and investment fees).
- SMSF: You pay for accounting, legal, auditing, and possibly financial advice. Costs can be high unless your balance is large enough to justify them.
- Responsibility
- Conventional Super: The fund handles compliance and reporting.
- SMSF: You are responsible for making sure the fund complies with Australian Tax Office (ATO) regulations, including preparing financial statements and lodging tax returns.
- Flexibility
- Conventional Super: Less flexible but very hands-off.
- SMSF: High flexibility – suitable for those with specific investment strategies or those wanting to pool super with family members.
Is an SMSF Right for You?
Managing your own super is not for everyone. It can offer more control and investment opportunities, but it also involves legal duties, financial risk, and the need to stay across complex regulations.
Before making any decisions, it’s important to seek advice from a licensed Financial Adviser.
Questions to Ask Your Financial Adviser
- Am I financially and legally ready to manage my own super?
- Do I have enough super to make an SMSF cost-effective?
- What are the risks and penalties if I make a mistake as a trustee?
- Can an SMSF help me meet my investment goals more effectively than a conventional super fund?
- What ongoing time and responsibilities will I need to commit?
- Can I afford to pay for accounting, auditing, and legal support each year?
- What happens if my circumstances change (e.g., divorce, illness, travel)?
Final Thoughts
An SMSF can be a powerful tool for people who want more control over their retirement savings – but it’s not a set-and-forget option. If you’re considering it, the best step forward is speaking with a Financial Adviser who can look at your whole situation.
This article is general in nature and not financial advice. Please speak with your licensed Financial Adviser to determine what’s best for your personal circumstances.
If this article has inspired you to think about your unique situation and, more importantly, what you and your family are going through right now, please get in touch with your advice professional.
This information does not consider any person’s objectives, financial situation, or needs. Before making a decision, you should consider whether it is appropriate in light of your particular objectives, financial situation, or needs.
(Feedsy Exclusive)
