A Self-Managed Super Fund (SMSF) is a private superannuation fund that you manage yourself, as a trustee. With an SMSF you have control over how your retirement savings are invested — including assets like direct property, unlisted shares, and precious metals that are not available through retail or industry funds. That control comes with significant legal responsibility.
There are approximately 620,000 SMSFs in Australia holding around $900 billion in assets, according to ATO data. They are the largest segment of the Australian super system by assets.
Key Takeaways
- An SMSF is a private super fund you manage yourself as trustee — regulated by the ATO, not APRA
- Can have up to 6 members, all of whom must be trustees or directors of a corporate trustee
- Annual running costs are typically $3,000–$6,000 — generally only cost-effective with balances of $250,000+
- As trustee, you have personal legal liability for compliance — ignorance of super law is not a defence
- SMSFs can invest in direct property, ASX shares, and unlisted assets not available in most APRA-regulated funds
What Is an SMSF?
An SMSF is a trust fund regulated by the ATO (unlike other super funds, which are regulated by APRA). It must:
- Have up to 6 members (increased from 4 to 6 from 1 July 2021)
- Have all members be trustees (or directors of a corporate trustee)
- Have no member be an employee of another member, unless they are related
- Be established for the sole purpose of providing retirement benefits to members
The fund must have a trust deed, a bank account, and an ABN. It is registered with the ATO as a regulated super fund.
Individual Trustee vs Corporate Trustee
An SMSF can have either individual trustees (the members themselves) or a corporate trustee (a company where the members are directors). Each structure has different implications:
| Individual Trustees | Corporate Trustee | |
|---|---|---|
| Setup cost | Lower (no company setup fee) | Higher ($576 ASIC registration + company setup costs) |
| Annual ASIC fee | Nil | $63 (ASIC solvency levy) |
| Record-keeping | Asset owned in names of all trustees | Asset owned in company name — simpler |
| Penalty unit | Applied per trustee | Applied once to the company |
| Trustee change | Assets must be retitled on each member change | Company name stays the same |
Most SMSF advisers recommend corporate trustee structures for new SMSFs due to the administrative simplicity, particularly on member changes.
Who Can Be a Member?
SMSF members must:
- Be at least 18 years old (minors can be members but cannot be trustees — a parent/guardian acts as trustee for them)
- Not be disqualified from acting as a trustee (no ATO disqualification, not a bankrupt)
- Agree to act as trustee (or as director of the corporate trustee)
From 1 July 2021, the member limit increased from 4 to 6. This allows larger family groups — including adult children — to pool super in a single SMSF, which can reduce per-member running costs and allow more sophisticated estate planning.
How Much Does an SMSF Cost to Run?
Running costs are the key consideration for anyone weighing up an SMSF against an industry fund.
Typical annual costs:
| Cost | Typical Range |
|---|---|
| Accounting and tax return preparation | $1,500 – $3,000 |
| Annual independent audit | $300 – $700 |
| ASIC annual review (corporate trustee) | $63 |
| ATO supervisory levy | $259 |
| Financial adviser fees (if used) | Variable |
| Investment platform or brokerage | Variable |
| Total (simple fund) | ~$2,200 – $4,500/year |
Costs rise significantly if the fund holds property, has an LRBA (borrowing arrangement), or uses a specialist SMSF adviser for investment strategy or estate planning.
Break-even with industry funds: Industry funds like AustralianSuper charge around 0.5–1.0% of balance per year in total fees. At a combined balance of $500,000, annual fees in an industry fund might be $2,500–$5,000. This suggests the break-even point where an SMSF becomes cost-competitive is around $500,000 in total member balances, though lower for 6-member funds.
A detailed comparison is available in our SMSF vs Industry Fund guide.
ATO Compliance Obligations
Running an SMSF requires meeting ongoing ATO obligations:
Annual requirements:
- Lodge an SMSF annual return (tax return + compliance information) — due 28 February (or later if using a tax agent)
- Complete an independent audit by an ATO-approved auditor — must be done before the return is lodged
- Pay the supervisory levy ($259 per year)
- Report contributions via SuperStream when accepting rollovers
- Report pension payments and contributions to the ATO via Transfer Balance Account Reporting (TBAR) — event-based reporting
Ongoing requirements:
- Maintain the fund’s investment strategy (written, reviewed annually)
- Keep all financial records for 10 years (or 5 years for some records)
- Ensure all investments meet the sole purpose test (the fund must exist to provide retirement benefits)
- Ensure investments are made at arm’s length (market value)
- Stay within the in-house assets rule (investments in related parties cannot exceed 5%)
What Can an SMSF Invest In?
SMSFs can invest in a wider range of assets than APRA-regulated funds, including:
- ASX shares and ETFs
- International shares
- Direct residential and commercial property (including via borrowing)
- Business real property (where a related party tenant pays market rent — a permitted exception to related-party rules)
- Managed funds and listed investment companies
- Unlisted shares (within related-party limits)
- Physical gold and other precious metals
- Cryptocurrency (subject to ATO rules — see SMSF and Crypto)
- Collectables (art, wine, coins — subject to strict storage and insurance rules)
What SMSFs cannot invest in:
- Residential property purchased from a related party (you cannot sell your home to your SMSF)
- Loans to related parties (in-house asset rules prohibit this)
- Assets that breach the sole purpose test (e.g. a holiday home used by members)
The Sole Purpose Test
The sole purpose test is the foundational rule of SMSF compliance. The fund must be maintained solely to provide retirement benefits (or death benefits) to members. This means:
- Fund assets cannot provide a current-day benefit to members or related parties (e.g. living in a property owned by the SMSF)
- The fund’s investment decisions must be made for the purpose of building retirement savings — not for other goals
- Breaching the sole purpose test can result in the fund losing its concessional tax status and significant penalties
Who Is an SMSF Suitable For?
An SMSF may be worth considering for individuals who:
- Have a sufficient combined balance (generally above $500,000 across members)
- Want to invest in specific assets not available in industry funds (e.g. direct property, unlisted assets)
- Have the time and interest to manage compliance, or are willing to pay professionals to do so
- Understand the trustee obligations and legal responsibilities involved
- Want more control over estate planning within the super environment
An SMSF is generally not suitable for those who:
- Are starting out with a small balance where fixed running costs would erode returns
- Do not have the time or expertise to manage trustee obligations
- Want a “set and forget” super arrangement
- May have difficulty maintaining compliance (e.g. due to ill health)
Frequently Asked Questions
Can I put my house into an SMSF? No — you cannot transfer a residential property you already own (or that is owned by a related party) into an SMSF. This is prohibited under the related-party acquisition rules. An SMSF can purchase a new residential property from an unrelated third party, or it can hold commercial property purchased from a related party (under strict conditions). This is a common misconception.
Can I use my SMSF to buy property I live in? No. A property owned by your SMSF that you (or a related party) live in breaches the sole purpose test. The fund would lose its tax concessions and significant penalties would apply. An SMSF property must be a genuine investment — either rented at arm’s length, or business real property used in a business at market rent.
What happens if my SMSF doesn’t comply? The ATO can make the fund non-complying, which means it loses its 15% tax rate and is taxed at 45% on its assets. The ATO can also disqualify trustees, impose civil penalties, and refer serious cases for criminal prosecution. Compliance is not optional.
How do I wind up an SMSF? Winding up requires paying all members’ benefits (as a rollover to another fund or a cashing payment if a condition of release is met), lodging a final return, having a final audit, and notifying the ATO. The process typically takes 3–6 months and involves professional assistance.
SMSFs involve significant legal and compliance obligations. For advice tailored to your situation, speak with a licensed financial adviser or registered tax agent who specialises in SMSFs. You can find one through the ASIC financial advisers register or MoneySmart.