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An SMSF term deposit works the same way as normal term deposit , however they're designed specifically for self-managed super funds, not everyday individual customers.
An SMSF term deposit allows you to invest a sum of money for a fixed period of time. You're unable to access the money for the duration of the term - you can choose to invest anywhere from 3 months to 5 years. During that time, the money earns a fixed interest rate with interest paid monthly, quarterly or at the end of the term.
"In the same way that you have a savings account for 'present you' where it's earning the current cash rate, you might want to have an equivalent for 'future you'. That's all that an SMSF term deposit is; a chance to have your superannuation monies invested in cash, as opposed to other asset classes such as shares and property. If you've recently sold an asset within your SMSF, and are thinking about where to invest next, an SMSF term deposit is a good idea so that your money continues to work hard for you."
SMSF term deposits offer a fixed interest rate. This means the the interest rate will be locked in for the life of the term. This is different to savings accounts, which offer a variable interest rate and can change at any time with little notice.
A fixed interest rate can be both a good and bad thing. If interest rates are falling while you've already locked in a fixed rate it's good, as your rate won't fall. However if interest rates are rising, you'll be stuck with your lower fixed rate until the term deposit matures.
You'll usually get a higher interest rate on longer terms of a few years, and sometimes you'll get a better rate for larger deposits too.
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Firstly, you'll need to be a member of a complying SMSF. This means you'll need to be part of an SMSF with individuals as the fund trustees, or where a company is the trustee and each fund member is a director of that company. If you're not applying through your SMSF and instead as a personal customer you can open a regular term deposit instead.
Some banks will also place limits on the number of trustees a fund can have. For example, to be eligible to open a Ubank SMSF term deposit you will need to be a member of an SMSF with a maximum of 2 individual trustees or a corporate trustee with no more than 2 directors.
The exact application process for an SMSF term deposit varies depending on the financial institution. However, you will generally need to complete the following steps:
For SMSFs with individual trustees you will need to provide a certified copy of the relevant sections of the SMSF trust deed that clearly state:
If the trustee of your SMSF is a company, your bank will need certified copies of the sections of the SMSF trust deed that identify the corporate entity as the trustee and the individuals listed as members.
Finally, remember that you will need to supply the details of each person authorised to use the account, including:
Your SMSF isn't required to invest any money at all in an SMSF term deposit, but you might decide it's a good fit within your wider SMSF investment strategy to do so.
Depending on your fund's strategy, you'll likely have a portion of your investment allocated towards defensive or lower risk assets with term deposits a very popular choice.
As of September 2024, SMSFs had $161 million invested in cash and term deposits. In comparison, there was $166 million invested into property - so a very similar amount.
Thinking about setting up a self managed super fund? ESUPERFUND can help you create an SMSF and take control of your retirement. There is no minimum amount required and ESUPERFUND handles the annual compliance obligations for you.
SMSF Set up | Tax | Audit | Compliance | Admin
ESUPERFUND can help you set up your own SMSF. This review takes you through what you need to know to decide if it's right for you.
Learn the responsibilities and obligations of SMSF individual and corporate trustees, including the trustee declaration requirements.
Compare SMSF bank accounts in Australia to manage your self-managed super fund’s expenses, place trades, accept member contributions and earn investment income.
An SMSF service can help you establish your self-managed super fund, and assist with ongoing admin and management of the fund. Here are the pros and cons.
Understand the pros and cons of self managed super funds, including tax benefits and investment risks, before you open your own SMSF.
Learn how to roll over your super into your SMSF and make contributions into the fund.
How much does it cost to set up and run an SMSF? How large does your balance need to be for an SMSF to be cost-effective? Find out here.
Learn how to develop a strong SMSF investment strategy and what assets you can and can't invest in. Want an SMSF investment property? There's a few things to consider first.
I want to invest $1,000,000 from my SMSF in a term deposit.
Please advise what I need to do.
Regards
Minh
Hi Minh, you’ll need to choose a term deposit and complete the online application process to open the account. Once you’ve chosen a term deposit, you can also reach out to the bank directly for assistance with opening the account if you need.
Looking to either do a term deposit or SMSF from a inheritance I received which would be better growth and tax wise? Still working full-time with 6yrs to retirement…thoughts please.
Hi Sandra, Finder is a comparison site and we’re not licensed to offer you any personal financial advice. We’d recommend speaking with a financial adviser to get personal advice based on your situation.