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What is a self managed super fund (SMSF)

Learn how a self managed super fund works and how it’s different from a retail or industry super fund.

Alison Banney
Alison Banney

Updated

Fact checked

We’re committed to our readers and editorial independence. We don’t compare all products in the market and may receive compensation when we refer you to our partners, but this does not influence our opinions or reviews. Learn more about Finder .

A self managed super fund (SMSF) is a super fund that you manage yourself, unlike a standard retail or industry fund which is managed on your behalf.

This guide will give you an initial overview of what an SMSF is, how an SMSF works and how it’s different to a typical super fund. If you’ve already got an SMSF set up, we suggest you take a look at our guide on setting an investment strategy for your SMSF or our guide for SMSF trustees, instead.

Earn interest on the cash balance of your SMSF with an SMSF savings account

Data indicated here is updated regularly
$
$
months
Name Product Maximum Variable Rate p.a. Standard Variable Rate p.a. Bonus Interest p.a. Fees Interest Earned
AMP SuperEdge Saver Account
AMP SuperEdge Saver Account
1%
0.8%
0.2%
$0
New customers can earn an introductory rate of 1% p.a. for 6 months, reverting to an ongoing variable rate of 0.8% p.a. Earn interest on your SMSF funds.
More Info
ANZ SMSF Cash Hub
ANZ SMSF Cash Hub
0.5%
0.5%
0%
$0
This account is for SMSF trustees to access their SMSF cash balance, to make payments and investments, and to receive income to the one account.
More Info
AMP SuperEdge Cash Account
AMP SuperEdge Cash Account
0.25%
0.25%
0%
$0
Gain easy access to your funds while earning a competitive rate of interest with the AMP SuperEdge Cash Account.
More Info
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What is a self managed super fund?

An SMSF is a super fund that is managed by you and regulated by the Australian Tax Office (ATO). The purpose of the SMSF is the same as a typical super fund; to provide members money in retirement. SMSFs can have up to four members in the fund and members are often family members (although members don’t need to be related at all). The SMSF members are the people who contribute to the fund and benefit from the fund in retirement.

SMSFs come with the freedom and flexibility to invest your super however you want, though there are a number of costs involved and legal obligations to meet.

Here’s how a self managed super fund works

If you start an SMSF, you will be both a member of that fund as well as a trustee (unless you decide to appoint a company to act as your trustee – more on this in our SMSF trustee guide). As a trustee, you will have control over where your superannuation balance is invested and will be responsible for the day-to-day running of the fund. As a member you will benefit from the fund’s investment performance and be able to use the money generated from the SMSF to help fund your retirement when you’re no longer working.

Your employer will pay your super payments (currently set as 9.5% of your annual earnings) into your SMSF. This is called the super guarantee and is compulsory for all employees in Australia over 18 and earning more than $450 a month. It’s then up to you to decide how you’d like to invest that money, with popular SMSF investments including Australian and international shares and property investment. When you’re retired you can start to access the money generated by these investments to fund your lifestyle.

Self managed super fund vs a retail or industry super fund

The main difference between an SMSF and other super funds is that you’re managing the fund yourself. With an SMSF, you choose where to invest your balance based on what you believe will provide the best performance and returns. With retail and industry funds, a fund manager looks after the fund and makes these decisions on your behalf (the fund manager acts as the trustee of your fund, not you). Therefore, you may not even know where your own money is being invested.

With an SMSF you have complete control over your money and the freedom to invest it however you’d like. For example you could choose to buy an investment property through your SMSF, which isn’t an option if you’ve got your super in a standard super fund. However, it’s important to remember that you would also have more legal responsibilities and admin duties.

Setting up a self managed super fund can be expensive

Setting up and managing an SMSF can be costly and you generally need a large balance (over $200,000) for it to be considered cost-effective. There are establishment fees, annual audit fees, day-to-day management fees and ongoing investment fees to pay, as well as the cost of professional support such as tax accountants and financial planners.

If you have your super in a retail or industry fund you’ll also need to pay fees, but these are primarily admin and investment fees. Take a look at our guide on SMSF costs here and consider these costs against the fees charged by a standard super fund.

Is a self managed super fund right for me?

There are many benefits to opening an SMSF but there are also risks to be aware of. An SMSF may be right for you if:

  • You have solid investment experience and have a good understanding of financial markets.
  • You want to invest your superannuation in less conservative options beyond shares and cash.
  • You want full control over where your superannuation is invested and are comfortable with a higher level of risk.
  • You have enough time to manage the fund.
  • You have some legal expertise and are confident you can meet all the legislative and tax compliance regulations set by the ATO.
  • You have a large superannuation balance.
  • If you believe an SMSF is right for you, take a look at our six-step guide to setting up an SMSF here.

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