Setting Up a Self‑Managed Super Fund: Pros, Cons, and Costs

A Self‑Managed Super Fund (SMSF) is a private superannuation trust regulated by the ATO, where trustees are responsible for making all decisions—from investment selection to compliance. SMSFs offer unparalleled flexibility, allowing trustees to invest in direct property, shares, collectibles, or bespoke asset combinations. However, this control comes with significant administrative and legal obligations. SMSFs are generally recommended for individuals or small groups of up to four members with combined super balances exceeding $200,000. This threshold ensures economies of scale: spreading fixed setup and ongoing compliance costs over a larger asset base results in lower per‑dollar expenses and improved net returns compared to public or retail funds.

• Investment Flexibility: SMSF trustees can tailor portfolios to suit specific risk appetites, whether investing in direct real estate, unlisted shares, or even cryptocurrency within legal limits. • Control Over Timing: Trustees decide when to buy or sell assets and can implement tax strategies such as timing capital gains or accessing pension phase tax concessions efficiently. • Estate Planning Benefits: SMSFs allow binding death benefit nominations, giving trustees precise control over the distribution of super on death. • Cost Savings at Scale: For larger balances, SMSFs can yield lower ongoing fees than industry funds, especially if using low‑cost administration and audit providers.

• Regulatory Burden: Trustees must comply with super laws, prepare an investment strategy, and meet annual audit and tax lodgment deadlines. Non‑compliance can attract substantial penalties. • No Deposit Insurance: Unlike bank accounts, there's no government guarantee on SMSF assets if the trustee incurs personal insolvency or fraud arises. • Complexity and Time Commitment: Effective SMSF management demands financial literacy, time to oversee investments, and engagement with specialists (e.g., accountants, auditors, financial advisers). • Risk of Poor Decisions: Trustees bear full responsibility for investment performance and legal compliance, increasing the potential for costly errors without professional oversight. Trustees must honestly assess whether they have the expertise, time, and temperament to manage these responsibilities effectively.

The typical SMSF cost structure includes: • Setup Fees: $1,500–$2,500 for trust deed preparation, registration, and initial advice. • Annual Administration: $1,200–$2,000 for record‑keeping, compliance reporting, and financial statements. • Audit Fees: $300–$800 per member for the annual independent SMSF audit. • Financial Advice: Variable; hourly rates of $250–$400 or flat fees of $3,000+ for comprehensive strategies. • Investment Costs: Brokerage fees for share trades, property conveyancing, and costs for specialist asset valuations. On average, an SMSF with a $300,000 balance may incur total annual costs of approximately $4,000, resulting in a 1.3% expense ratio. By contrast, a MySuper balanced option may charge 0.5%–0.7% for similar services, highlighting the importance of scale when evaluating SMSF viability.

While there's no legal minimum to establish an SMSF, industry best practice suggests: • $200,000+: For basic investment strategies without real estate, ensuring administration costs remain below 1% of assets. • $400,000+: If investing in direct property to cover conveyancing, borrowing establishment, and ongoing property management fees. Below these thresholds, members may be better served by industry or retail funds offering similar investment options with lower per‑dollar fees and fewer compliance obligations. Prospective trustees should obtain a detailed cost‑benefit analysis based on their unique circumstances, projected fees, and desired asset mix before proceeding.

1. Choose Trustees and Trustee Structure (individual vs. corporate). 2. Draft and Execute Trust Deed. 3. Appoint Trustees/Directors and Prepare Trustee Resolutions. 4. Register SMSF with the ATO and obtain an ABN and TFN. 5. Develop an Investment Strategy aligned with member goals and risk profiles. 6. Open a Separation Bank Account exclusively for SMSF transactions. 7. Roll Over Existing Super Balances. 8. Engage an SMSF Administrator and Auditor for ongoing compliance. 9. Regularly Review Investment Performance, Compliance, and Strategy. Following these steps diligently ensures regulatory compliance and positions trustees for long‑term retirement success.