How a Self-Managed Super Fund Really Works

If you like the idea of having more control over your retirement savings, you’ve probably come across the term SMSF. Short for self-managed super fund, it’s a popular option for Australians who want to take charge of their financial future.

However, whilst managing your super can be incredibly rewarding, it also comes with its fair share of responsibilities. That’s why working with a trusted self-managed super fund accountant is so important: they help ensure your fund is set up correctly, stays compliant with regulations, and continues to operate smoothly as your financial goals evolve.

If you’re interested in starting your own SMSF, here’s what you need to know.

What Is an SMSF?

At its core, an SMSF is a private superannuation fund you manage yourself. Unlike retail or industry funds, where decisions are made for you by fund managers, an SMSF gives you the power to make investment choices and tailor your fund to suit your personal retirement goals. Each SMSF can have up to six members, and all members must also be trustees or directors of a corporate trustee. This means that everyone involved is responsible for making decisions about the fund’s assets and ensuring it complies with relevant laws.

How Does an SMSF Function?

An SMSF operates similarly to other super funds, with the main difference being that the members manage it. Once your SMSF is established, the fund can receive contributions from employers, members, and other approved sources. These funds can then be invested in a wide range of assets, such as shares, property, term deposits, and even collectibles – as long as the investment complies with superannuation rules.

Income earned from these investments, like dividends or rent, is taxed at a concessional rate (generally 15%) while the fund is in the accumulation phase. Once a member starts drawing a pension, the earnings from those pension assets may be tax-free. Keep in mind, however, that all investments must be made to provide retirement benefits to fund members. This is known as the “sole purpose test” and is a core rule of SMSF management.

Responsibilities of SMSF Trustees

Running an SMSF comes with a range of obligations, and it’s important to understand what’s involved before setting one up. As a trustee, you’re responsible for ensuring the fund remains compliant with super and tax laws regulated by the Australian Taxation Office (ATO). This includes keeping accurate records, lodging annual returns, organising audits, and maintaining an up-to-date investment strategy.

You also need to ensure the fund’s investments are made with the members’ best interests in mind and don’t immediately benefit them or their relatives. That means no personal use of SMSF-owned assets, even if they seem harmless, such as hanging an SMSF-owned painting in your home.

It’s a lot to take on, but many trustees work closely with professionals, such as accountants, auditors, and financial advisers, to stay on track and ensure their fund remains compliant.

Taking Control with the Right Support

A self-managed super fund gives you greater flexibility, more control, and the opportunity to tailor your retirement savings to suit your goals. While it does require time, effort, and a solid understanding of your responsibilities, the long-term benefits can be well worth it. With the right professional support, your SMSF can be set up correctly from the start and managed to support your financial success in the future .