What’s so appealing about an SMSF?

Self Managed Super Funds (SMSFs) are popular amongst Australians looking to have more of a say in how their super contributions are put to work.

SMSFs were legislated on the 8th of October,1999.

According to the latest information from the ATO, there are 596,180 SMSFs in Australia with a combined 1,119,007 members. The bulk of the members come from Victoria and NSW with just over 32% each (65.1% combined). They account for $750 billion or 28% of the $2.7 trillion dollars of super investment assets.[1] Not insignificant when you consider industry funds account for $678 billion and retail funds $623 billion.[2]

There’s a reason for their popularity.

SMSFs that are compliant with super legislation allow for member’s contributions and funds earnings to be taxed at a lower rate of 15% (concessional rate up to a certain limit). This represents an attractive tax-effective investment option. Furthermore, benefits received after the age of 60, for example dividends or the profits from the sale of a property, are tax-free. Earnings by the fund during pension phase are also tax exempt.

Trustees of SMSF funds have more control with regards to where and how their funds are invested. One big plus is that an SMSF can invest in ‘direct property’. This is different to a property trust or fund in that the fund owns the property (eventually, outright). In some cases this may also include commercial property which can be leased to a related party (for instance the SMSF’s Trustees’ own business).

Most people who have a public super fund will typically be charged a percentage fee based on the value of the fund. In contrast, SMSFs are charged as a flat fee for service (i.e. management). Let’s say a public superannuation fund charged a fee of 0.8% of the fund value.[3] If this fund had balance of $1,000,000, the fees would be $8,000 for the year. Compare this with some SMSF fees as low as $5,000 – $6,000. However it’s important to note that fees can vary from fund to fund and even SMSF managers, depending on the types of investments and services used.

SMSFs may provide more options when it comes to death benefits for its members. For instance, benefits can be paid to a dependant as a pension rather than a lump sum (so the SMSF doesn’t need to necessarily be wound-up), assets such as property can be transferred to a beneficiary directly and distribution of funds can be made to future generations in a tax effective manner.

Finally, SMSFs also offer a great way of providing asset protection. Future risk of bankruptcy, claims by debt collectors etc. making for an attractive option to business owners and high-net worth professionals.


[1] As at Jun 2018 Source: ATO

[2] Source: Superguide published JUNE 14, 2019

[3] APRA – average on-going fees charged by public funds 2017

The information provided herewith is general only and not intended as financial or investment advice and should not be construed or relied on as such. Before making any commitment of a financial nature you should seek advice from a qualified and registered financial or investment adviser.