SMSF Fundamentals

SMSF Fundamentals

Is an SMSF right for you?

Managing your own superannuation may not suit everyone – but if you are one of an increasing number of Australians wanting to take control of your retirement planning, a Self Managed Superannuation Fund (SMSF) may be the answer.

With added control, flexibility and potential cost savings, SMSFs may provide a number of advantages over other superannuation funds.

What is an SMSF?

An SMSF, in simple terms, is a superannuation fund established for one to four members. The members can be individuals, families and business partners that want to grow and manage their future wealth by creating their own super fund.

What benefits do SMSFs provide?

Acknowledged as one of the most tax effective structures for wealth creation, SMSFs offer a number of key benefits, including:

  • Control – over the structure and all decisions made by the fund
  • Flexibility – of investment choice, timing of contributions and access to income stream (pension) payments
  • Tax effectiveness – the opportunity to reduce tax rates on investment income and capital gains through, for examples, the use of franking credits, offsetting capital gains and losses, timing of disposal of assets and other capital gains considerations
  • Estate planning – SMSFs can be structured to provide effective estate planning
  • Asset ownership – ability to transfer personal shares and business real property into the fund, and
  • Asset protection – from bankruptcy and other legal claims (up to a limit).

Who can be a trustee?

Any person over the age of 18 can be a trustee of an SMSF provided they are not disqualified person or under a legal disability.

You cannot be a trustee of an SMSF if you:

  • Are insolvent (i.e. bankrupt)
  • Have been convicted of an offence involving dishonest conduct (against the Commonwealth, State, Territory or foreign country)
  • Have a civil order made against you.

Who are the members?

Members of an SMSF are also the trustees of the SMSF, so they control how contributions are invested and how benefits are paid, subject to regulatory controls. SMSFs must comply with the following restrictions:

  •  Must have no more than four members
  •  Every member must be a trustee of the SMSF or a director of the corporate trustee
  •  No member of the SMSF can be an employee of another member of the SMSF, unless the members concerned are relatives, and
  • Trustees of the SMSF must not receive any remuneration for their services as trustee.
  • Special rules apply for single-member funds which may allow a non-member to act as trustee or director of the corporate trustee.

Who regulates SMSFs?

As trustees of the SMSF, members of an SMSF maintain complete control over the investments of the SMSF and the provision of benefits as well as being responsible for the ongoing compliance of the SMSF. The governing legislation for SMSFs is the Superannuation Industry (Supervision) Act 1993, known as the SIS Act.

The Australian Taxation Office (ATO) regulates SMSFs via the SIS Act and offers extensive advice on whether this approach will work for you (see for further information) The ATO has the right to audit SMSFs for tax compliance and to ensure that the SMSFs are being used to effectively provide for retirement.

What are the trustee responsibilities?

Trustees normally have responsibility for all aspects of running the SMSF, including:

  • Maintaining all records of the SMSF
  • Establishing and implementing the SMSF’s investment strategy
  • Complying with all regulations under the SIS Act
  • Lodging tax and regulatory returns, and
  • Keeping up to date with changes in law to ensure the SMSF remains compliant

The penalties for not complying with all the laws and regulations can be severe. These include applying higher taxes on the fund, freezing the assets of the fund and criminal prosecution of the trustees.

Eligible investment assets

While trustees have full discretion in making investment decisions for the SMSF, they need to ensure that all investments are consistent with the SMSF’s investment strategy they have set and do not breach the SIS Act or other laws.

The following investments will generally be acceptable through your SMSF:

  • Australian shares
  •  Managed funds
  •  Foreign property
  • Direct property
  • Other listed securities (that is, listed property trusts), and
  • Bank deposits

Particular attention needs to be given when considering investment in the following:

  • Collectables, such as artworks, precious metals or gems
  • Derivatives, warrants and other structured products

It is recommended that trustees seek professional investment advice and consider the potential income and growth as well as the risks, liquidity and the diversification of the portfolio and whether it is consistent with the SMSF investment strategy before making any investment.

Assets generally not permitted in SMSFs

Superannuation law does not prescribe what the SMSF can invest in. However, trustees must ensure that all investments are made with the fundamental purpose of providing for the retirement of its members.

There are certain investment that would generally not be acceptable through an SMSF. These include:

  • Investments that deliver benefits to a person today rather than in retirement
  • Loans to SMSF members or their relatives
  • Assets with a charge over them
  • A business to be operated by the SMSF or its members, and
  • Non-arm’s length transactions.

More information on eligible assets is available from the ATO website

What is involved in setting up an SMSF?

1. Decide on the Fund Structure

  • Who will be the Members of the fund?
  • Will they be Individual Trustees or Directors of a Trustee Company?

2. Establish a Trust Deed

  • This is a legal document that sets out the fund rules and details the rights and responsiblities of the trustees and members

3. Register with the ATO

  • For the fund to be regulated and recognised as a complying fund, as well as obtain a TFN and ABN

4. Open a fund bank account

  • An account in the fund’s name to accept cash contributions and rollovers

5. Prepare an Investment Strategy

  • Provides the framework for the fund’s investment decisions

6. Appoint SMSF professionals

  • Consider whether to use one or more professionals to help you manage your fund e.g. tax agent, accountant, fund administrator, legal practitioner, financial adviser. An approved auditor must audit your fund each year and actuarial services will be required in certain circumstances.

How do I transact and invest through my SMSF?

A cash account is typically used as the ‘cash hub’ of your SMSF. This account is central to the effective management of your SMSF as it is the account through which:

  • all contributions and rollovers are received
  • all lump sum and pension payments to members are paid, and
  • all investments are settled.

For more information, call us on 1800 625 644 or email us at

Service Information

General information about our services

How we exchange information

We are able to provide you with a number of different methods of exchanging information.

For administrative simplicity and to provide you with the most efficient service, many of our documents are now available to you electroncially. This includes our Fund Establishment Kits and the Annual Accounts documents.

We also understand that some documents are only available in hard copy or you simply have a preference to receive hard copy documents. The choice is yours.

All documents are professionally presented and both the electronic and hardcopy documents are identical in content, design and format.

How we receive information
To provide you with the most efficient and cost effective administration services, we are able to receive most fund investment and asset information electronically.

This information is obtained through implementing a series of data feeds, but we don’t do anything without your consent.

We will always request written authority and not ever have access to transact on your accounts.

As not everything is available electronically, we will still require you to send in copies of certain documents. These documents can be faxed, mailed, emailed or even delivered in person to our office.

Document Security

Electronic documents

We only send documents and receive documents to and from your nominated email and postal address.

Any electronic documents issued by us are in secured format to prohibit unauthorised changes and to ensure that your records are true and accurate.

Hardcopy documents

We only send documents to your nominated postal address. Delivery of documents to any alternative address requires your written consent.