The 9 things you should know before opening a SMSF

The decision to open your own Self Managed Super Fund (SMSF) may be difficult one. It is therefore important to understand the pros and cons of SMSF‘s to help you decide whether a SMSF is best for your current life circumstances.The decision to open your own Self Managed Super Fund (SMSF) may be difficult one. It is therefore important to understand the pros and cons of SMSF‘s to help you decide whether a SMSF is best for your current life circumstances.


1. Control: You have total control of the investments you hold in your fund. If you have a super account with a fund manager – you have no control over the investments brought and sold in the fund. The holdings in the super fund may not all be disclosed.
If you have a SMSF, you can decide on the asset classes held. You may choose to purchase property and shares in the fund. With a super fund managed by someone else, you usually can only hold shares.
We wrote about the advantages and disadvantages of holding direct share investments vs managed funds in a previous blog post. We concluded that the returns on direct share investments are far more superior. This is because the returns on managed funds may be eroded by much higher fees: https //

2. Tax: There are also tax implications of managed funds as capital gains and losses are pooled together. However, in direct share investments, you can offset your losses against your capital gains to reduce your tax payable.  You are also able to use the franking credits from dividends to reduce your tax payable with direct share investments in an SMSF. Contributions and income of the fund are taxed at the concessional tax rate of 15%. Income of the fund is generally tax free once a pension is paid.

3. Consolidation of Superannuation: With a SMSF, you can have up to 4 members so you can consolidate four individual super funds into the one fund. This means only one SMSF fee is paid as opposed to four different fees in each of the individual super funds.

4. Fees: In a super fund, the performance fee is charged on your balance, so the larger your balance the more fees you pay. In a SMSF the greater the super balance, the more cost effective the SMSF is. With super balances more than $200,000, it is more cost effective to use a SMSF.

5. Estate Planning – If you pass away, the SMSF can still continue as your spouse and even your children can still receive the benefits. In a super fund, a death certificate or probate may need to be produced to transfer the super balance to family members.


1. Time consuming – Having your own SMSF can be a time-consuming task as you need to pick your own investments and time the market when entering or exiting a trade. If you don’t utilise the services of a professional, then you would also need to have extensive experience in the stock market. Having a stock broker can alleviate this stress as they can come up with stock ideas and identify entry and exit points. You still have control in most cases as advisers would normally need your consent before executing the trade.

2. Set Up and Ongoing Fees – There is an annual levy imposed on an SMSF of $259 and there is a set-up fee of approx. $2,220. There are also annual admin and audit cost of approx. $1050 + depending on the size of the fund. ASIC recommends that you need to have at least $200,000 in fund for it to be worthwhile to have a SMSF.

3. Administration – When you have a SMSF there are added admin responsibilities. For instance, you need to keep records for 10 years and you need to have accurate accounting records. Trustees must lodge an annual tax return and the fund must an audited by an approved auditor.

4. Legal Obligations: The SMSF trustees are personally liable for the fund. They have a legal obligation to manage the fund responsibly for its members. Non-compliance with super funds can result in severe penalties for the trustee.

Lauren Hua is a private client adviser at Fairmont Equities.

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Disclaimer: The information in this article is general advice only. Read our full disclaimer HERE.

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