How do Self Managed Super Funds Work?

How do Self Managed Super Funds Work?

self managed super fund

Self Managed Super Funds (SMSFs) have grown in popularity as a means for people to take charge of their superannuation assets in recent years. Individuals can manage their own superannuation assets through Self Managed Super Funds and choose investments that fit their own objectives and risk tolerance. In this blog, we’ll examine SMSFs more closely looking at their advantages and disadvantages.

How do Self Managed Super Funds Work? What Are They?

Self Managed Super Funds are a kind of superannuation fund that are run by the members themselves as opposed to a professional fund manager. SMSFs offer a method for people to save for retirement and are governed by the Australian Taxation Office (ATO).

The trustees of the fund or the directors of the corporate trustee must also be members of Self Managed Super Funds. This means that the members are responsible for making investment decisions, complying with superannuation laws and regulations, and administering the fund. Shares, real estate, cash, and fixed income investments are just a few of the many assets that SMSFs can invest in. They also give members more control over their superannuation investments and can be an excellent choice for people who are knowledgeable about financial management and investing techniques.

How do Self Managed Super Funds Work? Setup and Operation

 When creating a fund, it is necessary to seek professional guidance because setting up an SMSF can be a complicated process. The first step is to decide if an SMSF is the best option for you, depending on your unique situation, financial objectives, and level of investment expertise.

There are a number of procedures you must take if you choose to move forwards with creating an SMSF. They consist of:

  • An SMSF must be established with an SMSF deed because it is a form of trust. The deed describes the fund’s policies and spells out the duties and responsibilities of the trustees and members.
  • A corporate trustee for an SMSF must be nominated in accordance with the SMSF deed and must meet specific eligibility requirements. The trustee is in charge of overseeing the fund’s operations and selecting investments.
  • All SMSFs must register with the ATO, and they must get an Australian Business Number (ABN) and a Tax File Number (TFN).
  • Developing an investment strategy: SMSFs are required to have an investment strategy that takes into account the members’ investment goals, risk tolerance, and fund liquidity.
  • Setting up a bank account: SMSFs must have a separate bank account in the name of the fund, which is used to receive contributions and make investments.

How do Self Managed Super Funds Work? Management and Administration

The trustees of an SMSF are in charge of managing the fund and selecting investments once it has been established. This includes:

  • Contributing to the fund: Members can make contributions to their SMSF in the form of employer contributions, personal contributions, and government contributions. There are limits to how much can be contributed each year, and contributions may be taxed at different rates depending on the type of contribution.
  • Investing the money: SMSFs are able to invest in a variety of assets, such as stocks, real estate, cash, and fixed income investments. To make sure the investment strategy is in line with the members’ objectives and risk tolerance, it must be evaluated and revised on a regular basis.
  • When a member reaches retirement age or fulfils other requirements for release, SMSFs are required to provide rewards to that member. Benefits can be given as pensions, lump sums, or a combination of the two.
  • Managing the fund: SMSF trustees are in charge of adhering to all applicable superannuation laws and regulations, including maintaining correct records, creating financial statements, organising the annual audit and completing tax returns.
  • Employing experts: SMSF trustees should hire experts including auditors, financial advisors, and accountants to help with fund management. These experts can offer guidance on tax planning, investment strategies, and regulatory compliance.

How do Self Managed Super Funds Work? An SMSF Accountant

Charted Tax Advisor SMSF Specialist

A Self Managed Super Fund accountant is a specialist in SMSF accounting and financial administration. They are highly knowledgeable and skilled in tax rules along with superannuation legislation.

The following are some of the main duties and obligations of an SMSF accountant:

  • Creating an SMSF: An SMSF accountant can help with the establishment of an SMSF, including the creation of trust documents, application papers, and other legal paperwork.
  • Compliance: An SMSF accountant is in charge of making sure the SMSF complies with all applicable superannuation laws and regulations, including the creation of financial statements, tax returns, and other compliance paperwork.
  • Tax planning: SMSF accountants can offer guidance on tax planning techniques, such as the utilisation of concessional contributions, retirement transition plans, and pension planning.
  • Audit: Every year, an independent auditor is obliged to undertake an audit of all SMSFs. An SMSF accountant can communicate with the auditor on behalf of the trustees and help with the preparation of the financial statements and other documents needed for the audit.
  • Reporting: An SMSF accountant is in charge of creating and delivering trustee reports, which should include regular updates on the fund’s performance as well as information on compliance problems and investment plans.
  • Education: SMSF accountants can educate and teach trustees on superannuation laws, investment methods, and financial planning.
  • Administration: An SMSF accountant can help with the SMSF’s day-to-day management, including the processing of contributions, the payment of benefits, and the keeping of records.

Overall, an SMSF accountant is essential to the management of an SMSF, ensuring that the fund complies with all applicable laws and regulations and offering guidance on financial planning and investing ideas. It is crucial to hire an SMSF accountant with expertise in tax law and superannuation who also has a solid grasp of the trustees’ unique needs and objectives.

How do Self Managed Super Funds Work? Financial Planners

Although there is significant overlap between the two professions, an accountant and a financial planner have separate responsibilities. Financial planners help people make long-term financial plans, whereas accountants often concentrate on managing and reporting financial information.

The following are some of the primary distinctions between an accountant and a financial planner in Australia:

  • Accountants in Australia must be licenced and usually have a degree in accounting or a closely related discipline. They may also be members of a professional accounting organisation like CPA Australia or the Institute of Public Accountants (IPA). On the other hand, financial planners must possess a licence from the Australian Securities and Investments Commission (ASIC), and they may also have additional professional certifications like the Certified Financial Planner (CFP) designation in addition to degrees in finance, economics, or a related field.
  • Accountants are largely concerned with handling financial information, which includes preparing tax returns, financial statements, and other compliance paperwork. On the other hand, financial planners concentrate on assisting people and businesses in making plans for their financial futures, including risk management, retirement planning, and investment strategies.
  • Accountants may provide a wide range of services, such as tax planning and preparation, bookkeeping, financial reporting, and business advising services.
  • Fees: Accountants may bill clients according to the amount of time required to complete a given task, such as filing a tax return or conducting an audit. On the other hand, financial planners may charge a flat fee for particular services like financial planning or investment management or a portion of the assets they manage.

Benefits of Self Managed Super Funds

The degree of control and flexibility provided by SMSFs is one of their main advantages. SMSF members have more control over their investments and can customise their investment strategy to fit their goals and risk tolerance. Also, they have access to a greater variety of assets than other types of superannuation funds, such as direct shares and real estate.

SMSFs have the potential to be more affordable than other kinds of superannuation funds, especially for people with bigger account balances. SMSFs have a fixed fee structure, thus the charges are not determined by the size of the account balance.

The opportunity to pool funds with family members or business partners is another advantage of SMSFs. This can lead to more investment opportunities and possibly higher returns.

Risks of Self Managed Super Funds

 While SMSFs provide a number of advantages, managing your own superannuation accounts comes with certain dangers as well. The degree of responsibility and time commitment necessary are two of the major hazards. SMSF trustees are in charge of making sure the fund complies with superannuation laws and regulations, which may be difficult and time-consuming.

Trustees must be knowledgeable about financial management, market trends, and investment techniques. Professional assistance can help to reduce this risk, but it can also increase the overall expense of operating an SMSF.

The possibility of fraud and theft is another danger associated with SMSFs. SMSF assets are held in trust for the members, thus the trustees have a fiduciary duty to act in the members’ best interests. Nonetheless, there have been instances of SMSF fraud and theft, which can cause the members to suffer large financial losses.


Self Managed Super Funds (SMSFs) give people the opportunity to take charge of their superannuation assets and modify their investment approach to fit their unique objectives and risk tolerance. But, unlike other kinds of superannuation funds, operating an SMSF involves larger risks and demands a significant amount of effort and investment knowledge.

Before making a decision, it is crucial to thoroughly assess your personal circumstances, financial goals, and level of investment understanding if you are thinking of establishing an SMSF. An SMSF may be a potent instrument for accumulating wealth and ensuring your financial future with the correct degree of knowledge and dedication.

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