You don’t have to be an expert in super, be a guru in investing, or be particularly fond of paperwork to run a self-managed superannuation fund. Setting up and running a DIY super fund in Australia can be a relatively straightforward process, but you need to get it right from the start. 

Here are more details explained by the experts of Wealthlab:

Can you self-manage a superannuation fund?

Generally, nearly anyone can set up a DIY super fund or a self-managed super fund (SMSF). But, if you’re an employee, you can’t arrange your employer’s compulsory contributions to be paid into your SMSF unless you have the right to choose your own super fund in Australia.

Control.

Taking control of your super is often the main reason for setting up an SMSF. Running a self-managed superannuation fund also gives you flexibility over your level of super contributions, types of investments, tax planning, and estate planning.

Competence.

Do you have sufficient knowledge of super and the skills to run an SMSF? Do you have access to advisers with SMSF and tax expertise, such as an accountant or a tax-savvy financial planner?

Compliance.

You can expect onerous reporting, monitoring, and investment requirements. Are you up to it?

Commitment.

DIY super is a lifelong journey – at least until you retire and maybe longer if your fund is going to provide you with a pension, or your children with superannuation benefits. Running your fund can take up quite a bit of time too, particularly if you’re planning to be an active investor.

How much money do you need to start an SMSF?

A popular question asked by prospective trustees is: How much money do you need to justify a DIY super fund as a cost-effective super option?

The good news is that the financial services regulator, the Australian Securities and Investments Commission (ASIC), has commissioned research to uncover what the magic starting balance might be for an SMSF.

If all DIY super funds were run similarly, and had identical costs, the ideal minimum balance for a cost-effective SMSF would be easy to identify.

The Amount Needed to Start an SMSF

The magic figure for everyone considering an SMSF is then the fund balance that enables an SMSF to cost less than an alternative super fund, such as an industry super fund or retail super fund.

The more practical answer is that the minimum necessary to enable an SMSF to be financially viable depends on the individual costs of your SMSF, and those costs can then be compared to what you would be charged if you opted for a large super fund option rather than an SMSF.

A low-fee large super fund charges, on average, roughly just over 1% of your account balance in fees. If your SMSF costs are greater than 1% of the value of your SMSF assets, or greater than the costs of the large-fund alternatives available to you, then your SMSF’s fund balance may not be the most cost-effective balance.

At least $200,00 and up to $500,000

According to ASIC’s SMSF research, if SMSF trustees undertake some of the fund administration responsibilities themselves, rather than appoint a service provider to do everything, then SMSFs with fund balances of $200,000 can be cost-competitive when compared to large funds, such as industry and retail super funds. The proviso is that the research deals with averages, so some SMSFs will be cheaper to run and some will be more expensive, depending on fees charged and the service level required.

If you want a full administration service for your SMSF, then the minimum fund balance is likely to be $500,000 if you want your SMSF to be cheaper to run than other non-SMSF alternatives.

Balances of less than $150,000

SMSFs with fund balances of between $100,000 and $150,000 can be competitive against traditional retail personal super funds, but not cost-effective when compared against industry funds and the new lower-fee retail super fund offerings.

If you expect to start an SMSF with less than $100,000 in superannuation savings, the ASIC research found that a $100,000 fund balance is only cost-effective if you plan to make large super contributions or transfer super amounts from other funds, within a reasonable timeframe.

What is the cost to establish your own fund?

Once you have made up your mind to take control of your retirement savings and establish your own SMSF, the next step is to find an SMSF expert to set up your fund (generally a Financial Planner or Accountant).

The setup includes:

• Building your SMSF trust Deed in line with ATO standards
• Registering your SMSF with ASIC & ATO
• Applying for TFN and ABN numbers
• Preparing an investment strategy for your superannuation fund
• Completing the individual member risk profiling
• Researching the current super funds that you have to ensure current benefits (such as insurances) are not lost
• Finalising the rollover money into your SMSF
• Preparing of a Statement of Advice for any super rollover or change of insurance for your fund
• Setting up a bank account suitable for your SMSF fund
• Assisting you in the signing of all SMSF documentation to ensure your fund is finalised in line with ATO standards

The cost to set up your fund (completing the above tasks), is high and If you plan to have borrowings within your fund then we will be required to establish a Bare Trust for you as well. To set up a SMSF with borrowing is it can be over $8,000 to set it all up.

How much will it cost to manage the administration and compliance of my fund (on-going)?

On an ongoing basis and to allow you to concentrate on the investment management side of your SMSF, generally most people outsource the Compliance and Audit side of their fund. 

This removes the burden of keeping up to date with all the changes that happen within superannuation and provides you with a team of experts that you can ask questions and bounce ideas off. Your compliance team will complete the following yearly on your behalf:

SMSF Level

• Providing a planning booklet based on the information taken from your SMSF tax return
• Completing the annual tax return for your SMSF
• Assisting with the ATO audit for your SMSF
• Chasing of information on your investment property from your property agent
• Unlimited phone access to accounting and planning staff
• Annual catch-up with accounting or planning (in office) to discuss strategies for the SMSF

Trustee/Member Level

• Completion of the annual risk assessment for each member
• Assisting with strategies for surplus money in the SMSF bank account
• Review of risk protection strategies
• Assisting with the rollover of money from external super funds

The cost of providing the above service can range between $2,500 to $2,900 per annum and payable by your SMSF. Please note that each investment you choose within your fund may have additional costs associated with them.

What are the benefits of an SMSF?

There are a number of benefits of an SMSF. Being a trustee means you can choose how to invest and manage your super savings. Below we explore the main benefits to setting up an SMSF and managing your own superannuation.

1. Investment Control

Most superannuation funds will allow you invest into assets such as:

• Shares
• Fixed interest
• Property via managed funds (often with restrictions)
• SMSFs can offer a range of additional options including:
• Direct property (commercial or residential)
• Physical gold and other commodities
• Collectables such as artwork (subject to strict requirements)

2. Managed Portfolios

SMSF benefits also include the flexibility of borrowing within your fund for investment purposes. Also, some small business owners may hold their business premises within their SMSF for a variety of reasons including asset-protection, succession planning, and security of tenancy.

3. Greater Investment Flexibility

SMSF members also have greater flexibility on when they acquire and sell their investments and this hands-on approach can mean, for example, as market conditions change you can quickly respond by adjusting your investment portfolio.

4. Ability to Pool Your Super

Another benefit to an SMSF is the ability to pool your resources with up to three other members. This increased pool may allow you to access investment opportunities that may not be available otherwise to your SMSF.

5. Estate Planning

SMSFs offer great flexibility with your estate planning needs. If the fund’s trust deed allows it, SMSF members can make binding death benefit nominations that do not lapse, unlike many public offer superannuation funds which tend to require binding death benefit nominations to be updated every three years. In addition, SMSF members may have greater flexibility in specifying how death benefits are to be paid.

6. Effective Tax Management

In an SMSF you have greater control of your assets and investment decisions, which may allow you to better manage the tax position of the SMSF.

The current tax rate on earnings within a superannuation fund is 15%,but where the income is produced by assets wholly supporting an income stream such as a pension, there is no tax payable within the fund on that income.

This difference in tax rates means that by having control over the disposal of assets, you may be able to reduce, or potentially eliminate a capital gains tax liability.

7. Adding Value with Property

Adding to your SMSF with property can be another way to grow your super. Owning property through your SMSF typically involves the fund acquiring a residential or commercial rental property which is leased to unrelated tenants. Fund members or relatives can’t rent a residential property from an SMSF because of the in-house assets test.

What are the risks of an SMSF?

There are strict laws and regulations that govern SMSFs. As a trustee of your own superannuation fund, you’re held responsible for your investments and complying with super and tax laws. So it’s important to understand the risks before you get started.

1. Time Needed to Manage Your Own SMSF

Running your own SMSF can be time consuming and even though you can appoint an SMSF administration service, which most trustees do, there are significant activities which need to be completed throughout the year. It’s important that you have an experience team behind you to assist in meeting SMSF obligations.

2. Skills Needed to Manage Your Own SMSF

All superannuation members should have an understanding of the investment markets and classes in which their super benefits are and could be invested. However, this is more important for trustees of an SMSF who have to make and implement the investment decisions of the fund.

When running your own SMSF, you’re required to formulate and regularly review an investment strategy which considers the risk, diversification, liquidity, solvency, and insurance requirements of the fund. Your SMSF specialist, accountant, and financial planner can also provide great value to you in this area and ease the burden of trying to understand all the rule changes.

3. Unlocking the Language of Superannuation

Super funds can be a world of mysterious language. Don’t let terminology slow down your retirement planning; financial jargon rolls off the tongues of advisers and experts, but it can be hard to understand what they mean. Here are some of the super terms that you may encounter as you plan ahead for your super fund:

• Self-managed super fund: The official name for the most popular type of DIY super fund. A SMSF can have no more than four members, and, ordinarily, all members must be trustees, and all trustees must be members. In the case of a single member SMSF, you need two individual trustees (including the member), or you must set up a corporate trustee, with yourself as director.
• Superannuation Guarantee (SG): The official term for compulsory super contributions made by employers on behalf of their employees. An employer must contribute the equivalent of 9.5% an employee’s ordinary times earnings, such as wages or salary. The SG percentage will progressively increase until it reaches 12% from July 2025.
• Concessional contributions: Super contributions that you (or your employer) make from before-tax income. Your employer, or you if you’re self-employed or otherwise eligible, can claim a tax deduction for such contributions.
• Non-concessional contributions: Super contributions that you make from your after-tax income. You may hear this type of contribution called an after-tax contribution or even an un-deducted contribution.
• Tax-free component: This part of a super benefit is tax-free.
• Taxable component: This part of a benefit is taxable when taken under the age of 60 (except when the low-rate cap is applicable), and tax-free when taken on or after the age of 60 (except when you receive an untaxed benefit).
• Low-rate cap: A lifetime tax-free limit that applies to superannuation lump sums paid from a taxed benefit after the age of 55 but before the age of 60.
• Taxed benefit: Taxed benefits are tax-free when received on or after the age of 60. Most super benefits, including benefits paid from SMSFs, are taxed benefits. Some benefits paid from certain public sector funds are untaxed benefits.
• Untaxed benefit: A benefit that hasn’t been subject to super taxes, which means the benefit is subject to a higher rate of tax, when withdrawn, than are taxed benefits. A life insurance payout within an SMSF may be considered an untaxed benefit.

Disclaimer: All information on Self-Managed Super Funds is general in nature only and does not consider your personal objectives, situation, or needs. You should consider whether any information on Self-Managed Super Funds is appropriate to you before acting on it. The Australian Tax Office website on is also a highly recommended source of valuable information relating to the establishment of a Self-Managed Super Fund.