What Is a Self Managed Super Fund? SMSF Basics Explained

Victorian investors often ask what is a self managed super fund and whether the control and flexibility are worth the extra responsibility. An SMSF is a private superannuation fund that you manage yourself, but it also means you’re personally accountable for investment decisions and legal compliance.

In this guide, we’ll break down SMSF structure, setup, trustee obligations, common costs, pros and cons—so you can determine if managing your own super is the right retirement strategy for you.

SMSF in a Nutshell

An SMSF (Self-Managed Super Fund) is a superannuation trust structure that allows up to six members to manage their retirement savings. All members must be either:

• Individual trustees or
• Directors of a corporate trustee (commonly used for asset protection)

An SMSF must be maintained for the sole purpose of providing retirement benefits and is regulated by the Australian Taxation Office (ATO) under the Superannuation Industry (Supervision) Act 1993 (SIS Act).

Why People Choose SMSFs Over Retail or Industry Super Funds

Self-managed super is not for everyone—but here’s why thousands of Victorians go the DIY route:

Greater Investment Control

You can choose:

• Direct Australian and international shares
• Term deposits and cash
• Commercial or residential property
• Collectibles, managed funds, and even cryptocurrency (with restrictions)

Cost Efficiency at Higher Balances

While fixed SMSF costs may outweigh returns for smaller balances, once your fund grows past $250,000, admin fees often become competitive with standard industry or retail funds.

Estate Planning Flexibility

You can:

• Tailor death benefit nominations
• Control how benefits are paid to dependents
• Segregate assets between members for clarity

Combine Family Wealth

Couples and family members can pool their super into one SMSF, allowing for unified strategy and lower per-member costs.

Your Duties as an SMSF Trustee

SMSF trustees carry full responsibility. Duties include:

• Developing and maintaining an investment strategy considering diversification, risk, liquidity, and insurance.
• Ensuring an independent annual audit is conducted.
• Lodging the SMSF Annual Return with the ATO.
• Paying the ATO supervisory levy ($259 annually).
• Keeping required records—some for up to 10 years.
• Monitoring contribution caps and ensuring benefits are only accessed after a valid condition of release.

Non-compliance can attract trustee penalties of up to $18,780 per person and taxation at 45% on fund assets.

Setting Up an SMSF in Victoria: Checklist

1. Draft or purchase a compliant trust deed
2. Decide on a corporate vs individual trustee structure
3. Apply for ABN and TFN through the ATO
4. Set up a bank account in the fund’s name
5. Appoint members and trustees formally
6. Register for an electronic service address (ESA)
7. Roll over your existing super funds after receiving ATO confirmation of compliance

Cost Breakdown: Typical Annual SMSF Expenses

These are rough averages—some trustees manage costs better, while others engage advisers for ongoing help.

Common Pitfalls to Avoid

Many SMSF breaches are unintentional. Watch out for:

• Related-party transactions—must be at arm’s length and properly documented.
• In-house assets (like loans to related businesses) exceeding 5% of total fund value.
• Early access schemes—accessing super before preservation age is illegal.
• Overconcentration in a single asset class—especially property—invites ATO scrutiny.

Investing in Property Through SMSFs

Victorians often consider property via SMSFs, but there are strict rules:

• If borrowing, you must use a Limited Recourse Borrowing Arrangement (LRBA).
• Banks usually require 30%–40% deposit.
• All rent and leases must be arm’s length—especially if renting to your own business.
• Capital gains and rental income may be tax-free in pension phase, depending on your fund structure.

Legal and loan costs are higher, and the property must be used solely for retirement benefits.

How to Wind Up an SMSF (If It’s Too Hard)

If managing your own super becomes overwhelming, you can exit by:

1. Selling or transferring assets
2. Rolling balances back to a retail/industry fund
3. Lodging a final return with the ATO
4. Paying any outstanding tax or fees
5. Closing the SMSF bank account

The ATO provides a detailed exit checklist to ensure proper closure.

SMSF Suitability Self-Test

Ask yourself:

• Do I have time and interest to monitor financial markets?
• Is my super balance high enough to justify SMSF running costs?
• Am I comfortable with personal legal responsibility for compliance?
• Do I have reliable support from financial, legal or tax professionals?

If you answered “no” to most, a traditional fund might serve you better.

Local Considerations for Victorians

Victorian SMSF trustees should be aware of:

• Land tax obligations on property holdings
• Stamp duty on in-specie transfers
• State-based property and estate planning laws that can influence asset protection strategies

An accountant or financial planner familiar with both federal and Victorian regulations is vital.

Final Thoughts

A self-managed super fund offers powerful benefits, but it isn’t for everyone. The compliance burden is real, and mistakes are costly. If you’re serious about running your own super, get advice from a qualified accountant or financial adviser before setting up.

Contact TTS & Associates today to see if an SMSF fits your retirement goals.