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What are the advantages and disadvantages of a Self Managed Superannuation Fund (SMSF)?

Advantages of an SMSF Control:

As a member and trustee of your own fund, you are responsible for the investment strategy and can therefore choose where your superannuation is to be invested. You can also decide when to buy and sell assets.  Disposing of assets once the fund is in pension phase will eliminate capital gains tax.


There is a wide range of investments to choose from, whether it be direct shares, managed funds, or real property. You have the ability to transfer personal assets into your SMSF known as an in-specie contribution.  These assets may include shares and business real property. Low Tax Environment: 15% on net earnings and 10% on capital gains (provided the investment is held for longer than one year). Once you are aged sixty the tax rate can decrease to 0% on net earnings and capital gains.


Generally SMSF's pay lower fees than industry or retail funds. As your members balance increases your fees as a percentage of the fund balance may decrease.


A SMSF can instantly alter their investment strategy.  With large funds there can sometimes be a substantial lag between the time the member issues the instructions and the time that the instruction is executed.

Purchase assets not affordable by yourself

As a SMSF can have up to 4 members you are able to pool your resources to purchase larger assets like real property. Additionally SMSF's have the ability to borrow money.  

Disadvantages of an SMSF Responsibility:

Being a trustee of your fund you are legally responsible for all decisions made.  Notwithstanding the advice from your accountant; lawyer and financial planner the responsibility ultimately lies with you. As an SMSF trustee you are also responsible for the investment allocation.  Therefore knowledge of investing is critical.


Operating an SMSF can be quite time consuming.  Even if you out source the administration function you are still responsible for the fund's performance and compliance. Time should be set aside to keep proper records and attend to the statutory requirements of lodging income tax returns and having financial statements prepared and audited.

Restricted Access:

Members can not access their fund balance until they are aged 55 or a condition of release is met.


There are strict laws that govern the super industry. Violation of these laws and regulations can result in a loss of tax concessions. Trustees must ensure they abide by the changing rules and regulations at all times. The Australian Securities and Investments Commission (ASIC) and the Australian Taxation Office (ATO) regulate and enforce penalties for breaches of the law.

Potential poor asset diversity

If an SMSF has only one asset or asset class, i.e., real estate, then the performance of the fund is reliant on that single asset or asset class.

High Costs

If an SMSF is established with a small balance then as a percentage of the total fund balance the associated compliance and running costs will be large.  The cost effectiveness of a potential SMSF needs to be considered prior to its establishment.