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What are the Advantages and Disadvantages of SMSF?

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January 23, 2023

For many Australians, retirement may be the final goal, but the thing which comes with retirement is no regular income. The government of Australia has a retirement plan. One of the most significant plans is to save into superannuation funds. It encourages people to invest and save for retirement. They can directly control and manage their funds.

Self-managed superannuation funds (SMSFs) are private, self-established superannuation funds with an utmost of six members. Instead of a retail or industry fund, your employer will give money for your superannuation guarantees into your SMSF. You will be in charge of supervising the investments in the fund, which is subject to strict rules and regulations.

Self Managed Super funds (SMSFs) fund usually selected by a person or family to manage their superannuation. Every member of an SMSF is a trustee and are liable for investment decisions and ensure that the superannuation and tax law are followed. Like any other superannuation fund, SMSF member, trustees, or corporate trustees must operate their funds to deliver retirement benefits, as summarised in the Superannuation Industry (Supervision) Act 1993.

Let’s have a look at the advantages and disadvantages of SMSF.

The Advantages of a Self-Managed Super Fund

According to the superannuation industry act 1993, the members of SMSF trustees or corporate trustees must manage their funds solely for retirement benefits. There are many rules and regulations which have to be followed by people. SMSF has a mixed image. It depends on the person with whom you are talking. Knowing about SMSF’s advantages and disadvantages, in detail will let you know whether it is right for you.

Here are some of the advantages of SMSF to make it more clear.

1. Investment choice

One of the biggest reasons to opt for SMSF is it has a broader range of investments. It is common for small businesses to get into SMSFs because commercial properties are purchased with their funds. This property can be let out, to their business supplying at enduring market rates. An SMSF can also borrow money to purchase an asset, but doing so gets difficult as more banks have pulled their SMSF financing options off the market.

The things eligible in SMSF are an investment in unlisted companies, gold, artwork and other valuables. The SMSF follows all the rules and regulations; particular conditions must be fulfilled for these investments.

2. High Level Of Flexibility And Control

The trustees are also a member of superannuation funds, they have the flexibility to change their conditions which suits their financial requirements. Only this fund can do such a thing. If you are managing your super investments, it authorizes you to quickly make adjustments to your portfolio according to the market changes or get applied to recent investment options.

3. Effective Tax Management

Retail and industry superannuation has the same rate of tax. An SMSF enables you to execute tax planning methods. SMSF also helps you reduce tax payments. Self-managed superannuation accountants help the trustees to handle their tax liabilities. It will save them from the stress and difficulties they suffer.

4. Accountability


If you are both trustee and member, you will be more informed about how your superannuation funds invest and how the assets perform. They are not applied to retail and industry super funds because they had delayed the information of distribution funds. A good superannuation administrator will use the updated software for their work. They can daily keep track of the results of your decisions. A professional administrator will monitor the software and allow you to access the current information whenever you need it.

5. Costs of running your fund

Previously, SMSF funds were used by rich people because of the high compliance fees. Nowadays, due to advanced technology and competition between service providers. SMSFs are available at cost-effective rates. The price of maintaining the SMSFs will depend on the level of professional assistance you utilise. The expenses of the funds decrease accordingly as their value increases. The fees of the principal SMSFs funds are specified.
In retail and industry, super funds fees will be canceled from your overall balance.

6. Pooling your super with others

SMSFs allow you to do your superannuation with up to 5 other people. It opens the possibility to finance things as a person won’t be able to do it on such direct possessions. This is a different type of advantage of self-managed super funds. We can say that there are benefits and risks of SMSF. This will be clear by knowing it deeply. Now that you have seen the advantages of SMSFs. You might have got some thoughts about it.

7. Investment Options

Investment options

There are many investment options in SMSF. Initially, we know that only wealthy people can invest, now a self-employed and small business owner can get the SMSFs funds. They can purchase and sell properties and other assets.

8. Protection from Creditors

There are certain rules and regulations where creditors cannot access the person’s superannuation. Until and unless someone has purposefully placed assets into SMSFs to avoid payment to creditors. In such cases, the repayment rule may be applied. Protection from the creditor is given, but if anything wrong happens, fess is applied.

The Disadvantages of a Self-Managed SuperFund

Now here are some of the disadvantages of SMSF. Though they have their benefits, everyone doesn’t need to agree to these benefits. If you have to think that it is good for you to measure all the Advantages and Disadvantages of an SMSF, then calculate. It is crucial to note that SMSFs are still controlled by the ATO and performed under the same regulations. It is a significant financial decision that takes time and aptitude to supervise. So before investing, give a glance at the cons of self-managed super funds.

1. Investment Knowledge Is Required

smsf management perth

Members of the SMSF fund require an adequate amount of knowledge in understanding the fundamentals of investment practices. As they have a reasonable understanding of it, they will be accountable for whatever happens with their savings. They also need to be updated about the laws and regulations of the SMSFs. Learning and understanding can be hard. It is not that easy for everyone to know it thoroughly. It is very complex to understand SMSFs.

Most people are not professionals in finance and superannuation. So, we suggest that doing it yourself is not advisable. The reason for not suggesting you do it yourself is cost and tension. If any error occurs in setting up or managing, you will unnecessarily be stressed. Therefore, many people will help you in doing this properly.

2. Time-Consuming

Everybody wants to make a suitable investment. The research part will consume a lot of time. Knowing about the SMSFs may consume a lot of time as you have to keep records of all your investments. As a member of the self-managed super funds, you will be responsible for researching and managing funds. Once you start managing it regularly, it will consume less time and takes only when something goes wrong.

3. Duties & Responsibilities of being a Trustee

When you are capable enough to manage your retirement savings, you take all the decisions about the assets. As a trustee, make sure that you are well knowledgeable about the investment options. If you are not aware of the investment, it will impact your assets. Some people are not familiar with SMSFs and do not have the efficiency to deal with them.

All the trustees have some duties to follow, which should not be taken lightly. They ensure that their funds comply with laws and regulations. Trustees need to know everything about tax regulations that apply to superannuation. If the ATO finds that there has been a violation of these duties and obligations, trustees could be penalised severely, for which they would be held personally liable.

Tax rates ranging from 47% may be subject to a severe violation. There is required time and knowledge for SMSF management but SMSF managers can help you in preserving the record of the funds.

4. Living Overseas

The majority of the SMSFs fundies reside in Australia. If you have any plans to move overseas permanently or want to contribute to the fund while living overseas. This will make your fund rebellious with the law.

5. Costs of running your fund

It can be the most significant disadvantage of SMSFs that the expenses of maintaining SMSFs funds will affect negatively when the assets are held of less value. Many of the expenses are fixed for the SMSFs, and the low-value asset will struggle. When the value of the fund increases, its value proportionality decreases. You have to perform the necessary actions to know whether the funds are beneficial for you or not.


After knowing SMSF’s advantages and disadvantages, it will be helpful for you to understand the SMSFs fund. It is necessary to understand everything which is made for our benefit.

The advantages of having a self-managed super fund are influenced by your situation, skills, and choices. SMSFs, on the other hand, are increasingly appealing to pre-retirees because of their expanding popularity. To keep an SMSF running, you require a lot of financial and legal knowledge, which is why you still need experienced financial advice.

There are many people in Australia who are investing in SMSFs funds. It is always conceivable to give your financial advisor the authority and obligation to make the transaction on your behalf. As a result, you will feel less stress and be able to manage other investments.

Also Read: Seven Steps To Setting Up A Self-Managed Super Fund (SMSF)

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