Self-managed super

These days some people are looking for more control over how their super is managed. If you’re thinking about it, the best place to start is with your Industry SuperFund, because they act in your best interests. They can help you make the right decision and might even have what you are after.

A self-managed super fund (SMSF) might sound appealing on the surface, but you need to make sure it’s right for you, because if things go wrong, it could leave you much worse off in retirement.

Read on to see some things you should consider.

Independent research by ATO

Data provided by the body responsible for the regulation of SMSFs, the Australian Taxation Office (ATO), shows some of the benefits and challenges, especially in the first years after setting up an SMSF. The data shows that there is a direct relationship between SMSF size and the return on assets. The ATO says that generally the larger the SMSF, the more improved the rate of return.

SMSF Return on Assets

The ATO’s data shows that generally only sizeable SMSFs can provide a positive rate of return on assets.

SMSF historical returns by asset range

Source: ISA Analysis, ATO SMSFs - A Statistical Overview 2020-21.

Try the 8 point checklist (or talk with your Industry SuperFund)

Do I have a starting base? Generally, you will need a minimum starting balance of around $200,000 and an expectation that the fund will continue to grow, for a self-managed fund to be beneficial. In addition a SMSF trustee will be required to invest a significant amount of time and have a strong knowledge of the stock market and investments.
What will I give up to put aside the few hours per week required to manage an SMSF?
Will the fees charged by my accountant, my financial adviser and the auditor that I will need, cancel out any gains from going with an SMSF?
Do I have the time to learn and keep abreast of the frequent changes to SMSF rules and regulations made by the Australian Tax Office?
Am I willing to buy separate life insurance and income protection insurance to make up for the insurance cover that I may have with my current super fund?
Do I have the expertise with shares, trusts and other investment products to make better decisions than the professionals employed by Industry SuperFunds?
I am prepared to be personally liable for all the decisions made by the fund even if I get professional help or another fund member makes the decision.
I am aware that unlike APRA regulated funds such as Industry SuperFunds, SMSFs are not protected by a statutory compensation scheme that covers loss in the event of theft and fraud. Many SMSF investors have as a result lost their life savings when they have been the victim of fraudulent activity.

SMSFs – higher costs for most account sizes

Source: ISA Analysis, ATO SMSFs - A Statistical Overview 2020-21.

Depending on how much you have to invest, SMSF’s can cost significantly more to run, compared to being a member of an Industry SuperFund.

SMSF performance

ATO and APRA data also shows that industry super funds have outperformed all SMSF fund size categories on an annualised basis apart from those over $5m.

Source: ISA Analysis, ATO SMSFs - A Statistical Overview 2020-21, APRA Annual Superannuation Bulletin, June 2022.
Note: Please see footnote on conditions applicable to this comparison.

Can I take more control of my current super with a super fund?

The simple answer is yes. The best way is to look at the investment option you have chosen within your fund. All funds offer a range of investment options you can choose from, ranging from very safe (defensive) investments, up to those that carry more risk, but also the potential for high growth.

Usually you can split your super across a number of investment options to spread any risk and still enjoy potentially higher returns.

Many Industry SuperFunds offer self-directed investment options which allow members to have a high degree of control over their investment options, including the ability to invest funds at an individual company level e.g. ASX 300 options.

The rate of return you receive when you make a self-directed investment could be higher or lower than that received by members who rely on the decisions of the fund’s investment managers. APRA data shows that 5 Year Annualised Returns to 2020 for industry super funds was 6.2%. *

If you have super in more than one fund, it is generally wise to roll your super into a single fund so you can control you investment choices through a single online interface. For more information about consolidating your super, visit our Consolidating Your Super page.

Get advice

As with any major financial decision, it’s wise to consider getting independent, unbiased advice from a financial planner or professional – preferably one who does not receive commissions for recommending products. A good place to start is to contact your Industry SuperFund and ask to speak to one of their advisers.

If you're thinking of switching to an SMSF simply because you're not happy with your current fund, you might be better checking out other super funds first, like an Industry SuperFund.

The ATO has a section about self-managed super funds on their website.

* Past performance is not a reliable indicator of future performance. Consider a fund’s PDS and your objectives, financial situation and needs, which are not accounted for in this information before making an investment decision.

Footnote:
The returns of self-managed super funds (SMSFs) and APRA funds are not directly comparable due to some methodological differences in their calculation. The ATO changed the methodology for calculating SMSF returns in their 2020-21 statistical publication in line with recommendations made by the International Centre for Financial Services (University of Adelaide), but some differences still persist. However, these differences are not sufficiently material to alter the findings that SMSFs (particularly those with assets less than $1 million) have underperformed industry funds on average over the past 5 years.