Is a SMSF right for you?

Key risks to consider when establishing the fund

The following table outlines the key risks self-managed superannuation fund (SMSF) members/trustees need to consider when establishing and running an SMSF.

Key Risks


Trustee obligations

















As a member of an SMSF you must also be a trustee. You must have the time and skills to manage running your fund and meet a range of legal and administrative obligations.

You may outsource some functions if you do not have the time and relevant skills, such as investment management and administration of the SMSF. However, you (along with the other trustees) are ultimately responsible for the operation of the SMSF.

Some of your key trustee responsibilities include:

  • ensuring assets are held for the sole purpose of providing retirement benefits
  • accepting contributions and paying benefits in accordance with superannuation and taxation laws and the SMSF trust deed
  • keeping super assets separate from personal or business assets
  • valuing fund assets
  • preparing and keeping proper records, including financial statements, tax returns, audits, actuarial certificates (where applicable) and minutes of trustee meetings and decisions
  • having the financial accounts and statements for the SMSF audited each year by an approved SMSF auditor, and
  • meeting the reporting and administration obligations imposed by the Australian Taxation Office.


Potential consequences of not complying with obligations and relevant laws may include:

  • the SMSF losing access to tax concessions, and
  • you as a trustee may be penalised or issued with education directives.


Even if you are less actively involved, all trustees are equally required to comply with trustee responsibilities and obligations and are liable for the actions of other trustees.

Who are members of the fund?



Consider who you want to have as member(s) of your SMSF.

  • As all members are generally trustees of the SMSF or directors of the corporate trustee, are you comfortable sharing the responsibilities of managing the fund?
  • In a two-member fund, if a member wishes to exit the SMSF, is there an alternate member, or would you prefer a single member fund with a corporate trustee?
Different SMS trustee structures





An SMSF can be established with either individual trustees or a corporate trustee. Advisers, along with tax and legal professionals, can help determine which structure is suitable for your SMSF. There may be additional costs in establishing a corporate trustee, however, this structure can help reduce specific risks, which may include:

  • less cost and effort when membership changes
  • greater protection from litigation
  •  greater control for single members, and
  • more longevity.
Development of an investment strategy









Because you’re a trustee of the fund, you can exercise more direct control over the investment strategy. As trustee you are responsible for developing, implementing, documenting and reviewing an appropriate investment strategy for the fund.

A common investment strategy can be developed for all members or multiple investment strategies can be tailored for each member. As trustee you must consider the:

  • risk/return profile and objectives of each member
  • benefits associated with asset diversification (or lack of)
  • risk involved with, likely return and liquidity of each investment, and
  • restrictions on acquiring assets from related parties and lending.


You have a choice of managed investments, direct shares and private assets1 such as direct property and unlisted investments in private entities. Investments acquired must be consistent with the investment strategy, permitted by the trust deed and comply with superannuation laws. As part of the investment strategy, you and other trustees must consider whether insurance should be provided for members and for relevant fund assets such as direct property or collectibles.









There are many costs2 involved in setting up your own fund, including establishment costs, legal costs, ongoing administration costs and investment costs.

SMSFs are generally more appropriate if you have a larger account balance and want to be actively involved in the management of your super.

Set-up costs may include creating the trust deed, completing ATO forms, establishing a corporate trustee (if applicable) and other advice or administration costs related to structuring the SMSF, purchasing investments and accepting rollovers or contributions.

Ongoing costs may include the annual SMSF supervisory levy, legal and accounting fees, audit fees, costs to produce annual statements, tax liabilities, asset valuations and any potential investment, borrowing and advice fees. An SMSF will also incur additional costs if wound up.

  1. There are specific restrictions on the types of assets you can acquire in an SMSF. To find out more, speak to a financial adviser and a registered tax agent.
  2. ATO: Self-managed super funds – A statistical overview 2017-18 Table 25.


Key risks


Recourse and penalties by Regulator?









The ATO can apply various actions to deal with SMSF trustees who have not complied with the relevant laws which can include:

  • an education direction – a written direction to the SMSF trustee to participate in a course to improve competency and ability to meet regulatory requirements
  • an enforceable undertaking – the trustee initiates to rectify a contravention which the ATO can accept or not
  • a rectification direction – the trustee must rectify a contravention as directed by the ATO
  • administrative penalties – trustees are personally liable to pay penalties for administrative breaches
  • disqualification of trustee – individuals may be prevented from acting as a trustee or director of corporate trustee
  • civil and criminal penalties – may be imposed by the court for breaches, and
  • tax penalties – if the SMSF is non-complying, the fund may lose tax concessions and any income and capital gains may be treated as non-arm’s length income and taxed at 45%.


The ATO could also freeze SMSF assets or direct the fund to be wound-up.

Access to complaint mechanisms Member/trustee disputes generally need to be resolved through remediation, arbitration or in the courts. Only disputes related to investments and financial advice can be lodged by trustees with the Australian Financial Complaints Authority.
Statutory compensation SMSFs do not have access to the statutory compensation scheme in the event of theft or fraud.
Exit strategy





On establishment, you (along with the other trustees) should prepare an SMSF exit strategy to ensure any exit is as straightforward as possible. It is important that you:

  • understand the information in the trust deed for what happens in the event of a trustee’s death
  • consider the likely costs involved in winding up an SMSF (including costs related to selling assets and paying professional advice fees)
  • understand any trust deed requirements, regulatory obligations and tax implications, and
  • make a binding death benefit nomination and appoint an enduring power of attorney.