In short: A self-managed super fund (SMSF) gives you control over how your retirement savings are invested, including direct property, but you take on a trustee’s legal duties, the admin and the cost. As a rough guide, an SMSF is hard to make cost-effective with less than about $500,000 in the fund, so it suits people with a larger balance, time to run it and real investing knowledge.

Australian employers have been making mandatory contributions to their employee’s super funds since the Superannuation Guarantee was introduced in 1992.

For the majority of us, professional super funds control the investment decisions for our superannuation in return for a fee.

However, more than 1.2 million Australians are members of a self-managed super fund (SMSF), a private fund run by its own members (ATO figures, June 2026).

Whilst an SMSF might outperform one of the APRA-regulated funds (APRA is the Australian Prudential Regulation Authority), it also comes with a wave of risks and responsibilities that must be taken into consideration.

In this article, we’ll explore the pros and cons of Self-Managed Super Funds and whether it’s the right strategy to fund your retirement.

What are the pros of a Self-Managed Super Fund?

The biggest reason for choosing a Self-Managed Super Fund is that people want to be in control of their own finances. An SMSF lets you make your own investment decisions and gives you the full responsibility of accumulating funds for your own retirement.

An SMSF also gives you access to a wider range of investment options that would otherwise be unavailable through standard super funds. SMSFs allow you to invest in (almost) anything, providing the asset meets regulations and the sole purpose test.

This includes the ability to directly invest in property, allowing you to earn income from the rental payments as well as the capital growth of the property. Unlike a standard super fund, you can also invest in assets such as physical gold or art, although collectables come with strict storage, insurance and no-personal-use rules.

Another benefit of SMSFs is the ability to combine your capital with others and boost your purchasing power. SMSFs allow you to pool your superannuation with up to five other people, which can help you purchase assets that might otherwise be unaffordable. This feature is particularly useful for sharing with family members and funding your retirement by investing in property.

SMSF returns are taxed at a maximum of 15%, the same beneficial tax rate that is available at other super funds.

What are the cons of a Self-Managed Super Fund?

Taking on a Self-Managed Super Fund means also taking on the many responsibilities and risks that are associated with an SMSF.

With an SMSF, you’re accountable for all compliance, administration and investment decisions that are required to manage the fund. Importantly, this means that you’re personally liable for all of the fund’s decisions, regardless of whether you received professional help.

If you lose money from the fund through theft or fraud, you won’t be eligible for any government compensation schemes to reclaim these losses.

For the super fund to be worthwhile, an SMSF demands a high level of investing expertise and sound decision-making. In an industry or retail super fund, these decisions are made by investment managers who are highly skilled and experienced in this area.

ASIC research has found that smaller SMSFs, on average, have delivered lower returns than APRA-regulated funds once costs are taken into account.

Moneysmart’s SMSF guide walks through the costs and risks in more detail.

On top of investing knowledge, SMSF’s require an extensive legal understanding of the compliance and tax laws that govern superannuation. This can bear a heavy burden as the legislation is often complex and can impose a high penalty for trustees who breach their obligations. Whilst an accountant will be able to help with these requirements, the responsibility ultimately falls on the trustee to ensure their fund complies with the relevant rules and legislation.

Ultimately, one of the biggest disadvantages of an SMSF is that setting up and managing the fund is very time-consuming.

Expect to spend real time on it every month: reviewing investments, keeping records, meeting deadlines and dealing with your auditor. Many business owners already struggle to find an hour a month for their own books, so be honest about whether you have the time.

The ongoing costs involved with managing an SMSF can also be substantial. Accounting, tax, legal and investment advice all add up, and some costs, such as the annual independent audit and the ATO supervisory levy, apply whatever the size of your fund.

An SMSF might be right for you if…

• You already have a large superannuation balance. Due to the extensive costs involved with managing an SMSF, you will likely need a balance upwards of $500,000 for an SMSF to be cost-effective. Most standard super funds increase fees as your super grows in value, whilst ongoing SMSF costs will generally stay the same.

• You have the time. If you’re prepared to take on often tedious and time-consuming responsibilities of an SMSF, then a Self-Managed Super Fund might worthwhile. Alternatively, not being 100% committed to your SMSF can hurt your fund’s performance and leave you at risk of failing your legal and tax obligations.

• Investing in property is an important part of retirement wealth strategy. From our experience, SMSF members often choose that path because they wish to use their savings to build a property portfolio, hence the need for a Self-Managed Super Fund. If your retirement wealth strategy is more focused towards stocks, a standard super fund will likely be a much safer and easier approach to growing your superannuation. Keep in mind that a residential property owned by your SMSF can’t be lived in or rented by you or your relatives.

• You already have extensive investing and legal knowledge. If you’re hoping to outperform other standard super fund options, we highly recommend that you first have a strong understanding of investing and diversification. The performance of your fund is ultimately your responsibility and any decisions you make will have lasting consequences for your retirement. Equally, not fully understanding your legal or tax obligations can cause you headaches and, in the worst cases, severe financial ramifications.

If you’re weighing up whether to switch to an SMSF, we recommend you first speak with a professional you trust who can advise you the right approach for your individual circumstances.

If you already have an SMSF and want the admin, tax return and audit coordination off your plate, our accounting team offers SMSF administration. Talk to Sam about your situation.

Frequently asked questions

How much do I need to start an SMSF?

There is no legal minimum, but because many costs are fixed, funds with less than about $500,000 often struggle to be cost-effective compared with a large fund.

How many members can an SMSF have?

Up to six. Every member must be a trustee, or a director of the trustee company.

Can I live in a property my SMSF owns?

No. A residential property held by your SMSF can’t be lived in or rented by you or any relative. It must be held purely for retirement.

Last updated: 4 November 2026.

General information only, based on the rules at the date above. It does not take into account your circumstances, so speak to your accountant before acting.