With control comes responsibility

Running your own super fund allows you to make investment decisions around how your retirement savings are invested. This hands-on approach and the idea of control is what leads many people to establish their own self-managed super fund (SMSF). However, it’s important to understand that with greater control also comes greater responsibility.
 

What being an SMSF trustee really means

When you establish an SMSF, you become the trustee of that fund. This isn’t just a title – it means you’re legally responsible for ensuring your fund complies with all Australian superannuation laws and other regulations, which are overseen by the Australian Taxation Office (ATO).

Even if you employ professionals like accountants, financial advisers or auditors to assist with the operations in your SMSF, you as the trustee are ultimately accountable to comply with regulations and duties.
 

Key responsibilities you’ll need to manage

1. Developing and regularly reviewing your fund’s investment strategy.
2. Ensuring all investments comply with super legislation
3. Maintaining accurate financial records
4. Arranging an independent annual audit
5. Preparing and lodging an annual tax return
6. Ensuring the fund meets all regulatory obligations and deadlines

1. Developing and regularly reviewing your fund’s investment strategy

This initially involves understanding and setting your fund’s investment objectives and then buying, monitoring and selling assets that are consistent with your fund’s investment objective, risk tolerance and retirement goals. This isn’t a one-time task – it requires regular monitoring and adjustments, plus documenting why you made each decision.

TIP: See the ATO’s guidance on setting and monitoring your SMSF investment strategy.
 

2. Ensuring all investments comply with super legislation

The investments in your fund must meet the sole purpose test, meaning that they need to be maintained for the core purpose of providing retirement benefits to members, or ancillary purposes such as to pay death benefits to beneficiaries. As a result, personal use of fund assets is not allowed. For example, if collectibles like art or jewellery are held by your SMSF, its members, trustees or related parties can’t use, wear or display them. They also can’t be used or stored at a member's home. They must be securely stored elsewhere and the location documented. There are also rules around lending and borrowing, among many other restrictions.

TIP: Review the ATO’s investment restrictions on its website.

3. Maintaining accurate financial records

Under super laws, there are also extensive record-keeping requirements so that trustees can demonstrate their fund is meeting its requirements. Financial records must be kept for at least five years, and trustee records for at least 10 years. 

TIP: See the ATO’s website for more on record-keeping requirements for SMSFs.
 

4. Arranging an independent annual audit

Each year, an accredited auditor must review your fund to confirm it complies with super laws and that financial statements are accurate. This audit is mandatory and must be completed before lodging your fund’s tax return.

TIP: Review the ATO’s information on auditing an SMSF.

5. Preparing and lodging an annual tax return

If your fund holds assets, you must lodge an annual tax return by the relevant financial year’s due date.

TIP: Make sure you read and understand the requirements of lodging an annual tax return for your SMSF.
 

6. Ensuring the fund meets all regulatory obligations and deadlines

There are many rules and deadlines to keep track of throughout the year. Staying organised and informed is essential to avoid penalties or compliance issues.

TIP: Read and understand the ATO’s summary on SMSF obligations.
 

What’s right for you?
 

For some people, the involvement and engagement of managing their SMSF is part of the attraction. They enjoy researching investments, reviewing performance, ensuring compliance, keeping and documenting records, and being heavily involved in the decision-making.

But for others, the ongoing responsibilities can be far more time-consuming than expected. Running an SMSF requires regular oversight, documentation and compliance activities throughout the year – with some estimates saying up to 100 hours a year (Source: SMSF Investor Report, April 2021, Investment Trends).  

By comparison, members in large super funds benefit from having these responsibilities managed on their behalf. Investment professionals, administrators and governance teams oversee portfolio construction, administration, compliance and regulatory requirements.

For this reason, many people considering an SMSF may find it helpful to reflect on the question, “do I want more control of my super, or do I prefer professional management without the responsibility of running the fund myself?”

Understanding the responsibilities involved can help you ensure you choose the structure that best suits your time, expertise and retirement objectives.