Equip Super and TelstraSuper have signed a binding Heads of Agreement and agreed to proceed with a ‘merger of equals’ between the two funds.

 Find out more

Self-managed super fund strategies: what you need to know

Some Australians prefer a self-managed super fund because of its flexibility – they get to save for retirement on their terms.  

While this is true, an SMSF also requires time, effort, and a significant commitment to do it properly because, with an SMSF, you are fully responsible for its success.  

There are also legal requirements to take into consideration when running an SMSF. You will need to: 

  • Prepare and implement an investment strategy for your SMSF.
  • Review that strategy regularly.  

Managing an SMSF can be a good option for those confident with finances and ready to take on the responsibility. However, it can feel like a lot to manage for many people. 

That’s why, for most, an industry or retail super fund is usually a much easier and more practical choice. You get peace of mind knowing your retirement savings are in good hands without having to handle all the details yourself.

What is an SMSF investment strategy?

Think of your SMSF investment strategy as a personalised roadmap guiding your investments towards your goals for retirement.

It exists as a live, written document and explains how your SMSF investments meet each member’s retirement objectives — an SMSF can have up to 6 members, each being an SMSF trustee. 

According to the Australian Taxation Office (ATO), your SMSF investment strategy must legally consider several vital factors. We have outlined these below.

Candid portrait of senior couple at home, man with grey hair and beard working on computer, glasses resting on forehead, seniorpreneur working from home with wife

What to consider when creating an SMSF investment strategy

When writing your strategy, you should factor in your age, employment status, and retirement date. This will help you work out your risk appetite. 

 

What lifestyle do you envision in retirement? Having an idea of how you want to spend your time will also help you to determine investment goals.

It is essential to understand the risks associated with different investments and how they align with your comfort level.

Spreading your investments across various asset classes can help to manage risk.

You will need to ensure your fund has enough cash to cover expenses and pay benefits to all members of the SMSF when required.

Consider if insurance is necessary to protect your fund and members.

How an SMSF investment strategy template can help

If it sounds like a lot to think about, a good SMSF investment strategy template can do some of the heavy lifting for you. 

By providing a structured framework, a template can help you consider all the essential factors and ensure your investments align with your retirement goals. A SMSF investement stratgy template should consider the following. 

 

Your detailsNotes
NameThe names of the trustees and/or beneficiaries.
Current ageThe current ages of the trustees and/or beneficiaries.
Planned retirement ageThe planned retirement ages of the trustees and/or beneficiaries.
Your risk profileThe investment risk tolerance profiles of the trustees and/or beneficiaries.
Retirement objectivesNotes
GoalsSpecify the desired income (annually) to maintain your desired lifestyle during your retirement.
Capital growthEstimate expectations for asset appreciation over time.
Diversification strategyNotes
Asset typesDifferent asset classes you plan to invest in.
AllocationSpecify what percentage of the total SMSF portfolio will be allocated to each asset class.
Strategy updatesNotes
FrequencyDefine how often the SMSF investment strategy will be reviewed to ensure it remains appropriate.
ReasonsSpecify triggers for updating the strategy, such as changes in employment, health, or market conditions.
Insurance considerationsNotes
Insurance coverageIndicate whether you have personal insurance coverage through the SMSF (such as life insurance or total and permanent disability insurance).
Liquidity considerationsNotes
Expected expensesCosts such as accountant and legal fees, insurance premiums or administrative costs associated with the investments.
Liquidity checkEnsure that there is enough liquidity when required.

The risks and costs of an SMSF

While an SMSF gives you control, it also requires ongoing commitment and a keen awareness of the potential risks to ensure your retirement savings are well-managed and secure. 

Before deciding to go with an SMSF, you must understand the responsibilities that come with it.

You're responsible for: 

  • Creating and maintaining an investment strategy tailored to your goals.

  • Considering factors like risk, diversification, and liquidity.

  • Making all SMSF-related decisions.

Additionally, your SMSF could be affected by personal changes like job loss, relationship breakdowns, or a member’s illness. 

Be aware that moving from an industry or retail super fund might also result in losing insurance coverage.

 

 

Setting up an SMSF involves upfront expenses, which can vary depending on the complexity of the fund. 

A more straightforward, single-member fund with fewer asset types may cost less to establish than a more complex one. 

Ongoing costs include annual auditing, accounting, and compliance fees, which are fixed and independent of your fund’s value. 

While some providers may offer lower setup costs, it's crucial to consider the long-term expenses, such as professional management fees, if you require additional help. 

These costs can add up, making an SMSF more expensive over time than industry super funds, which typically charge fees as a percentage of your assets.

Closing down an SMSF

If you open an SMSF and later decide it’s not right for you, you can always close it down.

To do so, you will need to: 

  • Ensure all tax and compliance obligations are covered, including lodging your final returns and settling any outstanding liabilities. 

  • Notify the ATO and either roll any remaining super balances into a complying fund or pay them out to any members if they're eligible. 

Following the proper steps is crucial in avoiding any issues, and having a financial planner guide you through the process can make it much smoother and less stressful.

If you’re looking for an alternative option for your super, Equip Super offers members a significant amount of control without the additional costs and risks that can come with an SMSF. 

Portrait of relaxed senior man at the beach at sunset

FAQs for SMSF investment strategies

An SMSF investment strategy should be reviewed regularly and updated when personal or financial circumstances change, or a significant event occurs. The ATO advises trustees to review their plan annually to ensure it remains relevant. Visit the ATO for more information.

 

No, there is no legal requirement for an SMSF investment strategy to be signed. However, trustees should ensure the strategy is adequately documented and regularly reviewed as part of their obligations.

The 5% SMSF rule states that in-house assets must not exceed 5% of your fund’s total assets. If your in-house assets exceed this limit, trustees must prepare and implement a plan to reduce the level to 5% or below, per ATO requirements. Visit the ATO for more information.

An SMSF requires significant financial knowledge, time, and commitment. You must be confident in making investment decisions and complying with all legal responsibilities. SMSFs give you complete control over your super investments but include responsibilities like managing audits, keeping records, and following strict superannuation laws.

An SMSF offers greater control but requires more effort, while a regular superannuation fund manages and invests your superannuation on your behalf. 

Closing your SMSF may not be as hard as you think. Here are a few things that you will need to do:

  • Notify the ATO of your intent to close the SMSF.
  • Complete the final audit and lodge any outstanding tax returns.
  • Arrange for the SMSF’s assets to be sold or transferred.
  • Payout or rollover all members’ benefits to another complying super fund.
  • Cancel the SMSF’s ABN, GST, and PAYG withholding registrations.
  • Keep records for the required timeframe as per ATO regulation.

Following the proper steps is crucial in avoiding any issues, and having a financial planner guide you through the process can make it much smoother and less stressful.

Yes, you can have both an SMSF and a regular superannuation account, and both have advantages. Some prefer the broad investment options available through a retail or industry super fund and their flexible and comprehensive insurance options. You can also receive Superannuation Guarantee (SG) contributions into a super fund rather than your SMSF, and diversifying between an SMSF and a super fund can provide flexibility and reduce any administrative burden.

Join our award-winning fund

Did you know you can change your super fund even after you’ve retired. Learn more about why Australians have been choosing Equip Super for over 90 years.

Join today
© 2023 Togethr Trustees Pty Ltd ABN 64 006 964 049 AFSL 246383 — *Past performance is not an indication of future performance.
We acknowledge all First Peoples of the beautiful lands on which we live and work, and their enduring knowledge and connections to Country. We honour the wisdom of and pay respect to Elders past and present.