Self-Managed Super Funds

Self-managed super funds (SMSFs), also known as DIY funds are the fastest growing sector of the superannuation industry. Many individuals and families are actively seeking to manage their own superannuation to reduce costs, provide flexibility and increase control over the realisation of their retirement goals.

In general, a super fund will be a SMSF where it meets the following conditions:

The fund has fewer than 5 members
Each member of the fund is a trustee
Each trustee is a fund member
No member of the fund is an employee of another member (unless related)
No trustee receives any remuneration for his or her services as a trustee
An SMSF can also have a corporate trustee where each member of the fund is a director of the corporate trustee and each director of the trustee is a member of the fund.

The trustee rules vary slightly for single member funds:

  • The member can be an individual trustee together with another individual that does not employ the member (the employment test does not apply where the individuals are related) or
  • The member is a sole director of the corporate trustee or
  • The member is a director of a corporate trustee together with another person that does not employ the member (the employment test does not apply where the individuals are related related)
  • Funds that meet the definition of an SMSF are regulated by the Australian Taxation Office

How much superannuation do I need to have my own SMSF?

ASIC recommends a total minimum fund balance of $200,000 to be cost effective. You can start your fund with less than this amount. Talk to one of our Advisers to see if your balance qualifies.

What are the benefits of a SMSF?

Some of the benefits of having your own SMSF include:

  • Increased flexibility over investment choice and allocation
  • Greater flexibility with regard to the structuring of life insurance
  • Greater flexibility and control over lump sums and pensions on retirement
  • Greater flexibility over estate planning
  • Increased control
  • Lower annual running costs where you have at least $200,000 in the fund
  • Able to pool funds with other members to purchase a large asset such as property
  • Ability to own your business property through the fund and lease to a related party
  • Able to transfer personally owned listed shares into the fund
  • Now able to borrow provided specific restrictions are complied with
  • Contributions and income of the fund are taxed at the concessional tax rate of 15%. Income of the fund is tax free once a pension is being paid
  • Asset protection

SMSFs are subject to stringent regulatory requirements which means they aren’t suitable for everyone. Please contact our office if you would like to further discuss whether an SMSF might be suitable for you. You should also read our Thinking about a SMSF

How much does it cost to set up?

The initial fee to set up your (SMSF) fund starts from $495 ($495 for individual + $880 for company) including GST however when an Accountant provides Accounting and Taxation advice, the fee starts at $1,100 plus an additional $880 if a company is required. This includes trust deeds, minutes and resolutions, member applications, trustee consents, investment strategy and Business registrations (ABN, TFN, Complying fund registration, GST and PAYG if applicable). Our partners will provide you with the forms and instructions for arranging rollovers from your existing funds.

Our partners will also provide you with copies of the ATO publications Roles and Responsibilities of Trustees and SMSF Key Messages for Trustees as part of your new SMSF Package.Our partners also offer a complimentary 60 minute meeting with you to ensure you understand your responsibilities as a trustee with each new SMSF set up. Click here if you would like to arrange an appointment.


What are the ongoing running costs?

The ongoing costs of running the fund include the annual ATO SIS Levy of $150 plus annual administration and audit costs of $800 + depending on the size of the fund. You should also read our Step by Step Guide to Setting Up your SMSF.

Can a Self Managed Super Fund Borrow?

Until recently, it has not been possible for superannuation funds to borrow because the Superannuation Industry (Supervision) Act had a strict requirement that super funds did not borrow or place charges over their assets. An amendment was made to the act in September 2007, which allowed super funds to borrow to invest in an Instalment Warrant provided certain conditions were complied with.

Whilst the amendment was originally done to allow funds to invest in instalment warrants over listed shares, the changes to the act were much wider than anticipated and now allow SMSFs to borrow to purchase a wide variety of assets including property.

In the time since the amendment to the legislation, borrowing in SMSFs has become more mainstream with many of the major banks releasing borrowing products suitable for SMSFs with competitive fees and interest rates.

How does the structure work?

The Super fund trustee borrows money under a limited recourse loan and uses this money to invest in a special purpose trust. The special purpose trust is asset specific (the trust can only be set up and used for a single asset). The special purpose trust buys an approved asset such as property or listed shares. The super fund trustee has an obligation to make further payments for the asset under an instalment agreement. Once the superannuation fund has paid the total instalments they can call for the transfer of the asset.

What are the opportunities?

Some of the opportunities of using an instalment warrant to borrow in your SMSF are:

  • The SMSF can borrow to purchase assets it may not be able to afford to buy outright and pay them off over time.
  • The SMSF obtains the benefit of income and capital growth from the time of acquisition.
  • A related party could lend money to the super fund at a commercial interest rate. This could be a way of getting money into the fund outside of the normal contribution limits.
  • The fund could acquire business real property or shares from a related party.

What are the risks and costs?

Following are some of the risks and costs which should be considered before proceeding with an instalment warrant arrangement in your SMSF:


  • Set up costs
  • The lender may charge a premium due to the limited recourse nature of the loan.
  • Some banks may not be keen to lend to SMSFs due to previous borrowing restrictions. Our Advisers will show you which banks have an appetite for your business.
  • Up front and ongoing borrowing costs from the lender will be incurred but these costs will be paid by your super fund once established.
  • Need to be conscious of the funds cashflow and its ability to repay the loan.
  • Stamp duty and capital gains tax may be incurred if the asset is transferred from a related party.
  • This arrangement may not be available forever. There is a risk that the ability for SMSFs to borrow may be removed by legislative amendment or Australian Taxation Office rulings.

How do I arrange the finance?

Our Advisers will assist you in obtaining finance for your SMSF at competitive rates as accreditations are held with most banks and non-bank lenders providing loans for SMSF's and Debt Termination Plans.

There is also an opportunity for a related party of the SMSF to supply the finance. If you have a company or trust and wish to borrow up to a maximum of 5% of your funds assets (cash) you can providing there is a loan agreement between your SMSF and your company or trust and there is an interest rate with repayments.

How to find out more

Robert Kirk Private Wealth Management
Phone: +61 7 3666 0126
Fax: +61 7 3666 0098
Email: info@kirkwealth.com.au