Self-managed super funds: Is DIY superannuation right for you?

Thinking about running your own super fund? More than a million Australians are doing it already … and making a success of it.

Research has shown SMSF investors are more successful than the big end of town. Artwork: Frank Ling

Self-managed super funds are an increasingly popular alternative to so-called “big super” for investors who have the ability to run their own money along with sufficient funds in their super savings to make it all worthwhile.

There are more than one million investors currently running their own super savings across Australia, with the most common unit being a couple where both are trustees of the fund. However, SMSFs can have up to six people (or members) in the fund.

Setting up an SMSF takes some effort in designing your investment structure and in the initial allocation of capital. You also need to find an accountant and perhaps a financial adviser to assist you.

The main risk beyond investment risk is making sure you stay within the rules set by the Australian Taxation Office for running a fund, especially if you have complex financial arrangements. The main investment risk in SMSFs is a lack of diversification, typically an over-reliance on property and holding more cash than is necessary.

SMSFs are most popular among those who have their own business and own a property used by that business.

Under current arrangements, the business owner can place the property in which the business operates into the SMSF. The SMSF is then paid rent for the premises.

Beyond optimising SMSFs for the use of business property, SMSFs are increasingly popular with active investors who are seeking to assert control over their investments and to minimise paying fees to multiple external parties.

The outstanding investment opportunity offered by SMSFs is the ability to quickly change tactical positions inside the fund, responding to threats or opportunities as they arise.

The tax of an SMSF fund works very much in the same way as tax when you have money in a big super fund. However, because you are in control of the investments you can optimise the tax effectiveness of your holdings.

For example, many SMSFs will have a substantial amount of ASX-listed shares with franked dividends that offer strong benefits in the retirement phase.

Most investors in SMSFs have more than $500,000 under management. As a result, the super “caps” are highly relevant. As of July 2025, the most each individual inside an SMSF can have underpinning a tax-free income is $2m.

There are plans to introduce a new tax on top of the $2m cap, which will be a 15 per cent tax on earnings on amounts over $3m.

Controversially, the new tax – called Division 296 – is to be based on both realised and unrealised gains (or paper gains).

How much should I have to start with?

There is endless debate on how much you should have to get started in an SMSF.

There are no fixed rules and estimates generally range between $200,000 and $1m.

In the Australian Wealth section, we have regularly recommended a figure of more than $300,000. This is especially so if the investors use professional advisers, keeping in mind that financial advice costs on average between $3000 and $4000 a year.

The arrival of passive investing, facilitated through exchange-traded funds, now allows investors to have fully diversified portfolios across listed markets such as shares, bonds and alternatives for very low fees.

However, complex SMSFs with listed investments, property and other assets such as collectables need to have higher starting amounts to justify the ongoing fees faced by such funds.

How long does it take?

In common with the debate over how much you should have in super, there are a variety of estimates on how many hours a month it takes to run an SMSF.

The answer is widely varied because every fund, just like every other commercial enterprise, is different – but the minimum is probably a few hours a month.

Once an SMSF has been established and the asset allocations are completed, the bulk of the time spent running the fund is related to satisfying documentation relating to new investments and making sure all bills, especially bills from the ATO, are up to date.

Do SMSFs invest better than the rest?

One thing is for sure, SMSF holders are richer – running perhaps four times more money on average inside their funds than everyday Australians in big super.

Separately, they invest more successfully than all other sectors within the super industry, including professional investors.

A key industry report in July 2025 concluded that SMSF investors were “slightly better” at the core discipline of asset allocation than professional investors.

However, when the after-tax investment returns were measured, the report concluded that “SMSFs have achieved comparable or superior asset growth compared to large professionally managed funds”.