Top 7 SMSF Questions Every Investor Asks — Answered

Self-managed super funds (SMSFs) are growing in popularity, with more than 1.1 million members across Australia managing over $900 billion in assets. But despite their increasing use, many Australians still have questions about how SMSFs work and whether they are suitable for their financial goals.

This blog addresses the top 7 questions investors ask about SMSFs, providing clear, concise, and evidence-backed answers to help you decide if an SMSF is right for you.

1. Can I Borrow in My SMSF?

Yes, SMSFs can borrow money through a Limited Recourse Borrowing Arrangement (LRBA), but there are strict rules governing this.

Key Rules: The loan must be used for a single acquirable asset, typically property or shares. The asset purchased with the borrowed funds must be held separately until the loan is paid off.
Limited Recourse: The loan is “limited recourse,” meaning that the lender’s ability to recover funds is restricted to the asset purchased, protecting other SMSF assets.
Benefits: LRBAs offer the ability to leverage SMSF funds for long-term growth and generate rental income within the super fund.
Risks: LRBAs come with compliance complexity, liquidity risk, and strict regulatory requirements (e.g., arms-length terms, market valuations).
Cite: For detailed guidance, refer to the ATO LRBA rules and SMSF borrowing guidelines.

2. How Can I Invest Through My SMSF?

SMSFs allow for a wide range of investments, but there are rules to ensure compliance with ATO guidelines.

Investment Options: You can invest in direct property, term deposits, ETFs, managed funds, unlisted assets, and even private equity.
In-House Asset Rules: SMSFs can only hold 5% or less of their total assets in in-house assets, which are investments in businesses or properties related to the SMSF members or trustees.
Prohibited Transactions: Transactions involving the purchase of assets for personal use (e.g., holiday homes, cars) or lending to family members are prohibited.
Due Diligence: It’s important that the SMSF has a clear investment strategy to guide decisions and ensure diversification.

Talk to Navigate about structuring a compliant SMSF portfolio that meets your financial goals.

3. SMSF vs Retail Super Fund — When Does Self-Managing Make Sense?

While SMSFs provide greater control and flexibility, they come with more responsibility compared to retail super funds. Here’s a breakdown of the key differences:

Feature	SMSF	Retail Super Fund
Control Over Investments	Full control and flexibility	Limited to the fund’s options
Tax Efficiency	Taxed at 15% in accumulation, 0% in pension phase	Typically higher fees, with tax benefits depending on the fund
Cost	More cost-effective at balances $250k–$500k+	Lower fees but fewer investment options
Compliance	Personal responsibility for compliance	Fund managers handle compliance
Estate Planning Options	Customisable, with greater flexibility	Basic, with some inheritance benefits

When Does SMSF Make Sense?

SMSFs are typically suitable for balances over $250k–$500k or for those who want direct control over assets like business property or family wealth.

Speak to Navigate about whether an SMSF is the right option for your retirement strategy.

4. What Are the Costs of Running an SMSF?

Running an SMSF involves both setup costs and ongoing maintenance fees. These costs can vary depending on the complexity of the fund and the type of assets held.

Setup Costs: Typically, setting up an SMSF costs between $2,000–$3,000 for trust deed creation and registration.
Ongoing Costs: These include annual audits, accounting, tax returns, and investment platform fees, which typically range from $3,000–$6,000 per year depending on the fund’s complexity.
Hidden Costs: Additional costs can include valuation fees, borrowing documentation, and advice fees.

Talk to Navigate about assessing whether the costs of an SMSF are worthwhile for your wealth strategy.

5. What Are the Main Compliance Requirements?

Compliance is a critical aspect of managing an SMSF. Trustees must ensure they meet ATO requirements to avoid penalties and maintain the fund’s good standing.

Key Compliance Requirements:

Annual Audit: SMSFs must be audited by an approved SMSF auditor every year (Australian Taxation Office – Annual Audit Requirement).
Lodging Returns: An SMSF must submit its annual return to the ATO, detailing financial information and contributions.
SIS Act Obligations: Trustees must comply with the Sole Purpose Test, maintain arms-length dealings, and adhere to contribution caps.

Talk to Navigate about outsourcing compliance to ensure your SMSF meets all regulatory requirements.

6. What Happens When Members Retire or Pass Away?

When members retire or pass away, SMSFs must be managed in accordance with their estate plan and superannuation rules.

Transition-to-Retirement (TTR): Members can start receiving income streams while still working, reducing their taxable income.
Pension Phase: Earnings supporting retirement income streams are tax-free, up to the $1.9 million transfer balance cap (Australian Taxation Office – Tax on Super Benefits).
Estate Planning Within SMSF: This includes ensuring binding nominations and reversionary pensions are set up to avoid disputes upon death.

Talk to Navigate about integrating your SMSF with your overall estate plan to ensure smooth succession.

7. How to Plan the Exit or Wind-Up of an SMSF

There may come a time when you decide to wind up your SMSF. This could be due to a change in financial goals, trustee age, or the desire to consolidate super into a retail fund.

Steps to Wind Up an SMSF:

Sell or Transfer Assets: Sell all fund assets or transfer them to another fund.
Pay Member Benefits: Roll over member benefits to other super funds or pay lump sums.
Final Audit and Return: Arrange a final audit and lodge the final return with the ATO.
Cancel ABN and Bank Accounts: Cancel the fund’s ABN, close the bank accounts, and notify the ATO.

Talk to Navigate about planning an efficient exit strategy to avoid tax penalties and lingering compliance issues.

How Navigate Financial Helps SMSF Trustees Stay Compliant and Strategic

At Navigate Financial, we offer end-to-end support for SMSF trustees. From setup to ongoing management, we help ensure your SMSF operates smoothly and remains compliant with all ATO regulations.

How We Help:

SMSF Setup and Strategy Design: We guide you through the SMSF setup process and help design a strategy tailored to your needs.
Collaboration with Accountants and Lawyers: We work with your legal and accounting partners to ensure the correct structures are in place.
Ongoing Compliance Monitoring: We coordinate annual audits, prepare reports, and help manage contributions, pensions, and property acquisitions.

Book a no-cost SMSF consultation to review your fund’s structure and strategy.

Evidence-Based Content

SMSF Membership: As of the SMSF Quarterly report June 2025, there are approximately 1.14 million members in Self-Managed Super Funds across Australia.
Cost-Effectiveness: Industry experts suggest an SMSF should have a starting balance of at least $200,000–$500,000 to be cost-effective, as smaller balances may incur higher fees than other fund types (ASIC Moneysmart – Self-managed super).
Record Keeping: SMSF trustees must keep records, such as minutes of trustee meetings and decisions about investments for at least 10 years.
Tax in Retirement Phase: Investment earnings on assets supporting a retirement phase income stream are generally tax-free, but this exemption does not apply to amounts above the $1.9 million transfer balance cap (Australian Taxation Office – Tax on Super Benefits).
Winding Up an SMSF: To close an SMSF, trustees must follow a formal process that includes dealing with all fund assets, arranging a final audit, and notifying the ATO within 28 days of the fund being wound up (Australian Taxation Office – Winding up an SMSF).

Frequently Asked Questions (FAQs)

Can I buy property through an SMSF?
Yes, SMSFs can purchase both residential and commercial property, subject to compliance with ATO regulations.
What are the costs of running an SMSF?
The costs of running an SMSF include setup fees, annual audits, accounting fees, and investment platform costs, which range from $3,000–$6,000 per year depending on complexity.
How many members can an SMSF have?
An SMSF can have a minimum of 2 members and a maximum of 6 members.
Is an SMSF right for me?
SMSFs are typically suitable for balances of $250,000 or more, or for those who want full control over their superannuation investments.