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Is a Self-Managed Super Fund (SMSF) Right for You?
24/09/2025
Many years ago, I started my first job as a junior paraplanner in a financial planning firm. The financial planner I worked for promoted buying a house within super. I saw people set up SMSFs and successfully purchased properties. I also experienced some clients whose SMSFs were disapproved by the ATO. In the last 15 years, I have worked for a couple of more firms and corporations and have conducted numerous compliance reviews on SMSFs, some of which were requested by ASIC. I would like to share my view on who SMSFs are best suited for and what marketing pitches or schemes you should avoid.
What are the common reasons that trigger people to set up an SMSF?
In my financial planning career, I have seen people set up an SMSF unnecessarily. By that, I mean an industry fund or a wrap account could have met their needs with fewer hassles, costs, and responsibilities. I have also seen people set up an SMSF to get into an investment scheme promoted by their financial advisers, which was later found to be a related party of the financial adviser, and the SMSF incurred a huge loss. Therefore, when you set up an SMSF to invest, you should have full control of every stage of the investments, from purchase to redemption. I believe the following three scenarios are reasonable for an SMSF structure to be used.
1. You are determined to purchase a direct property as an investment within your super fund to generate wealth for your retirement. Your passion for property is so strong that you don’t believe other forms of investments, such as shares and managed funds, will satisfy your goals and objectives. You don’t have enough deposit to purchase a property in your own name, or you have exhausted your personal borrowing capacity. You will need to take out an SMSF home loan, which means purchasing through a Limited Recourse Borrowing Arrangement (LRBA).
2. You are very savvy with share trading and want to build your own super investment portfolio. The managed fees and administration fees you pay to a retail super fund (normally percentage-based) have made the fixed fees for running an SMSF more cost-effective.
3. You are running a business from premises, and it makes sense for your super fund to own the premises and lease it to your business.
What are the red flags when you consider an SMSF?
1. Investment schemes that promise a return too good to be true. There is no shortage of these promotions on the internet or through professionals you are associated with. For instance, I have seen a group of clients who went to a financial adviser to set up an SMSF to purchase a direct property. The financial adviser talked them into becoming unit holder of a unit trust that had a property development project. The project went bust, and the SMSFs incurred a huge loss. Stick to things that you understand and over which you have full control.
2. You are self-employed, have a low super balance, and have not been making super contributions for the last two years or so. If you are in this position and wish to use an SMSF structure, you may need to start making regular super contributions and /or lump sum contributions to gain the trust of the ATO. Otherwise, there is a high risk that your SMSF will not be approved and registered by the ATO.
3. Any adverse record you may have with the ATO, including a history of insolvency, personal lodgement and payment history, outstanding ATO debt, etc.
Summary
An SMSF is a very tax-effective and appealing structure for wealth accumulation, particularly through investing in direct properties. If you are not sure whether it is appropriate for you, it is very important to seek advice from a licensed and well-regarded financial adviser.
Navigating the rules and regulations of an SMSF home loan can be complex. To help you get started, I've created a free guide on the key steps to take.
Click here to download your complimentary guide: Your SMSF Property Investment Checklist.
