As the name suggests, self-managed super funds are basically superannuation funds that you run and manage yourself.
SMSFs are different from mainstream super funds that you would have seen advertised and may already be a member of through your work or industry association. Mainstream funds – often classified as either industry, corporate, public sector or retail funds depending on their membership profiles – pool the investments of large numbers of members together (hundreds if not thousands of individuals) and take full responsibility for investing and administering these funds collectively on behalf of their members.
In contrast, SMSFs are private super funds in which the members themselves (who are usually closely related) are responsible for investing and administering their own retirement savings. SMSFs are also regulated differently, being overseen by the ATO whereas mainstream funds are regulated by the Australian Prudential Authority (APRA).
SMSFs must always be structured as trusts. A trust is an arrangement where a third party (called the “trustee”) holds and manages assets for the benefit of others (the “beneficiaries”). An SMSF is a special kind of trust that operates for the sole purpose of providing retirement benefits to its members (the beneficiaries).
An SMSF can have no more than four members and all members are required to act as trustees (or alternatively, be directors if the SMSF appoints a company to act as its trustee). The trustees are legally responsible for the management of the SMSF’s assets – such as selecting and managing the fund’s investments – and for ensuring the fund complies with all relevant laws and regulations. This doesn’t mean that an SMSF trustee cannot seek the advice and services of experts – rather, it means that the ultimate responsibility (and legal liability) always rests with the trustee and cannot be passed on to others.