For most people, the best way to invest your super isn’t found by chasing whichever fund tops a comparison table this year. It’s matching the investment option you already have, growth, balanced or conservative, to how long your money has left to grow and how much short term movement you can actually live with, then reviewing that choice every year or two instead of leaving it on autopilot. Once your balance moves past roughly $200,000 and you want real say over what your money buys, direct property, individual shares, even your own business premises, a self managed super fund becomes worth weighing up too.
This article walks through how to tell which path is actually yours: adjusting the option inside your current fund, or taking on an SMSF, and what has to be documented once you choose that second road.
Is Your Current Super Option Actually Wrong, or Just Unfamiliar?
Picture the moment. Your annual statement lands, the return looks thin next to what you remember from a few years ago, and you open the app to find your money sitting in “Balanced” without much memory of choosing it. The instinct is to assume something is broken.
Usually nothing is. Growth, balanced and conservative options aren’t ranked best to worst, they’re different mixes of growth assets like shares and property against defensive assets like bonds and cash. A growth option will fall harder in a bad year and climb further in a good one. A conservative option does the opposite. Neither is “wrong,” they’re built for different lengths of time in the market and different comfort with the ride.
Moneysmart’s guidance is worth following before you touch anything: compare your fund’s performance against the same investment option at other funds, over five years or longer, not the last twelve months. Check what you’re paying in fees, since a high performing option with high fees can still leave you worse off than a cheaper one with a similar return. If your fund has underperformed APRA’s annual performance test, they’re required to tell you, and that’s a genuine trigger to compare and consider switching.
Switching your investment option inside your existing fund is usually quick and free, done through the app or member portal in a few minutes, with the change taking effect within days. That’s very different from switching funds altogether, which involves a rollover and can mean losing insurance cover you’d need to reapply for. Start with the option, not the exit.
When Does Switching Options Stop Being Enough?
For a lot of people, adjusting the option is the whole answer. But some situations don’t fit neatly into a growth or balanced menu. You might want to buy a specific investment property rather than get generic property exposure through a diversified option. You might run a business and want your fund to own the premises you trade from. You might have strong views on individual shares that go beyond what an index style option offers.
These aren’t really “better investment options,” they’re a different kind of fund altogether. An SMSF isn’t a menu choice inside your current super, it’s a separate structure where you and any other members are the trustees, responsible for every decision and every compliance obligation that comes with it. That’s the fork in the road worth understanding before you go further.
What Can an SMSF Actually Invest In That Your Current Fund Won’t Offer?
This is where SMSF investment options in Australia genuinely differ from an industry or retail fund’s menu. Trustees can hold direct residential or commercial property, including buying with a limited recourse borrowing arrangement. They can hold direct shares, both ASX listed and international, individually rather than bundled into an index option. Term deposits and cash are available too, exactly as they are in any fund.
One option unique to SMSFs is business real property, where the fund buys a commercial premises and leases it back to a related party’s business at market rent, something an industry fund could never do for you. Unlisted trusts and private company shares are allowed within limits. Even collectables like art or wine can technically sit inside an SMSF, but only under strict rules: no member can display them at home, they must be insured in the fund’s name, and the fund needs a documented reason for holding them.
None of this is a free for all. The sole purpose test means every investment has to be about building retirement benefits, not present day enjoyment for members. The in house asset rule caps investment in, or loans to, related parties at 5% of the fund. Every related party transaction has to happen at arm’s length and market value. Break any of these and the ATO’s response escalates quickly, from a rectification direction through to the fund losing its complying status.
Is Your Balance Actually Big Enough to Make an SMSF Worth It?
Take Marco, 42, a plumber with $210,000 sitting in a retail fund’s balanced option, charged at roughly 1.05% a year, so a little over $2,200 in fees annually. He’s been offered a fixed annual fee for SMSF accounting, audit and ASIC obligations by RPS, and wants to know if switching structures actually stacks up.
The comparison isn’t just percentage versus dollar figure, it’s whether the fixed SMSF costs are small enough, relative to his balance, to be worth the extra control and the extra work. SMSF running costs vary with fund complexity, so get an actual fixed fee quote rather than relying on a rule of thumb, but the shape of the maths is consistent: fixed costs matter less as your balance grows, and matter a lot when it’s small.
As a general guide, and the figure we work to with clients, an SMSF tends to become genuinely cost competitive with an industry or retail fund from around $200,000 in combined member balance upward. Below that, fixed costs usually eat too much of the advantage. Above it, the case starts to depend on what you actually want to invest in and whether you have the time for trustee duties, not just the balance.
If your balance is under $200,000 and you’re not adding much more soon, then the smarter move right now is almost always getting your current investment option right, not opening an SMSF. If your balance clears that mark, you want direct property or business real property specifically, and you can genuinely commit time to running a fund, then an SMSF is worth a proper feasibility conversation.
What Has to Be in Your SMSF Investment Strategy? A Downloaded Template Won’t Cut It
Every SMSF is legally required to have a written investment strategy, and it has to do more than exist, it has to be followed. Under the superannuation rules, trustees must consider and document the fund’s approach to diversification, the risk involved and the likely return, the fund’s liquidity and its ability to pay benefits and expenses as they fall due, and whether the fund should hold insurance cover for its members.
Here’s the mistake we see constantly at audit time. A trustee finds an SMSF investment strategy template online, fills in generic percentage ranges for shares, property and cash, signs it once, and never looks at it again. Then the fund goes on to hold 90% of its assets in a single investment property. The strategy on file no longer describes what the fund actually does, and that mismatch is one of the most common findings an SMSF auditor reports to the ATO. A template is a starting shape, not a finished document, it only works if it reflects your fund’s real holdings and gets updated when those holdings change.
How Do You Actually Set Up an SMSF Investment Strategy, Step by Step?
- List every member of the fund along with their age, account balance, retirement timeframe and personal appetite for risk, since the strategy has to work for everyone in the fund, not just whoever is most active.
- Set out the fund’s investment objectives and the return you’re targeting against the risk you’re willing to carry, in plain terms a stranger could follow.
- Document the diversification approach, the asset classes you intend to hold and the ranges you plan to operate within, described closely enough that it can be checked against what the fund actually owns.
- Address liquidity directly. Can the fund pay a pension, a lump sum, or an unexpected expense like an audit fee without being forced to sell an asset in a hurry?
- Decide on insurance for each member, life cover, total and permanent disability, income protection, and write down the decision even if it’s a considered no.
- Have every trustee sign and date the strategy, then keep it with the fund’s permanent records alongside meeting minutes and asset registers.
- Revisit it before any investment that falls outside what’s written, and at minimum once a year or whenever a member’s circumstances or the fund’s asset mix changes significantly.
If you’re setting this up for the first time, then get the document drafted with your accountant before the fund makes its first investment, not after. If you already have a fund and can’t remember the last time anyone looked at the strategy, then that review is overdue today, regardless of what the calendar says.
Where This Leaves You
If you’ve read this far because your balance is modest and the real issue is a mismatched investment option, the fix is usually a five minute change inside your existing fund, backed by an honest look at your timeframe and risk tolerance. If you’ve read this far because you’re seriously weighing up an SMSF, the next useful step isn’t a template or a calculator, it’s sitting down with someone who can model your actual numbers, your balance, your goals, and what you want to invest in, against the real cost of running a fund.
That’s the conversation we have with clients across Epping and Melbourne’s north before anyone opens an SMSF. Book a feasibility check with RPS Accountants and we’ll tell you honestly whether an SMSF stacks up for you, or whether your existing fund, set up properly, is doing the job just fine.
Written by Ravi, Principal Accountant and Registered Tax Agent at RPS Accountants & Business Advisors (TPB No. 26161185). This article is general information only and doesn’t take your personal circumstances into account. Speak with us directly before acting on anything here, and for advice on specific investments, a licensed financial adviser.
