I’m in my 40s with $300,000 in super. Should I start an SMSF?

2 weeks ago 3

Opinion

September 3, 2025 — 5.01am

Could you please explain the difference between an SMSF and a large public super fund, and which might be better to set up? What are the main advantages and disadvantages of each? For example, how would this apply to a couple – a 45-year-old and his wife with $300,000 in a large public super fund.

A SMSF (self-managed super fund) is one where you, as trustee, make all the decisions about how the money is invested and managed. A large public super fund, by contrast, is run by professionals, with your money pooled alongside thousands of other members.

The idea of running your own super fund can be alluring, but much of the time, it’s wiser to leave it to the professionals.

The attraction of an SMSF is flexibility. You can invest in almost anything, including property, shares and unlisted assets but with that flexibility comes cost and responsibility.

Every SMSF must be audited annually and comply with strict rules, and trustees are personally liable if things go wrong. Unless balances are well above $500,000, and ideally closer to $1 million, the costs and workload often outweigh the benefits.

Large public super funds are the opposite. They are inexpensive, well regulated and offer broad diversification. You also get automatic access to insurance and don’t have to worry about compliance.

The trade-off is limited flexibility – you can’t buy individual properties or unlisted assets, but this isn’t an issue for most people. Unless you are an experienced investor with a fairly big superannuation balance and time to devote to running your own super fund, I suggest you leave it to the professionals.

When calculating the deeming of assets, does the government consider a home loan? How is gifting treated – for example, I gave my son $40,000 two years ago, does this amount reduce over time? How often can I change the declared value of physical assets such as cars, caravans, or household contents? And with superannuation, is it possible to leave the balance in accumulation phase rather than moving it into a pension account?

The family home is an exempt asset; therefore the loan will not reduce your assessable assets. It would be a different matter if you had an investment property with a loan secured over that property (then you could deduct the loan from the property value).

It’s a pity you did not take advice before giving your son $40,000 two years ago. A better option would be to give $10,000 with the balance of $30,000 as a loan. Then for the next two years, you could forgive $10,000 to reduce the loan.

But, as you have made an outright gift, the first $10,000 will be treated by Centrelink as a gift and the balance of $30,000 as an assessable asset until five years from the date of the gift. You are free to advise Centrelink of a changed valuation in your assets at any time.

Money in accumulation is not counted by Centrelink as an asset until you reach pensionable age, unless you choose to start a pension from that fund. Once you reach 67, money in superannuation is assessable whether you start a pension from it or not.

You’ve been highlighting the power of compound interest using 8 per cent in your examples. But interest rates are rarely that high, and you didn’t mention the tax payable each year on that interest, which would be added to our wages. I know capital gains tax is only due when you sell, but most of us need income to live on. For those who don’t qualify for the age pension, we must fund ourselves. Have I misunderstood your points?

The cornerstone of any portfolio is diversification – keeping some funds in cash, with the balance in growth assets like property and shares. For most investors, Australian shares are ideal. Buying an index fund gives broad market exposure, no entry costs like property stamp duty, and liquidity if you need access to funds.

The index currently pays about 3.8 per cent fully franked dividends and has averaged 9 per cent a year long-term, including growth. But liquidity comes with volatility – history shows six good years and four bad years per decade. That’s why growth assets need a long-term view.

More than 6 per cent of Australians have their retirement savings in an SMSF.

If you’re a self-funded retiree, share income can be tax-free thanks to franking, and capital gains tax only applies if you sell – which you can manage in small parcels to minimise tax. In your situation, your best option may be to have most of your money in the balanced sector of a superannuation fund.

You’ll get automatic diversification, all the decisions are made for you, and you can draw a pension that suits your budget.

I have two superannuation accounts – one in pension phase with a balance of $700,000 and another in accumulation phase with $800,000. I understand I cannot simply transfer the accumulation balance into my existing pension account. Could I instead recontribute money from the pension account and then combine the two into a single pension account?

If I did this, would it push me over the $1.9 million transfer balance cap (TBC)? At present, I have about $1.3 million of my cap remaining, having used $650,000 when I first set up the pension.

The TBC limits the amount you can transfer to pension mode. You can find out your actual unused cap from myGov. What this will be depends on when you made the first transfer.

You can then transfer an amount up to the value of your unused TBC from accumulation mode to pension mode into a separate pension, or you could roll the existing pension back into accumulation, and then use the combined amount to start a new pension. I strongly suggest you take advice. It’s difficult to negotiate this minefield on your own.

Noel Whittaker is author of Retirement Made Simple and other books on personal finance. Questions to: [email protected]

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.