A structured guide to the questions every prospective SMSF owner must answer first

SONAS WEALTH  |  THE SMSF COACH

SMSF TRUSTEE EDUCATION SERIES

By Liam Shorte  |  Fellow SMSF Specialist Advisor™  |  Financial Planner

⚖️  General Advice Disclaimer This article is general information only and does not constitute personal financial, legal or tax advice. The rules governing SMSFs are complex and individual circumstances vary significantly. You should obtain advice from a licensed financial adviser before acting on anything in this article. The author holds AFSL authorisation through Sonas Wealth Pty Ltd, corporate authorised representative of Viridian Advisory 476223.

Hi, I’m Liam Shorte — better known as The SMSF Coach. As a Financial Planner and SMSF Specialist Advisor with over two decades helping families take control of their super, I’ve seen it all. We often see people, who jumped in to an SMSF before really understanding how it works and it can be a time consuming and an expensive mistake to unwind.

Introduction

An SMSF can be one of the most powerful retirement structures available to Australians — but it is not the right choice for everyone. With over 661,000 SMSFs now operating across Australia and record numbers being established each quarter, I want to make sure that enthusiasm doesn’t outpace understanding.

Before we help anyone establish a fund at Sonas Wealth, we work through a rigorous set of questions together. Some people come in certain an SMSF is what they need. Some leave the conversation feeling the same way. Others discover a better path. Either outcome is a good one — because the goal is never to set up a fund. The goal is to protect and grow your retirement.

If someone is telling you to set up an SMSF then please read our previous article Red Flags to Watch Out For When Considering and SMSF 

Here is what that conversation looks like.

1.  What Are You Actually Trying to Achieve?

This is always the first question. Setting up an SMSF because you’ve heard it’s a good idea, or because a colleague mentioned it over coffee, is not a strategy. I want to understand your short, medium and long-term goals — and whether an SMSF is genuinely the best vehicle to get you there.

Sometimes the answer is clearly yes. Often it opens a broader conversation about alternatives that may serve your true objectives just as well, or better. I’ll never hesitate to point you toward a different path. An SMSF is not the right answer for everyone, and I don’t believe in setting one up just because we can.

2.  Is Locking Money Away the Right Move Right Now?

Superannuation is long-term money. For most people, it cannot be accessed until their preservation age — typically 60 — when they meet a condition of release. Before directing more wealth into super, we need to look honestly at your current financial commitments and what flexibility you might need in the next decade.

In many cases, redirecting surplus funds into debt reduction, a personal investment portfolio, or an insurance bond for tax-effective investing can deliver better outcomes while preserving access to capital. Super is a powerful tool — but it needs to be the right tool for the right job at the right time in your life.

💡  Worth Knowing: Carry-Forward Contributions

If your total super balance (TSB) is below $500,000, you may be eligible to use carry-forward concessional contributions — sweeping up unused cap room from the previous five financial years into a single large pre-tax contribution. This can be a powerful complement to an SMSF strategy, particularly when triggered by a significant asset sale or inheritance. Ask your adviser whether this applies to you before deciding how much to contribute and when.

3.  Do You Have the Time, Knowledge and Discipline to Run a Fund?

This is the question that surprises people most. Running an SMSF is not passive. It requires you to understand your trustee obligations, review your investment strategy regularly, stay across legislative changes, and commit genuine time to governance — every year, not just at setup.

📖  From the Coaching Files

I’ve had to talk a number of busy executives and business owners out of SMSFs when they couldn’t find a single hour in their week for a meeting — yet expected to manage an $800,000 investment portfolio. I’ve also worked with a couple who considered themselves property experts because they owned four regional Queensland properties, none of which they had ever visited. When we analysed the numbers, the yields were poor, capital growth was flat, and deferred maintenance costs were substantial. Their existing diversified super fund was objectively the safer option until they genuinely developed their property knowledge.

4.  What Do You Have to Roll Over — and Can You Actually Move It?

Not all superannuation balances can be rolled into an SMSF without careful consideration. Before making any decision, we need to confirm:

• Access restrictions — Some government, military or defined benefit funds (MSBS, Local Government Super) cannot be accessed before a specific age or in certain circumstances.
• Defined benefit value — In some cases, the guaranteed benefit from a defined benefit scheme is simply too valuable to walk away from. The certainty of income in retirement may outweigh the flexibility of an SMSF.
• Exit costs and liquidity — High exit fees or illiquid underlying investments can make an immediate rollover costly.
• Employer mandated funds — Some enterprise bargaining agreements require contributions to flow to a specific fund, which may limit your ability to redirect future Super Guarantee payments. Also some employers offer 1%+ extra to employees using their default fund…don’t lose out!

We work through exactly what you hold, what’s moveable, and what the true cost of moving is — before any action is taken.

5.  Have Your Insurance Needs Been Properly Addressed?

Insurance inside superannuation is one of the most commonly overlooked elements of an SMSF transition. When you leave an APRA-regulated industry or retail fund, you typically lose group insurance cover — often cover that would be difficult or impossible to replace on the open market due to health changes since you first obtained it.

⚠️  Critical: Insurance Lost on Rollover Cannot Always Be Reinstated

Once you roll out of an industry or retail fund, group life, TPD and income protection cover is typically cancelled and cannot be reinstated. If your health has changed since that cover was granted, you may find individual cover is either unavailable or prohibitively expensive. Get a full needs analysis before you move a single dollar. Your SMSF trust deed must also document that insurance needs have been considered — it is a compliance requirement, not optional.

At Sonas Wealth, we conduct a full needs analysis covering life insurance, total and permanent disability, and income protection as part of every SMSF review — before any rollover decision is made. Read our guide to managing insurance in a new SMSF or retaining in your existing account

6.  Are You Genuinely Clear on Your Trustee Responsibilities?

When you sign the Trustee Declaration, you are making a legal commitment that you understand the obligations of a trustee under superannuation law. Saying you didn’t understand those obligations after a compliance breach is not a defence.

As a trustee you are personally responsible for every compliance decision, every investment decision, all record-keeping obligations, and every reporting requirement the fund faces — even if you outsource administration to a professional. We will make sure you have a solid knowledge base before you commit. Your urgency to establish a fund doesn’t override our duty of care to you.

🔑  Key Trustee Obligations at a Glance

You need to read, understand and then sign off on the ATO SMSF Trustee Declaration

Maintain a written investment strategy and review it regularly

Arrange an independent annual audit by an approved SMSF auditor

Lodge an annual return with the ATO and pay the supervisory levy ($259 in 2025–26)

Keep detailed records of all transactions, decisions and meeting minutes for at least five years (ten years for some records)

Ensure the fund complies with the Sole Purpose Test at all times

Never use fund assets for personal benefit — not even temporarily

Here are helpful links to educational material from trusted sources like the ATO and their excellent SMSF education videos or the Government’s MoneySmart website SMSF pages. Our SMSF Coach blog has over 250 useful educational articles on everything SMSF.

7.  Does the Economics Actually Stack Up?

Fixed costs don’t scale down with a smaller balance. The maths needs to work in your favour before an SMSF makes financial sense compared to the APRA-regulated fund you’re currently in.

Cost Component	Typical Range (2025–26)
Setup costs (establishment + trust deed)	$1,500 – $3,000
Annual running costs	$2,000 – $5,000+  (You can find lower at a trade off)
Annual independent audit	$400 – $800
ATO supervisory levy	$259 per year
ASIC annual review fee – sole purpose trustee co.	$67 (look at paying 10 years upfront)

Fund Balance	Annual Cost ($3,500)	Effective Fee Rate
$150,000	$3,500	2.3% — hard to overcome
$200,000	$3,500	1.75% — borderline
$300,000	$3,500	1.1% — becoming viable
$500,000+	$3,500	0.7% or less — cost effective

You can run your SMSF for lower with some online providers but beware of limitations or deals with related parties where they get a cut of brokerage or mortgage commission or straight our referral fees that you ultimately pay.

$200,000–$250,000 in combined member balances is the minimum we normally use.

8.  Do You Understand the Risks — Not Just the Benefits?

SMSFs offer genuine advantages: investment control, tax flexibility, estate planning sophistication, and the ability to hold assets such as direct property and business real property. These are real, and for the right person at the right balance, they are compelling.

✅  Potential Benefits	⚠️  Key Risks to Manage
Engagement: we find people who take an active interest in their super are more likely to contribute more, invest consistently and therefore benefit from compound growth	Not understanding how the SMSF works or losing interest.
Full control over investment decisions	Personal trustee liability for all compliance failures. Could mean you can no longer be a director of your own business!
Access to direct property, unlisted assets and collectibles	Concentration risk — especially in property-heavy funds
Economies of scale investing as a couple or family and one SMSF set of fees rather than paying for multiple accounts.	Disagreements on how fund should be managed like different risk tolerances or something more serious like divorce
Tax planning flexibility (timing of contributions and capital gains). Not having to move accounts when changing from accumulation to pension.	Liquidity problems in retirement if assets are illiquid
Superior estate planning via binding death benefit nominations	ATO audit risk if governance is poor
Business real property can be held and leased to related parties	Poor diversification if trustees lack investment expertise
Tax-free income in pension phase on eligible assets	Fines up to $18,000 per trustee for serious breaches
Agility and Transparency: Members have full transparency over their investments, fees, and tax positions. The fund can also react quickly to market changes or legislative updates.	Indecision – being reluctant or afraid to press “Buy” or more often reluctance to admit a wrong call and “Sell”

We’ll give you a balanced view, not a sales pitch in either direction. No reasonable investment reliably produces excessive returns over the long term — and any adviser suggesting otherwise should be a red flag.

9.  Have You Thought Carefully About Your Investment Strategy?

Your investment strategy is not a formality — it is a legally required, living document that must genuinely reflect your objectives, risk tolerance, diversification approach, liquidity needs, and the insurance requirements of all members. The ATO expects it to guide every investment decision and to be reviewed regularly, particularly when member circumstances change.

A strategy that says “we will invest in whatever we feel like” is not compliant. We help you build something grounded in realistic expectations and genuine retirement planning — not just a document to tick a box.

Follow our guide here 6 Key Considerations for your SMSF Investment Strategy

10.  If Borrowing Is Part of the Plan, Is It Genuinely Affordable?

Limited Recourse Borrowing Arrangements (LRBAs) can be a legitimate strategy inside an SMSF, particularly for acquiring commercial or business real property. But they add significant complexity, increase risk, and must be structured correctly from day one — a defect in the LRBA structure can invalidate the arrangement and create a compliance breach.

Before proceeding with any gearing strategy, we assess:

• Whether borrowing is genuinely appropriate for your circumstances and risk profile
• Whether the loan is serviceable from the fund’s income and contributions, without relying on member contributions to cover shortfalls indefinitely
• Whether the long-term retirement outcome is improved — not just the short-term tax position
• Whether the trust deed and LRBA documentation are correctly structured

We’ll walk you through the rules, the process, and the most common mistakes to avoid before you commit to anything.

In fact we have an Education section just on Property in an SMSF with over 17 articles to guide you on every aspect of the strategy. WE DO NOT SELL PROPERTY BUT WE DO CATER FOR YOUR INVESTMENT PREFERENCES

11.  What Happens If Circumstances Change?

Life doesn’t stay still. Divorce, death, disability, loss of income, or a decision to move overseas can all complicate an SMSF significantly — and if you haven’t planned for these contingencies from the beginning, unravelling them can be expensive and stressful.

• Death benefit nominations — Binding nominations direct the trustee how to distribute your super on death. Not all trust deeds allow binding nominations; check yours. Non-lapsing nominations provide greater certainty.
• Incapacity — If a trustee loses capacity, the fund may be unable to operate without an enduring power of attorney in place. This is a commonly overlooked risk.
• Relationship breakdown — Super splitting orders following a divorce can create significant complexity in an SMSF, particularly where illiquid assets are involved.
• Moving overseas permanently — If all members relocate offshore, the fund may fail the Australian residency test and lose its concessional tax status. Seek advice well before any long-term departure.
• Winding up — Once a fund is wound up, it cannot be reactivated. Ensure you have a clear exit strategy and understand the process before you need it. We have you covered How to Wind Up Your SMSF

My View as The SMSF Coach

I’ve spent my career helping trustees get more from their SMSF — but I’ve also spent a lot of time talking people out of one when the timing, balance, or circumstances weren’t right. Both conversations matter equally.

The SMSF sector is growing rapidly — over 661,000 funds, more than 1.2 million members, and record establishment numbers in recent quarters. Some of that growth reflects genuinely well-considered decisions by people who understand what they’re taking on. Some of it reflects enthusiasm running ahead of understanding.

An SMSF done well can be one of the most effective long-term wealth structures available to an Australian. An SMSF done poorly — or set up for the wrong reasons at the wrong time — can quietly erode the retirement security it was meant to protect. My job is to make sure you know which one you’re looking at before you commit.

If you’ve read this and still think an SMSF might be right for you, let’s have that conversation properly.

Pre-Decision Checklist

Before committing to establishing an SMSF, work through each of the following with your adviser:

📌  Key Takeaways

✅  An SMSF can be a powerful retirement structure — but only when established for the right reasons, at the right balance, and by trustees who understand the obligations.

💰  The cost-effectiveness threshold is around $200,000–$250,000 in combined member balances. Below that, fixed running costs represent a significant fee drag on returns. The true cost depends on the mix of investments and services you engage.

⚠️  Insurance cover held inside an industry or retail fund is typically lost on rollover and may not be replaceable. Get a needs analysis before moving any funds.

📋  Signing the Trustee Declaration is a legal commitment. Not understanding your obligations is not a defence if something goes wrong.

🚫  ATO penalties for serious trustee breaches can reach $18,000 per trustee — and non-compliance can result in the fund being taxed at 45%.

🔑  Your investment strategy is a legal document, not a formality. It must genuinely reflect your objectives, diversification approach, liquidity needs and member insurance requirements.

💡  Always obtain personal advice from a licensed SMSF specialist before establishing a fund or making any rollover decision.

Thinking About an SMSF — or Want a Second Opinion? If you’d like a no-obligation conversation about whether an SMSF is right for your situation — or you want a straight-talking second opinion on an offer you’ve received — reach out. That’s what The SMSF Coach is here for. http://www.smsfcoach.com.au  |  Sonas Wealth, Sydney www.sonaswealth.com.au

Always make sure that you’re your strategy complies with relevant superannuation and tax regulations before implementation

Are you looking for advisors that will keep you up to date and provide guidance and tips like in this blog? then why not contact us at our Castle Hill or Windsor office in North West Sydney to arrange a one-on-one consultation, just click the Schedule Now button up on the left to find the appointment options.

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Liam Shorte B.Bus FSSA™ AFP

Financial Planner & Fellow SMSF Specialist Advisor™

      

Tel: 02 9899 3693, Mobile: 0413 936 299

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