May 30, 2017

The whole point of managing your own super fund is to give you more freedom and control over your financial future. It makes sense to invest your SMSF in a venture that suits your current lifestyle and will help you maintain that standard for as long as you wish.

Some think that managing their own super fund gives them complete autonomy over their investments, but this isn't completely true.


Just take a minute to think about the whole point of a super fund: it's a nest egg to support you in retirement. Because of that, the ATO has certain protections in place to ensure that people don't squander their retirement savings but instead use their accounts for the intended purpose.

Blanket Restrictions

The two biggest no-nos when it comes to investing your SMSF are summed up in these principles:

'Arm's Length Basis'

'Sole Purpose Test'

The first restriction means that whatever sales or purchases you make in connection with your SMSF must reflect current market values. 

'Sole Purpose Test' is being able to prove to the ATO that any investment activity withy your super fund is strictly limited to generating retirement funds. Your SMSF investments must help you reach the goal of saving up for retirement, not help you accumulate wealth for your enjoyment right now.

This means that you will be limited as far as what you can use your SMSF to invest in. For example, you can't use it to buy a vintage car . . . unless you hire it out for a profit that boosts your super fund. No joy rides for yourself! 

Or you may use your fund to invest in fine wines . . . but no drinking it yourself until you're done investing!

SMSF Common Investment Options

Many choose to invest their self-managed super funds in:

  • Managed funds (retail or wholesale, domestic and/or international)
  • Private Unit Trusts
  • A business (non-related party to avoid hassle) and business property
  • Non-traditional assets such as coins, antiques, art, taxi plate licences or ATMs
  • Direct investments (such as shares, ETFs, cash, term deposits, hybrids, income securities, gold/silver bullion and bonds)
  • Direct property (Residential houses, villas and units as well as Commercial property such as offices, warehouses, factory units, shops and land)

Investing in commercial property is a very common option for folks looking to invest their SMSFs. There are often great tax benefits. If you're considering this investment strategy, just remember that you can't live in or use the property for any personal benefit. It's only there to reinforce your super. 

Investing With Your SMSF - What Are The Other Limitations?

Besides the two main restrictions mentioned above, you need to be aware of other limitations placed on your SMSF. Many funds have specific limits detailed in the trust deed. Review your deed on a regular basis to ensure that your ever-evolving investment strategy lines up with what your fund allows.

Some general limitations for almost any SMSF include the following:

  • lending to members and their relatives
  • acquiring assets from 'related parties' of the fund
  • borrowing
  • investing in 'in-house' assets

Remember, SMSF assets can't be mixed in with your personal or business assets. It's up to you and every other trustee in your fund to make sure that there are distinct boundaries in this regard.

What Next

Is your SMSF compliant with the latest ATO guidelines? Need further advice on how to wisely invest with your SMSF?

Contact us or call 08 8373 3333 to arrange a free, no obligation appointment. 

Written by Ben Calder, Private Client Adviser at Calder Wealth Management.