Home Business What Can A Self-Managed Super Fund (SMSF) Invest In?

What Can A Self-Managed Super Fund (SMSF) Invest In?


A self-managed super fund (SMSF) is a legal trust structure that benefits its members – who are also trustees of the fund – upon retirement. One of the perquisites of having an SMSF is the members’ autonomy in deciding how their fund is managed and controlling where their money is invested.

Additionally, SMSF allows you to invest in a broader range of asset classes than a traditional superannuation fund. However, each SMSF investment comes with its own benefits and implications. Hence, it is vital to keep your financial goals in mind and have the right SMSF investment strategy when considering your options to ensure you invest effectively.

In this article, we will discuss what you can invest in with an SMSF, as well as how you can develop a solid SMSF investment strategy.

What can you invest in with an SMSF?

Everyone’s retirement plan is unique and personal to each individual’s needs, which is why investment goals and risk tolerance also vary. With an SMSF, you can tailor your investments to match your retirement goals.

SMSF members can invest in a wide range of assets, such as:

Australian and international shares

Investing in the share market is an extremely lucrative prospect for one’s retirement plans. However, your returns depend on your choice of company so it is crucial that you do thorough research before investing.

Before you consider expanding overseas with international shares, start with a diversified portfolio that includes exposure to several market sectors such as banks and resource businesses to spread the risk. Larger, well-established companies also serve as a solid foundation in your SMSF investment journey.

Cash and term deposits

Most banks offer term deposits specifically tailored to manage SMSFs. You can invest a portion of your SMSF balance for a fixed period of time at a predetermined rate of return by opening a term deposit.\

As long as you do not withdraw your cash before the end of the term, you can earn higher interest than conventional saving accounts. Nevertheless, a high-interest savings account is still useful for easily accessible cash.


Slightly higher up the risk curve from term deposits but less volatile than shares, bonds are a common type of fixed income product. When you invest in a bond, you are lending money to the bond issuer, who agrees to pay a specified amount of interest and reimburse the capital on a specific date, better known as the maturity date.

The bond market includes both corporate and government bonds, with the latter being regarded as the safer investment option due to the minimal risk of default.

Physical commodities

Commodities are appealing to SMSF investors due to their independence from shares, property, and bond returns. Considered “real assets”, physical commodities cover a diverse range of raw materials, including agricultural and energy products, and metals such as gold and silver.

Commodities can also be used as a hedge against inflation as they are one of the few asset classes that do well during periods of rising inflation.

Hybrid investments

In essence, hybrid investments are a way for corporations to borrow money from investors in return for coupon payments. The term “hybrid” refers to the investment’s capacity to combine the features of both debt and equity investments, and it is often seen as a more conservative investment than shares in the company itself.

Similar to a debt investment, there is usually an agreement to pay a rate of return until a specified date. There can also be features akin to shares, such as a future “call” date where capital is offered back to the investor at a predetermined rate.


Collectables include artwork, jewellery, antiques, cars, coins, memorabilia, and even wine. However, it is best to note that the Australian Taxation Office (ATO) has a few rules concerning investing in collectables.

Generally, your SMSF has to meet the “sole purpose test”, which means your fund needs to be maintained for the sole purpose of providing retirement benefits to your members. In this case, you need to ensure that SMSF members do not have use of, or access to, the collectables. Your fund will fail the sole purpose test if it provides a pre-retirement benefit to someone.

Residential and commercial property

Acquiring a property through an SMSF is not the same as purchasing a property directly. Before deciding to invest your SMSF in a residential or commercial property, you need to be aware of the rules and regulations that you need to adhere to for this investment strategy, including:

  • You cannot purchase a residential property using your SMSF from a related party of an SMSF member. The property also cannot be lived in or rented by a fund member.
  • Your SMSF can only acquire your commercial property if you pay rent to your SMSF at the market rate.
  • You have to register your SMSF for goods and services tax if it owns a commercial property that receives rent of over $75,000 per year.
  • There are additional restrictions (including concerns about employing a limited resource borrowing arrangement) and tax implications that you should consider when obtaining a bank loan for a property purchase through an SMSF.
  • Implications of purchasing a commercial property or an overseas property through your SMSF.

Before making a purchase, SMSF investors will be required to consider the following factors:

  • Is the property compatible with my risk tolerance?
  • Is there enough cash in my SMSF to pay any repairs, council rates, water rates, or unforeseen expenses?
  • Am I able to retain the property for the long term to account for market fluctuations and substantial costs such as stamp duty and agent’s commission?
  • Is it possible to achieve adequate diversification within the fund?
  • Is my SMSF capable of borrowing the funds required to purchase the property?

Restrictions on investments

While you can invest in virtually anything with an SMSF, you have to keep in mind that there are certain restrictions implemented on SMSF investments. These restrictions are designed and put in place to protect your superannuation benefits and ensure you get appropriate returns on your SMSF investments.

According to ATO, all investments made by your SMSF must be done on a commercial “arm’s length” basis. This means the purchase and selling price of fund assets, as well as the income from those fund assets, must always reflect the actual market value and rate of return.


  • The sole purpose of your SMSF investment should be to provide retirement benefits to the members.
  • You cannot purchase assets from, or lend money to fund members or other related parties.
  • Your SMSF is not allowed to borrow money.
  • Your SMSF assets should be separate from the personal assets of the members.
  • The SMSF investment must comply with the Superannuation Industry (Supervision) Act.

If you breach any of these investment restrictions, ATO may impose significant penalties, including disqualifying you as a trustee, and even prosecution. Hence, it is best for you to speak with experienced financial planners in Melbourne to make sure your SMSF investments comply with the law.

Make sound SMSF investment decisions

With an SMSF, you can be actively involved in managing your superannuation investment strategy. However, making the right investment decisions and ensuring efficient implementation of an investment strategy takes time, commitment, and expertise.

It is best to seek help from reliable and experienced financial planners in Melbourne who can not only assist you in making sound investment decisions but also assist in addressing some of the complexities associated with SMSF. With expert guidance, you will be able to reap the benefits from your SMSF investments effectively.


Please enter your comment!
Please enter your name here