When planning for your retirement, choosing between an Industry Super Fund and a Self-Managed Super Fund (SMSF) is a significant decision. Both options have their pros and cons, and the right choice depends on your financial goals, investment knowledge, and personal circumstances.
This guide will walk you through key factors to consider when comparing SMSFs and Industry Funds, helping you make an informed decision.
Understanding the Basics
What is an Industry Super Fund?
Industry Super Funds are large, professionally managed superannuation funds. They are regulated by the Australian Prudential Regulation Authority (APRA) and offer a range of investment options without requiring members to manage individual investments.
Key Features:
- Low fees compared to retail funds
- Professionally managed investments
- Default life insurance options
- No requirement for members to make investment decisions
What is an SMSF?
A Self-Managed Super Fund (SMSF) is a private superannuation fund that you manage yourself. It allows you to have direct control over your investments but comes with greater responsibility and regulatory obligations.
Key Features:
- Up to six members can manage the fund
- Full control over investment decisions
- More flexibility in asset selection, including property and direct shares
- Requires compliance with Australian Taxation Office (ATO) regulations
Questions to Ask When Comparing SMSF vs Industry Fund
How Much Control Do You Want Over Your Super?
- Industry Fund: Investments are managed by professional fund managers, meaning you don’t need to make individual decisions.
- SMSF: You have full control over investment choices, which requires time, knowledge, and confidence in managing your own super.
What Are the Costs Involved?
- Industry Fund: Typically lower fees due to large-scale management, but fees vary depending on the fund and investment choices.
- SMSF: Costs can be higher due to administration fees, compliance costs, and professional advice fees, but economies of scale may apply for larger balances.
How Much Time and Effort Can You Commit?
- Industry Fund: Requires little effort beyond selecting your preferred investment option.
- SMSF: Requires time to research investments, manage compliance, and complete annual tax obligations.
Can You Have an SMSF and an Industry Fund?
Yes, it is possible to have both an SMSF and an Industry Fund simultaneously. This can be beneficial if you want to diversify investments while still maintaining access to insurance and employer contributions in an Industry Fund.
What Investment Options Are Available?
- Industry Fund: Offers a range of pre-set investment options such as conservative, balanced, and growth portfolios.
- SMSF: Allows investment in shares, property, managed funds, and even physical assets such as gold, subject to regulations.
Can an SMSF Invest in Industry Super Funds?
Yes, an SMSF can invest in an Industry Fund by purchasing units in the fund as part of its investment strategy. However, it must comply with Superannuation Industry (Supervision) Act 1993 (SIS Act) regulations.
How to Rollover an SMSF to an Industry Fund?
If you decide to transition from an SMSF to an Industry Fund, the process involves:
- Selling the SMSF’s assets, which may include shares, property, or other investments, ensuring all transactions comply with superannuation regulations.
- Paying any outstanding liabilities, including tax obligations, member benefits, and any administrative fees associated with winding up the fund.
- Rolling over the remaining balance into an Industry Fund by completing the necessary transfer documentation and ensuring compliance with the fund’s acceptance requirements.
Is My Super Fund APRA-Regulated or a SMSF?
An APRA-regulated fund is a superannuation fund that falls under the oversight of the Australian Prudential Regulation Authority (APRA). These funds include Industry Funds, retail funds, corporate funds, and public sector funds, all of which are managed by professional trustees who ensure compliance with superannuation regulations and investment strategies.
If your super fund is regulated by APRA, it is a public offer fund (such as an Industry Fund or retail fund) where trustees make investment decisions on behalf of members.
If your fund is regulated by the ATO, it is classified as a Self-Managed Super Fund (SMSF), meaning the members are responsible for compliance, investment strategies, and fund management.
How Many SMSF Funds Are There in Australia?
According to the ATO, there are over 600,000 SMSFs in Australia, managing more than $800 billion in assets.
What Makes a Fund an “Industry Fund”?
An Industry Fund is a type of APRA-regulated superannuation fund originally established to serve workers within specific industries. Unlike retail funds, which are run for profit by financial institutions, Industry Funds operate on a “profit-to-member” model, meaning all profits are returned to members rather than distributed to shareholders.
Key Characteristics of Industry Funds:
- Not-for-profit structure – Returns go back to members.
- Strong links to specific industries – Many Industry Funds were originally created to serve workers in sectors such as construction, healthcare, hospitality, and education, though most now accept members from any industry.
- Lower fees compared to retail funds – Due to their scale and structure, they often have competitive fee structures.
- Automatic insurance options – Typically provide default life and income protection insurance for members.
Some of the larger APRA-regulated Industry Super Funds in Australia include:
- AustralianSuper – One of the largest funds, open to all industries.
- Hostplus – Primarily catering to the hospitality, tourism, and sports industries.
- CBUS Super – Designed for workers in the construction and building industry.
- REST Super – Originally created for retail workers but open to all.
- HESTA – Focused on workers in the health and community services sector.
- UniSuper – Catering to employees in the higher education and research sector.
These funds provide professionally managed investment options and competitive fee structures, making them a popular choice for workers in their respective industries.
Final Thoughts
The decision between an Industry Fund and an SMSF depends on your investment preferences, financial situation, and willingness to take on management responsibilities. If you prefer simplicity and low-cost management, an Industry Fund may be the right choice. If you want greater control over your retirement savings and are willing to handle compliance obligations, an SMSF could be beneficial.
It’s always a good idea to speak with a licensed financial adviser before making any decisions regarding your superannuation.
For professional Gold Coast SMSF accounting services, get in touch with the team at TW Accounting.
DISCLAIMER
The information provided in this article is for general informational purposes only and does not constitute financial advice, taxation advice, or investment advice. TW Accounting & Business Solutions is not licensed to provide financial product advice under the Corporations Act 2001.
Before making any superannuation contributions, withdrawals, or investment decisions, you should consider your personal circumstances and seek advice from a licensed financial adviser or a registered tax agent.
Superannuation laws are complex and subject to change. The Australian Securities and Investments Commission (ASIC) provides information on licensed financial service providers at www.moneysmart.gov.au.
