A SMSF (Self-managed super fund) and SAF (Small APRA fund) are very similar with the exception of 2 important things – SMSF is regulated by the Australian tax office (ATA) and SAFs are controlled by the Australian Prudential Regulation Authority (APRA). Also, SAF must appoint professional licensed trustee, who has full responsibility for all legal and administrative decisions. Of course, both types of funds have their own advantages which we will single out for you here.

Advantages of an SMSF

1. Regulatory – Regulatory rules are pretty much the same for both types of funds, however administrative side is easier to deal with if you have SMSF than it is with SAF.
2. Investments – When it comes to owned investments, SMSF offers greater flexibility. Investing through SMSF may include business real property, direct property, unlisted managed funds, shares etc. SMSF trustees have total freedom to decide on where their retirement savings will be invested and can also choose the most suitable for them investment strategy.
3. SAF and SMSF Costs – The SAF members need to pay an independent trustee to run and manage their fund, so they have bigger running costs and face stricter regulatory supervisory levels than members of SMSFs. The SAF costs are much higher than the costs of SMSF.
4. Tax obligations – SMSF members can report annual tax returns later by enlisting the services of an agent, while the members of SAFs must meet tax reporting deadline which is October 31.

Advantages of SAF

1. Compliance risk – The compliance risk of running a SAF is taken by the professional trustee. If a SAF is breaking any rules, the fund members will not be held responsible for the mistakes. On the other hand, SMSF members and a trustee are all responsible for keeping the fund in compliance.
2. Administration – In SAF, professional organisation takes care of fund’s administration and paperwork. In SMSF, all trustees are responsible for fund’s administration (they can also get a professional adviser).
3. Members – SAF member can be an employee of another member, while SMSF trustee can’t be an employee of another member (unless they are family).
4. Travel – SAF is more flexible than SMSF when it comes to travelling. SAF member can go overseas for a longer period of time and still be in compliance, while SMSF members cannot do that. If SMSF trustee wants to travel abroad, he/she must fulfill 2 requirements. The first documents states that main management of a fund will remain in Australia, and the second is an active member test. If any of these 2 requirements is violated, the SMSF member is automatically not in compliance and will face very high penalty taxes.

According to the above, it seems that SMSF is perfect for those who want to have full control of their investments and be involved in decisions-making process, while SAF is ideal for those who want to participate in investment decisions, but have few compliance and legal responsibilities.