Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 305

When is it worth establishing a second SMSF?

With the introduction of the Transfer Balance Cap, some SMSF members were required to move assets from their retirement pension account to their accumulation account to ensure their pension account did not exceed $1.6 million on 1 July 2017.

Other superannuation changes have also meant that if an SMSF member has a total superannuation balance of $1.6 million across all of their superannuation funds, and the member is in receipt of a retirement pension, then their SMSF can only calculate the income tax exemption using the unsegregated method.

Where is best to hold pension assets?

Some SMSF members wonder if it is worth establishing a second SMSF where they hold pension assets in their existing SMSF and accumulation account assets in the second SMSF.

There are some good reasons to have two SMSFs. One SMSF could be used to retain higher-yielding investments in the tax-free pension fund and lower-yielding investments in the tax payable accumulation fund. It may assist the member’s pension balance to grow faster than their accumulation account due to the growth of assets in the pension fund.

On the other hand, if all assets were in the one SMSF, then the investment earnings need to be allocated in proportion to the member’s pension and accumulation account balances. Also, in the event a liability arose from an investment in one SMSF, the assets in the other SMSF would not be exposed or affected.

Assets in the two SMSFs can be segregated for investment reasons where different strategies are developed for members with different risk profiles. This is especially useful if the SMSF members are of different ages and at different stages of their lives. As the number of members in an SMSF is limited to four, having two or more SMSFs will also allow larger families to have their children included in the SMSF environment.

It may also assist in asset protection in the event any family member is exposed to a separation claim due to a relationship breakdown.

Some members may establish a second SMSF so that they can have different death benefit nominations in each SMSF, as well as the control of each SMSF left to different people. This may avoid situations where a death benefit is left for one person but the control of the SMSF is passed to a different person, which may result in the controlling person being tempted to ignore the wishes of the deceased member when allocating the death benefit. Members will need to ensure appropriate death benefit nominations are put in place especially with reversionary pensions.

Doing it for the right reasons

There is nothing stopping someone from establishing a second SMSF and doing so on its own would not be a concern to the Tax Office. This is especially so if there are genuine commercial or family reasons for doing so. However, the ATO would be concerned if the member of the SMSFs started manipulating assets between the two SMSFs or switching each of the SMSFs between accumulation phase and retirement phase.

The downside of having two SMSFs is of course the additional administration costs and the initial process of transferring selected assets from the existing SMSF to a newly-established SMSF. Members need to document transactions with care so that there is no confusion as to which assets belong to which SMSF.

Moving assets between the two SMSFs will result in a capital gains tax event with the appropriate tax treatment.  Stamp duty may also apply. Members need to consider 'related party' rules when transferring assets between SMSFs as only listed securities and business real property can be transferred between related parties.

Anyone that is considering establishing a second SMSF should discuss their situation with a licensed financial planner who specialises in the superannuation law. It is a costly strategy and it doubles your compliance obligations so it’s not something members should enter into lightly.

(Editor footnote: One reason to consider retaining a single large SMSF is that if Labor's franking credits proposal is adopted, an SMSF might have tax payable on the accumulation assets to use the franking credits generated by the whole fund, including the pension assets. If assets are separated into a pension SMSF, franking credits may be lost in future).


Monica Rule is an SMSF specialist and author. Her advice is general in nature and you should seek advice that relates to your specific circumstances before making any decisions.

For anyone working with SMSF clients, Monica will be speaking at a webinar hosted by the Institute of Public Accountants on Building a Nest Egg in a Self-Managed Superannuation Fund, on 16 May 2019.


Leave a Comment:



Avoid these top five errors in your SMSF annual return

Cost of running an SMSF receives updated judgement

Is bigger better? Expanding the membership of SMSFs


Most viewed in recent weeks

Stop treating the family home as a retirement sacred cow

The way home ownership relates to retirement income is rated a 'D', as in Distortion, Decumulation and Denial. For many, their home is their largest asset but it's least likely to be used for retirement income.

Two strong themes and companies that will benefit

There are reasons to believe inflation will stay under control, and although we may see a slowing in the global economy, two companies should benefit from the themes of 'Stable Compounders' and 'Structural Winners'.

Welcome to Firstlinks Edition 433 with weekend update

There’s this story about a group of US Air Force generals in World War II who try to figure out ways to protect fighter bombers (and their crew) by examining the location of bullet holes on returning planes. Mapping the location of these holes, the generals quickly come to the conclusion that the areas with the most holes should be prioritised for additional armour.

  • 11 November 2021

Reducing the $5,300 upfront cost of financial advice

Many financial advisers have left the industry because it costs more to produce advice than is charged as an up-front fee. Advisers are valued by those who use them while the unadvised don’t see the need to pay.

Welcome to Firstlinks Edition 431 with weekend update

House prices have risen at the fastest pace for 33 years, but what actually happened in 1988, and why is 2021 different? Here's a clue: the stockmarket crashed 50% between September and November 1987. Looking ahead, where did house prices head in the following years, 1989 to 1991?

  • 28 October 2021

Why has Australia slipped down the global super ranks?

Australia appears to be slipping from the pantheon of global superstar pension systems, with a recent report placing us sixth. A review of an earlier report, which had Australia in bronze position, points to some reasons why, and what might need to happen to regain our former glory.

Latest Updates

Investment strategies

Are they the four most-costly words in investing?

A surprisingly high percentage of respondents believe 'This Time is Different'. They may be in for a tough time if history repeats as we have seen plenty of asset bubbles before. Do we have new rules for investing?

Investment strategies

Firstlinks survey: the first 100 tips for young investors

From the hundreds of survey responses, we have compiled a sample of 100 and will publish more next week. There are consistent themes in here from decades of mistakes and successes.


What should the next generation's Australia look like?

An unwanted fiscal drain will fall on generations of Australians who have seen their incomes and wealth stagnate, having missed the property boom and entered the workforce during a period of flatlining real wages.


Bank results scorecard: who deserves the gold stars?

The forecasts were wrong. In COVID, banks were expected to face falling house prices, high unemployment and a lending downturn. In the recovery, which banks are awarded gold stars based on the better performance?

Exchange traded products

In the beginning, there were LICs. Where are they now?

While the competing structure, ETFs, has increased in size far quicker in recent years, LICs remain an important part of the listed trust sector. There are differences between Traditional and Trading LICs.


Should you bank on the Westpac buy-back?

Westpac has sent out details of its buy-back and readers have asked for an explanation. It is not beneficial for all investors and whether this one works for some depends on where the bank sets the final price.

Investment strategies

Understanding the benefits of rebalancing

Whether they know it or not, most investors use of version of a Strategic Asset Allocation (SAA) to create an efficient portfolio mix of different asset classes, but the benefits of rebalancing are often overlooked.


Six stocks positioned well for a solid but volatile recovery

The rotation to economic recovery favouring value stocks continues but risks loom on the horizon. What lessons can be drawn from reporting season and what are the trends as inflation appears in parts of business?



© 2021 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.