The why and how of direct investment super options

For the portion of your super in a DIO, you don’t pay investment management fees to your super fund, since you are managing the investments yourself. If you choose ETFs or LICs, they will have costs built in before the investment return is calculated and you should make yourself aware of those costs.

When it comes to tax on returns, some people are critical of the ‘pooled’ nature of traditional super investment options.

While super fund managers do consider the after-tax impact of their transactions and investment decisions more broadly, a DIO allows members to control the timing of capital gains and, as a result, their after-tax outcome.

Perhaps the most powerful application of this control can be applied by choosing not to sell investments during the accumulation phase.

While your super is still in the accumulation phase, investment income is taxed at the rate of 15%, with a one-third discount for capital gains on assets held for 12 months or more. But once you shift your super into the retirement phase (after starting a retirement income stream/pension), the tax rate on investment income is zero. By choosing to keep direct investments through the transition from accumulation to retirement phase, you eliminate tax on capital gains when you eventually sell those assets.

Also, keep in mind that the transfer balance cap puts a limit on the amount one person can move into the retirement phase.

What’s on offer

Various retail and industry super funds provide direct investment options. In retail funds, the option is often called a wrap because the super fund structure is just a ‘wrapper’ for the investment menu.

In industry funds, members usually need to leave a small portion of their balance in one of the other investment options run by the super fund, so administration fees and insurance premiums associated with the wider fund can be deducted. A minimum balance is also generally required in a cash account within the direct investment service. Fees directly associated with the service, such as brokerage, are deducted from this cash balance. Funds also commonly require a minimum balance before their members can use the member direct service.

In retail funds, a cash account is generally used to manage the deduction of all fees, and a minimum balance is required in that account.

Funds also help with tax and investment reporting for these direct options, and many provide access to broker research or updates from research houses like Morningstar.

We checked the 30 largest funds to see what is on offer and summarised our results in the table below, ordered from the largest to smallest fund by asset value. Only funds open to new members and offering a direct investment service are listed. This information was current in February 2025 and may change.

The fees listed are the additional charges directly deducted from members’ accounts for the direct investment option and do not include the other fees and charges that apply for fund membership or the indirect cost of any term deposit, ETF or LIC selected.

The maximum investments listed apply to the category of investment. Other maximums may apply to the proportion of your balance that can be held in a single share or ETF. You should always read the Product Disclosure Statement and guide to the direct investment option carefully before making a decision.

SMSFs versus member direct

While DIOs provide a step up in control, they can’t replicate all the features of an SMSF.

A key difference is that SMSFs offer additional flexibility in the type of assets that can be purchased. For example, an SMSF can invest in real property, both commercial and residential. Business owners, in particular, tend to favour an SMSF if their premises can be held within the fund and leased back to the business.

An SMSF can also offer additional security in tax planning as the risk of changing super funds before retirement (and therefore needing to sell investments and incur capital gains) is much lower. An SMSF can move service providers without changing the fund itself.

SMSFs can also provide more certainty about the distribution of your super after your death in some circumstances.

However, direct investing with a large fund comes with less of the paperwork and trustee responsibilities involved in running your own SMSF.

Give and take: SMSF members investing with an industry fund

In an innovative move, Hostplus has launched an option that allows individuals with an SMSF to use their investment expertise. Hostplus Self-Managed Invest (SMI) enables SMSFs to invest in several of Hostplus’ existing investment options, as well as bespoke options designed for SMSF investors, including diversified options, Australian and international shares options, an infrastructure investment option and a property investment option.

Hostplus SMI gives SMSF investors access to asset classes they might find difficult to access on their own, such as unlisted commercial property, infrastructure and private equity. These ‘non-traditional’ type investments in office buildings and airports usually require initial investments in the millions of dollars. With $115 billion in funds under management, Hostplus can take advantage of its sheer size to invest in these asset classes.

The bottom line

If you’re looking for control over your investments and tax outcomes but don’t want the responsibility and time commitment of an SMSF, direct investment options are worth a look.

Alternatively, if ultimate control and responsibility is for you, including the option to invest in real property, perhaps an SMSF is more up your alley.

And if you do go down the SMSF pathway and want access to non-traditional asset classes like infrastructure without the big upfront investment, there are always Hostplus’ SMI options.