Small APRA funds: What are they and why would I need one?

According to SAF target market determinations, these structures are unsuitable for those:

2026 SMSF calendar

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Our free calendar includes due dates for important documents plus suggested dates for trustee meetings and other strategic issues for your SMSF.

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• Seeking a guaranteed return on capital
• Who don’t have an SMSF or intend to set one up
• With short-term cash needs who don’t meet the condition of release
• With simple investment needs who don’t need access to a broad range of investments
• Who don’t have an adviser or are self-advised with an account manager to help transact on their behalf.

SMSF members moving overseas? Residency and active member tests

To be an Australian super fund and be eligible to obtain the tax concessions that are granted under the superannuation and tax laws, all super funds must meet three tests:

1. The fund must be established in Australia, or any asset of the fund must be situated in Australia
2. Central management and control of the fund is ordinarily in Australia
3. Active members who are Australian residents hold at least 50% of the fund value.

Meeting these tests can become an issue, in particular, the central management and control test, where an SMSF member is moving overseas. This is where converting to a SAF canprove beneficial.

As the licensed trustee of a SAF is both incorporated and managed from Australia, it ensures the fund meets the central management and control test.

However, as all three tests need to be met, it’s important that non-resident members of the fund do not make contributions while they are non-resident in Australia, unless they hold less than 50% of the fund assets and other Australian residents must be making contributions to the fund.

Back in 2021, the Morrison Government proposed reforms that would relax the residency test, but they have yet to be legislated.

SMSF trustee capacity issues

In the event that an SMSF trustee loses capacity, they will no longer be able to carry out their trustee duties or continue in their trustee role, which will eventually create an issue in meeting the requirement under superannuation law that all SMSF members must act as a trustee of their fund.

In this situation, one practical option is to ‘convert’ or roll over the SMSF’s assets into a SAF and for the ongoing management and trusteeship of the fund to be carried out by the trustees of the SAF.

Investing with a SAF

Under the super rules, SAFs have the same ability as an SMSF to invest in a wide range of assets.

A SAF’s investments are directed by the members and generally, the licensed trustee is not involved in making investment decisions unless the fund’s members fail to adhere to the fund’s established investment strategy. In this situation, the trustees will require the members to rectify the situation to ensure the SAF remains compliant with the super rules.

If you are interested in moving to a SAF, it’s important to check the investment assets acceptable to the licensed trustee.

Different SAF trustees have different rules relating to fund investments. For example, some SAF trustees don’t permit funds to invest in units in unlisted trusts. If you have special assets you wish to include in your SAF, it’s essential to carefully check the trustee’s rules before moving to a SAF structure. 

Generally, if the overall investment portfolio is relatively diversified, a SAF may hold assets such as business real property, private company shares and collectables.

While an SMSF can have an undiversified investment portfolio (such as one mainly consisting of a large business real property), this may not be acceptable to the trustee of a SAF.

What are the pros and cons of SAFs?

Pros:

• Reduced responsibility and administrative burden
• Control of your super investments
• Estate planning certainty
• Security for ageing fund members worried about diminishing mental capacity
• Ability to be a SAF member after being declared bankrupt
• A professional licensed trustee helps avoid common legislative breaches
• Ability to live or work outside Australia for an indefinite period without the SAF being declared a non-resident super fund
• A licensed trustee is required to issue a product disclosure statement (PDS) and annual member statements
• Access to assets (such as wholesale investments) is unavailable through an SMSF
• Provides a tax-effective exit strategy from an SMSF.

Cons:

• Potential limits on available investments (such as collectables or large commercial properties), depending on the professional licensed trustee’s rules
• Financial planners are not required to hold and maintain specialist advice qualifications when advising on a SAF (required for SMSFs)
• The licensed trustee controls the custody of all the fund assets
• More expensive than in-house administration by SMSF trustees
• Fees are generally charged as a percentage of fund assets.

How much do SAFs cost?

Due to the ongoing fees, it’s generally more expensive to have your super savings managed through a SAF compared to using an SMSF structure. However, this can depend on the underlying investments held by your SAF.

Although a SAF may be cost effective if the fund is only investing in shares and managed funds, it’s important to think about whether either a SAF or SMSF is really the right option. 

Both these fund structures give members control over the assets held by the fund, but in many cases, the same assets are now available more cost effectively through the DIY or Member Direct investment options offered by large retail and industry funds.

Annual fees and costs for a SAF with a single investment option

The example and table below has been sourced from the Perpetual Small APRA Fund PDS and schedule of fees and costs. It shows the combined effect of the ongoing annual fees and costs for a single investment option (Balanced Growth Fund) for a SAF with a fund balance of $50,000.

This is an example only; fees and costs will vary depending on the investments selected and your account balance. Also note that additional fees for fund maintenance, ATO reporting, annual audit and actuarial fees will apply.

Example – Perpetual Small APRA Fund Service with a fund containing a Perpetual Balanced Growth Fund balance of $50,000

Source: Perpetual

1. This is the Trustee fee.
2. This is the administration fee. The effective administration fee percentage will decrease if your fund’s value exceeds the first tier of $500,000 (see administration fees within additional explanation of fees and costs for further information).
3. This does not include investment-related fees and costs charged in or through the Perpetual Balanced Growth Fund.
4. This does not include any net annual transaction costs borne by all investors in or through the Perpetual Balanced Growth Fund after any buy/sell spread recoveries on investor-initiated transactions.

*Additional fees apply.

SAF vs SMSF: How do they compare?

SAFs and SMSFs are both small super funds focused on a limited number of fund members. Each of these fund structures can have only six or fewer members.

SMSFs are established, managed and controlled by their members, who are also the fund trustees. While SAFs operate in a similar way to an SMSF, a professional trustee is responsible for establishing and managing a SAF on your behalf.

A key difference between SMSFs and SAFs is that they are regulated by different regulatory bodies – the ATO and APRA, respectively.

In the case of fraud or theft, SAF members are able to complain to the Australian Financial Complaints Authority (AFCA) and are eligible for compensation.

SMSFs are ineligible to seek help from AFCA or to receive compensation.

In addition, SAFs can apply to AFCA for the resolution of a dispute or complaint arising over a death benefit paid from the fund, whereas SMSFs don’t have that option. AFCA’s dispute resolution service is free, whereas SMSF members can only use the more expensive court system.