SMSFs and Family Trusts

Self-Managed Super Funds (SMSFs) and Family Trusts are similar in that both are commonly used to manage and grow wealth.

The table below highlights the key differences between these two structures:

Features	Self-Managed Super Fund	Family Trust
Primary Goal	Retirement savings (Sole Purpose Test)	Wealth creation & asset protection
Tax Rate	15% (accumulation); 0% (pension phase)	Beneficiaries’ marginal rates
Access	Restricted until a “condition of release” is met	Immediate access at any time
Regulation	High (regulated by the ATO and an annual audit is required)	Lower (State laws, no mandatory audit)
Asset Use	Strictly no personal use	Flexible

Asset Protection Considerations

While both structures can provide strong asset protection, they must be properly established and maintained for that protection to be effective.

In some cases, including bankruptcy, asset protection can be challenged. For example, if assets are moved to protect them from creditors, a bankruptcy Trustee may be able to reverse those transfers under clawback rules if they were made before insolvency.

With Family Trusts, protection may also be affected where a person is found to retain effective control of the Trust. In such cases, courts may treat Trust assets as accessible to creditors.

This article from a specialist legal adviser provides further insight into situations where asset protection may fail.