Creating an SMSF investment strategy using ETFs

For many Australians, running a self-managed super fund (SMSF) means they can take significant control of their financial future. With that control comes the opportunity to shape your strategy to something on your terms.

New tax rules affecting high-balance members, ongoing market uncertainty and evolving superannuation regulations mean your SMSF investment strategy needs to be both robust and adaptable. If you’re building your strategy around ETFs, you’re already leveraging one of the most flexible and cost-effective investment tools available to retail investors. If not, this guide will show you how to do that.

What is an SMSF investment strategy?

An SMSF investment strategy is a written plan outlining how you invest to achieve retirement goals. Under the Superannuation Industry (Supervision) Regulations 1994, anyone who wants to set up an SMSF must have one, review it regularly and ensure it reflects the circumstances and wishes of each member.

Think of it as your fund roadmap: where you’re heading, how you’ll get there and what might derail you along the way.

Key components of your strategy

1. Primary goal and risk tolerance

Start by defining what you want to achieve and how much volatility you can stomach.

For example, a couple in their mid-40s with a combined balance of $400,000 might target 8% annual growth. As a result, they might have a higher risk tolerance than SMSF members who have only five years until retirement and therefore might be shifting capital toward capital preservation. Professional advice can help navigate these trade-offs, particularly as circumstances evolve.

2. Asset allocation framework

Your strategy should specify target ranges for different asset classes. The ATO expects genuine asset allocation ranges (e.g. 40-50% equities) and not overly broad ranges like 0-100% that fail to demonstrate genuine planning.

You can implement this simply by using ETFs, as they offer inherent diversification and liquidity across Australian equities, international shares, bonds and alternative assets.

Example: Growth-oriented SMSF allocation

Source: Betashares (for illustrative purposes only)

3. Liquidity and cash flow

An SMSF strategy must address how obligations like tax payments, audit fees, insurance premiums and drawdowns will be met. For instance, if you have started to withdraw regular income from your super (i.e. the pension phase), then it may make sense to maintain a cash buffer of 3-6 months’ worth of expenses in a money market ETF.

4. Division 296 considerations

From 1 July 2026 (pending passage of legislation), members with total super balances exceeding $3 million face an effective tax rate of 30% for a portion of earnings attributable to a balance between $3 million and $10 million (double the current 15%). Balances over $10 million may attract as much as a 40% tax rate for a percentage of earnings equal to the percentage of an individual total super balance above $10 million. Both rates only apply to a modified taxable income of a SMSF, including realised earnings.

One important feature of this Division is that income from assets supporting pension liabilities is also included in the calculation of the modified taxable income. Accordingly, pension income, currently exempt from income tax, will be subject to income tax.

For high-balance SMSFs, these proposed changes mean you’ll need to consider:

• Additional liquidity to pay the extra tax
• Timing of asset realisations to manage tax liabilities
• Further compliance costs to determine tax liability under this proposed Division
• Targeted restructuring strategies (where appropriate), such as recontribution strategies for those aged 60+ approaching retirement.

If Division 296 may affect you, obtaining professional advice is highly encouraged. The tax calculation will likely be complex and the implications vary significantly based on your fund’s composition and member circumstances.

5. Other recent changes

From 1 July 2024, concessional contribution caps increased to $30,000 (from $27,500) and non-concessional caps to $120,000 (from $100,000). The preservation age was set at 60 years old for everyone. On 1 July 2025, the transfer balance cap also increased by $100,000 to $2 million and the superannuation guarantee rate was raised to 12%.

Other essential elements

• Maintain a list of approved investment types or products. This isn’t legally mandated, but it helps prevent impulsive decisions and ensures proper due diligence before adding new holdings.
• Superannuation law requires you to consider personal insurance (life, TPD, income protection) for each member. Also consider trustee liability insurance and, if relevant, landlord insurance for property holdings.
• You must review your investment strategy at least annually and whenever circumstances change materially. Document any strategy reviews in trustee meeting minutes for your auditor.

What you can’t do

SMSFs can’t buy assets from members or related parties, lend to members or (generally) borrow money. Exceptions exist but you should seek professional advice to find out what these are.

While you can concentrate your entire balance in one asset, you must document how this aligns with members’ objectives and explain your approach to concentration risk.

ETF ideas for SMSFs

If you decide to build an SMSF with the assistance of ETFs, you’d be in good company. Hundreds of thousands of Australians have an SMSF that owns at least one ETF. 

Here are some examples that address different components of an SMSF strategy, from core equity exposure to income generation and liquidity management.

• A200 Australia 200 ETF offers access to 200 of the largest companies listed on the ASX, serving as a low-cost and diversified core holding. This fund aims to replicate the performance of the Australian sharemarket (before fees and expenses) while providing quarterly distributions.
• NDQ Nasdaq 100 ETF gives exposure to top-tier US technology giants such as Microsoft, Alphabet and Nvidia. NDQ offers investors a gateway to the innovation economy.
• MMKT Australian Cash Plus Active ETF provides access to cash and high-quality money market securities, offering retail investors enhanced returns on cash while maintaining a high degree of capital stability.
• ECRD Australian Enhanced Credit Income Complex ETF targets a high level of monthly income by investing in a diversified portfolio of investment-grade Australian fixed-income securities. This fund is a compelling option for SMSF investors seeking income but who are also comfortable with the additional risks that gearing can present.
• YMAX Australian Top 20 Equities Yield Maximiser Complex ETF utilises a covered call strategy to enhance income over and above dividends, which may be particularly beneficial in sideways trading markets.

You can learn more about each ETF on Betashares Direct.

A strong strategy is a strong foundation

If you run an SMSF, a well-crafted investment strategy serves as the foundation of your retirement planning.

With the introduction of Division 296 and the broader changes to SMSF legislation over the last few years, having a clear and well-documented strategy is important. Review your strategy regularly, ensure it reflects each member’s current circumstances and don’t hesitate to seek professional advice.

If you’re considering how your fund is implemented in practice, you can also explore SMSF accounts on Betashares Direct to see how different platform features may support your investment strategy.

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