Self-managed superannuation funds (SMSFs) have become the retirement savings vehicle of choice for more than 1 million Australians.

According to Australian Tax Office data, there are now more than 600,000 SMSFs collectively managing close to $900 billion in superannuation assets.

Yet, as popular as SMSFs have become over time, it's also clear that many people operating their own super fund don't have a full understanding of what they can and can't do under the law.

The ATO, which regulates the SMSF sector, takes a harsh approach when it comes to non-compliance in the form of issuing fines, imposing civil and criminal protections, all the way though to withdrawing compliance status and freezing fund assets in the most serious cases.

Here's five common SMSF myths that all fund trustees should know.

I can use my SMSF to invest in anything

No. You're only able to invest in assets that are defined within the scope of your fund's trust deed. Under superannuation law, you also can't use your SMSF to buy residential property from yourself or a related party. However, you can sell certain other assets to your SMSF at market value, including shares, exchange traded funds, managed funds, and commercial property.

I don't need a formal investment plan

No. Under superannuation law you must prepare and implement an investment strategy for your fund and review it regularly. Your SMSF investment strategy needs to be in writing and tailored to the specific circumstances of the fund. In other words, it needs to detail the fund's investments and explain how they meet the retirement objectives of its members. This must accord with the fund's percentage or dollar allocation to different asset classes.

I can borrow from my SMSF under a loan agreement

No. You and other members can't access any cash reserves held within your SMSF, even under a formal loan agreement. Accessing retirement funds for personal reasons will trigger a breach of superannuation rules and likely result in penalties. The only exception is where a loan is made to a private related company under a documented loan agreement. Any such loan can't exceed 5 per cent of the fund's total assets.

I can make use of the assets held by my fund

No. Under the sole purpose test, all assets within a SMSF can't be used for anything other than providing retirement benefits to members. That means, for example, that an investment property held within the fund can't be used by members, their families, or other related parties. The same goes for collectable assets such as artworks, motor vehicles, coins or jewellery. Collectible assets must be stored at an independent facility and individually insured by the fund.

The trust deed is a static document

No. SMSF trust deeds do become outdated over time, primarily as a result of significant changes to superannuation legislation. Trust deeds shouldn't need to be updated regularly, but a periodic review by a licensed financial professional such as an accountant is recommended.

Summary

While the ATO is most concerned with deliberate compliance breaches by SMSF trustees, the regulator has consistently made it clear that trustees need to be fully aware of their legal obligations under the Superannuation Industry Supervision Act.

Trustees also need to strictly abide by their SMSF trust deed, which can contain stipulations on the types of assets their fund is allowed to invest in. Unless read carefully, a trustee could inadvertently breach the conditions of their own fund.

The Australian Securities and Investments Commission has previously warned that the decision to establish an SMSF shouldn't be taken lightly.

"SMSFs may be an attractive option for investors wanting more control over their superannuation investment strategy, but it requires real skill, care and diligence to manage your own superannuation," ASIC says.

"SMSFs are not for everyone simply because not everyone can meet the significant time, costs, risks and obligations associated with establishing and running one."

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