The ETFs that suit an SMSF are the usual core building blocks: Australian shares such as VAS, global shares such as VGS, bonds and cash such as SUBD and AAA, or an all-in-one fund such as VDGR. The bigger risk is behavioural: selling in a crash, or chasing last year's winner. A three-part structure of cash buffer, defensive assets and growth, sized so you pass the "pillow test", does more for most trustees than picking a better fund.
There are no "SMSF ETFs"
Every ETF on the ASX can be held by an SMSF, and none is designed only for them. What changes inside super is the tax and the rules around the fund, not the product:
- Accumulation phase: earnings are taxed at 15%, and capital gains on assets held more than 12 months effectively at 10%.
- Pension phase: earnings on assets supporting a retirement pension are generally tax-free, and franking credits from Australian shares can be refunded in cash.
- An investment strategy is required. Trustees must document and regularly review a strategy covering risk, diversification, liquidity and the ability to pay benefits.
- Liquidity matters. The fund must be able to pay pensions, audit fees, the ATO levy and any insurance without a forced sale.
The retirement red zone
The five years either side of retirement are when your balance is largest and your ability to recover from a loss is smallest. A 30% fall at 35 is a setback. A 30% fall at 66, while you are drawing a pension, can permanently reduce what you live on, because units sold at low prices never get the chance to recover. This is sequence risk, and it is the reason SMSF structure matters more than SMSF product.
Pension minimums: the numbers you must plan for
Once your SMSF pays a retirement pension, the law requires a minimum withdrawal each year, set as a percentage of the balance on 1 July. Miss it and the pension can lose its tax-free status for that year.
Minimum yearly withdrawal on a $1 million balance
The money has to come from somewhere every year, in good markets and bad. The question is whether it comes from cash you set aside, or from shares sold at whatever price the market offers that month.
The three-part SMSF portfolio
A simple structure solves most of the problem. Split the fund into three parts, each with one job.
- Cash buffer: one to two years of pension payments. In a cash ETF such as AAA or BILL, or a high interest account. You draw from here, so you never sell growth assets in a fall.
- Defensive: bonds and credit. SUBD, VAF or VBND add stability and are used to refill the buffer.
- Growth: the core. VAS or A200 for Australian shares and their franking credits, plus VGS, IVV or BGBL for global growth.
The three-part SMSF portfolio
In a normal year, distributions from shares and bonds refill the cash buffer. In a bad year, you draw from the buffer and leave everything else alone. The simplest version is one all-in-one ETF plus one cash ETF, for example VDGR, which already holds about 30% in bonds and cash, alongside AAA.
Choosing the defensive building blocks
Not all defensive ETFs behaved the same over the past five years. Rising interest rates in 2022 pushed traditional bond funds down, while cash and floating-rate credit held up.
Cash and bond ETFs: one year and five years
That does not make traditional bonds pointless. They have historically risen when share markets fall sharply in a recession, which cash and credit do not do as reliably. Many trustees hold a mix. Compare options on our bond ETFs and cash ETFs pages, or read every bond ETF on the ASX.
The behavioural trap
Here is the part nobody talks about. In a large industry fund, a crash happens to you, and you mostly do nothing because switching takes effort. In an SMSF, you can log in and sell everything in two minutes, at the bottom, with nobody to talk you out of it.
- Panic selling. Selling core ETFs after a fall turns a temporary loss into a permanent one, and a retiree rarely gets back in at the right time.
- Chasing performance. Moving the fund into whatever topped last year's tables. Over the past year, SEMI rose 109% while VAP fell 14.3%. Leadership like that rotates, and arriving late is costly.
- Tinkering. Frequent switching adds brokerage, capital gains tax and complexity, and rarely adds return.
The pillow test
Ask yourself: if the fund fell 30% next year, could you put your head on the pillow and sleep? If the honest answer is no, the fix is a more defensive mix now, not a panic sale later. The trade-off is real, though. More defensive funds grew noticeably less over the past five years.
Five years in all-in-one funds, by level of bonds
The right mix is the most growth you can genuinely hold through a bad year. A portfolio you abandon in a crash will do worse than a slightly more conservative one you stick with. Compare VDHG vs VDGR and VDGR vs VDBA.
SMSF or industry fund?
An SMSF gives you control over exactly which ETFs you hold, when you buy, and how you manage your cash buffer and tax. It also gives you the responsibility, the annual audit and running costs, and the behavioural risk described above. It tends to suit trustees with larger balances, a genuine interest in managing their money, and the discipline to follow a written plan. Read super vs ETFs and best ETFs for Australian retirees for more.
Common questions
What are the best ETFs for an SMSF?
The same broad, low-cost ETFs any investor uses: Australian shares (VAS, A200), global shares (VGS, IVV, BGBL), bonds (VAF, SUBD, VBND) and cash (AAA, BILL), or an all-in-one fund such as VDHG or VDGR. Structure and discipline matter more than the specific fund.
How much cash should an SMSF hold in pension phase?
Many trustees hold one to two years of pension payments in cash, so they can meet minimum drawdowns without selling shares after a fall. On a $1 million fund drawing 5%, that is $50,000 to $100,000.
Can an SMSF get franking credits refunded?
Yes. In pension phase, where earnings are generally tax-free, excess franking credits from Australian shares ETFs can be refunded in cash by the ATO, which is one reason Australian shares are popular in SMSFs.
What is the minimum pension drawdown for an SMSF?
It depends on age: 4% under 65, 5% from 65 to 74, rising to 14% from age 95, applied to the balance at 1 July each year.
Joshua Stega is a financial adviser with 20 years' experience and the founder of ETF Adviser. He built ReviewETF to make every Australian ETF easy to find and compare.
General information only. It does not take into account your objectives, financial situation or needs. Consider the PDS and TMD before investing. Past performance is not a reliable indicator of future performance. Data as at 30 September 2026.