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What is an SMSF term deposit?
An SMSF term deposit offers trustees of self-managed super funds a way to invest cash over a fixed period with a fixed return.
Beyond some specific rules relating to eligibility and the application process, an SMSF term deposit works the same as an ordinary term deposit. It allows you to invest a lump sum with a fixed interest rate for a period of time of your choosing, typically between one month and five years.
Interest can typically be paid monthly, quarterly, six-monthly, annually or when the deposit reaches its maturity at the end of the term.
While a term deposit isn’t necessarily a requirement for an SMSF, it’s a popular defensive or low-volatility asset to have as part of the investment strategy. According to the Australian Taxation Office’s June 2026 quarterly SMSF Statistical Report, the total estimated assets of SMSFs were valued at $1.107 trillion across 680,301 self-managed super funds with 1,246,552 members. Cash and term deposits (16%) were behind only listed shares (26%) as the top asset allocation by value.
Amanda Cassar, a financial adviser and SMSF Specialist Adviser at Wealth Planning Partners, explains that term deposits are an attractive investment because of the certainty they offer to retirees.
“Knowing exactly what interest they'll receive and when their capital will become available provides peace of mind, particularly when investment markets are volatile.”
What impacts your SMSF term deposit rate?
Term duration
The term duration you choose will impact the interest rate on your SMSF term deposit. Depending on the stage we’re at in the interest rate cycle, the highest rates could be on shorter or longer terms. If you are in a position to be flexible, it can be worth considering a range of term durations rather than only comparing rates based on a single term length.
Interest payment frequency
Whether the interest is paid monthly, quarterly, annually or at maturity may be important for your investment strategy. It could also influence the term deposit rate as some providers pay a higher rate of interest on term deposits if the interest is only paid out at the end of the term as opposed to monthly.
Deposit amount
Some providers offer tiered interest rates on their term deposit products based on the deposit amount. It's important to be aware of the tiers that apply to the product as it could impact your overall return.
Early withdrawal
If for any reason you need to withdraw the funds before the term ends, you could risk a penalty from the provider in the form of a lower interest rate. You may also need to give the bank a minimum amount of notice in order to be able to withdraw funds early – it’s usually not instant. All this makes term selection all the more important.
Not all SMSF term deposits are labelled as ‘SMSF term deposit’
Something to watch for is that it’s common for providers to not offer a standalone SMSF term deposit product and instead make their standard or business term deposit available to SMSF customers. This can make it trickier to compare options, but it’s important to not overlook high-rate options simply because the product doesn’t have SMSF in the name.
How to apply for an SMSF term deposit
Here’s what to consider when applying for an SMSF term deposit.
Check your eligibility
Only eligible SMSF trustees can open an SMSF term deposit. Most providers will also require the fund to hold a current Australian Business Number (ABN). There may also be a cap on the number of trustees allowed on a single account, e.g. Judo Bank only allows SMSFs with one corporate trustee or between two and four individual trustees to apply online.
Compare SMSF term deposits
Before applying, also make sure the term deposit you’re considering for your SMSF is competitive based on its interest rate, fees and features. Choosing a term deposit from the bank your SMSF is already with won’t necessarily be the most suitable option.
Check the investment meets your fund’s obligations
Before investing, trustees should check that the term deposit is permitted under the fund’s trust deed and is consistent with its written investment strategy. You’ll also need to ensure the term deposit is opened on standard commercial terms without preferential treatment because a fund member or related party has a connection to the provider.
Trustees should also ensure the fund retains enough accessible cash to meet expenses and any required benefit payments.
Make an application
After choosing an SMSF term deposit, you will need to provide documentation to the provider during the application process to verify the fund’s details and the identities of its trustees or corporate trustee’s directors. This may take the form of a certified copy of the SMSF’s trust deed, the fund’s Australian Business Number (ABN) and Tax File Number (usually requested but not required).
Photo identification for each individual trustee or all directors, and proof of the fund’s bank account are usually also requirements. At this stage, you’ll also need to specify your choice of investment amount, the preferred term, and the interest payment frequency (monthly, annually or at maturity).
Deposit funds and make no withdrawals
Interest will typically begin to accrue once the account is open and the money is transferred from the SMSF bank account into the term deposit. To ensure that there are no rate penalties and that the term is successfully fulfilled, avoid making any withdrawals.
Pros and cons of SMSF term deposits
Pros
- Term deposits are generally considered less risky than growth investments, like shares.
- It offers a fixed, predictable return, as long as the funds remain invested.
- Offers protection from falling market rates as the rate is fixed at the start of the term.
Cons
- You lose flexibility over those funds as the money is essentially locked away and withdrawing early can result in paying a fee, earning a reduced interest rate or both.
- If the interest rate your term deposit earns for your SMSF is lower than the rate of inflation, you will ultimately lose purchasing power over time.
- It’s a fixed interest rate for the life of the term deposit, so even if interest rates overall in the economy are increasing, your return won’t improve.
Amanda Cassar, Financial Adviser and SMSF Specialist Adviser at Wealth Planning Partners
“One overlooked benefit is the ability to plan around retirement cash flow. For SMSF trustees drawing regular pension payments, having funds available through cash reserves and maturing term deposits can reduce the need to sell growth investments during a market downturn.
However, there’s also reinvestment risk. A trustee enjoying an attractive fixed rate today may find that substantially lower rates are available when the deposit matures. As interest rates decline, the returns available on new term deposits may become less attractive. If the interest earned doesn't keep pace with inflation, investors may be preserving their capital in dollar terms while gradually losing purchasing power.”
Amanda Cassar, Financial Adviser and SMSF Specialist Adviser at Wealth Planning Partners
What SMSF rules should be considered before opening a term deposit account?
The Australian Taxation Office lists obligations SMSF trustees must follow when making investment decisions and maintaining the fund. Some of these obligations include:
Meeting the sole purpose test The sole purpose of an SMSF investment is to provide retirement benefits to the fund’s members. Under this obligation, it is generally illegal to access retirement funds early, invest in a related business, use finance for personal use, or be paid for your duties or services as a fund trustee.
Develop and review the investment strategy Decisions must reflect the SMSF’s investment strategy which takes into account members’ personal circumstances, investment objectives and types, as well as the need for liquidity and diversification of assets.
Pay benefits Trustees are legally responsible for ensuring that a member only accesses their super benefits when they meet a condition of release – e.g. reaching preservation age and retiring.
Comply with investment restrictions Any investment that an SMSF makes cannot provide present-day benefit for the members or related parties. This means that, apart from in very limited circumstances, you can’t acquire assets from or lend money to fund members and the SMSF can’t borrow money.
What are the alternatives to an SMSF term deposit?
Amanda Cassar from Wealth Planning Partners explains that “term deposits can play an important role in an SMSF portfolio, but I wouldn't necessarily describe them as better than other investments. Rather, they serve a different purpose.”
“We often use term deposits as part of a diversified investment strategy, alongside shares, managed funds and other assets. They can provide a relatively stable component of the portfolio while allowing longer-term investments the opportunity to grow.”
Some other investment options to include in an SMSF strategy include:
- High interest savings accounts
- Listed shares
- Managed funds
- Bonds and debt securities
Why include other investment options in an SMSF strategy?
Amanda Cassar, Financial Adviser and SMSF Specialist Adviser at Wealth Planning Partners
“Term deposits can be a valuable defensive component of an SMSF, but they shouldn't be mistaken for a complete retirement investment strategy. Retirees need to balance certainty today with sufficient growth to fund their lifestyle tomorrow. As I often remind clients, the objective isn't simply to avoid losing money in investment markets. It's also to avoid losing purchasing power over time.”
Amanda Cassar, Financial Adviser and SMSF Specialist Adviser at Wealth Planning Partners
