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Setting Up Your SMSF – Costs to Consider

How much capital do I require for an SMSF?

With so many advantages, it's no surprise that self-managed super funds (SMSFs) are the fastest-growing area of the superannuation market.

They give people more financial control, flexibility, and investment alternatives, but there are also obligations and fees to consider.

Starting an SMSF may be the solution if you want to take control of your superannuation and save for a more comfortable retirement. However, before going the SMSF route, you should be aware of not only the time and effort required to manage your investments but also the costs involved when doing it yourself.

Let's look at how much it costs to maintain an SMSF and how much you need to contribute to make it a feasible alternative for your retirement funds.

Would you like to speak to a specialist? Book a complimentary discovery session by calling: (03)999 81940 or emailing

How Much Money Do You Need to Start an SMSF?

Trustee candidates often wonder: "At what level of wealth does it become economically viable to establish one's own superannuation fund?" The good news is that the Australian Securities and Investments Commission (ASIC) has commissioned research to determine what the magic beginning balance for a self-managed super fund would be (SMSF).

If all DIY super funds were administered in the same way and charged the same fees, determining the optimal minimum balance for a low-cost SMSF would be simple. The fund balance that allows an SMSF to cost less than an alternative super fund, such as an industry super fund or retail super fund, becomes the magic figure for anyone considering an SMSF.

The more realistic response is that the minimum required to make an SMSF financially viable is determined by the individual costs of your SMSF, which can then be compared to what you would be charged if you chose a major super fund option instead of an SMSF. A low-fee large super fund charges around 1% of your account balance in fees on average. If your SMSF expenditures exceed 1% of the value of your SMSF assets, or if they exceed the costs of the large-fund alternatives accessible to you, your SMSF's fund balance may not be the most cost-effective balance.

Despite the fact that all SMSFs have varying cost levels, ASIC has commissioned a study by Rice Warner consultants to determine what the minimum cost-effective fund balance is for an SMSF.

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At least $200,000 and up to $500,000

SMSFs with fund balances of $200,000, according to ASIC's SMSF research, can be cost-competitive when compared to large funds, such as industry and retail super funds, if SMSF trustees undertake some of the fund administration responsibilities themselves rather than appointing a service provider to do everything. Because the research must deal with averages, certain SMSFs will be less expensive to administer than others, depending on fees levied and service level required.

If you want a comprehensive administration service for your SMSF, the minimum fund balance will most likely be $500,000 if you want your SMSF to be less expensive to administer than non-SMSF options.

Balances of less than $150,000

SMSFs with fund balances ranging from $100,000 to $150,000 can compete with traditional retail and personal super funds, but they are not cost-effective when compared to industry funds and the new lower-fee retail super fund offers.

If you want to establish an SMSF with less than $100,000 in superannuation savings, the ASIC study indicated that a $100,000 fund balance is only cost-effective if you intend to make big super contributions or transfer super sums from other funds within a reasonable timeframe.

How much do I need to have to make getting an SMSF worth it?

When it comes to the minimum viable SMSF balance, many people are more concerned with the why than the how. Although, for my family SMSF, it was $200,000 since I considered that the administrative costs, as well as my additional time and effort, would not justify having a self-managed superannuation fund until my wife and I had that much in the fund.

Thankfully, in recent years, it has become more of a personal choice rather than a mere financial one. The personal decision is driven by a desire for greater transparency, greater control, or a hands-on approach to retirement fund administration. It is frequently a desire to pool a couple's finances in order to realize economies of scale or to have the option to fund a home acquisition in superannuation with or without borrowing.

What are the expenses associated with an SMSF?

According to the government's 2009 Super System Review, SMSF members are older, earn more, and have greater superannuation balances than the average worker, with an average SMSF member balance of $456,000. There is a logical explanation why SMSFs with $200,000 or less had greater proportional charges than would be charged in a public offer fund and did not perform as well as larger SMSFs.

Here are some of the reasons SMSF fees are no longer a major concern:

Data feeds from financial institutions, stock trading platforms, and managed funds have led to a dramatic reduction in administrative and auditing costs, as has the practice of outsourcing these functions to countries with lower labour costs. So, if you wish to manage all of the assets yourself, here are the approximate costs:

Once off SMSF Setup Fees

  • Trust Deed: $150-$500
  • SMSF Sole Purpose Trustee Company: $500 – $880

SMSF Annual Fees

  • Online Accounting Admin & Audit (Basic service with little or no tax, accounting or structure advice): $665 – $1660
  • Annual ASIC Corporate Fee: $45
  • ATO Supervisory Levy: $388 ($518 for new funds in 2014)
  • Add in five Share/ETF/Hybrids trades per year at an average of $33
  • No charge for a bank account, term deposits or IPOs.

So you're looking at annual costs of $1,263 or higher. On the basis of the 1 percent fee rule of thumb, someone with $126,300 would be able to administer an SMSF cost-effectively.

Remember, these are the base prices; if you add the need for tax or financial strategy or product guidance, you must be prepared to pay extra, either on an ongoing or fee-for-service basis.

SMSF competitors talk about returns, asset allocations, and fees and commissions, but they entirely overlook the "sleep factor" that many individuals value in an SMSF. People value transparency, security, and control, even if the same characteristics are touted as being available in the "Member Directed" industry or retail funds. Because of the GFC, many people no longer appear to trust the large players, and the internet and technology mean they don't have to either.

So, in light of current market prices to maintain your SMSF, $125,000 may be the bare minimum for a successful fund. Still, I will stick to my recommendation of $200,000 with regular annual payments, which means that the fund should be far above $300,000 within 5 years. This explains the administrative expenditures as well as some good advise and suggestions to help users get the most out of the system.

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How do SMSFs function?

A self-managed superannuation fund, often known as an SMSF, is a private superannuation fund that you manage and control to assist you in saving money for retirement. There can be a maximum of four members in an SMSF. Members of a self-managed super fund (SMSF) generally serve as trustees, which gives them the ability to administer the fund for their personal financial gain. This indicates that you are responsible for making all choices pertaining to the fund as well as ensuring that you remain in accordance with all applicable laws and financial regulations.

When you are in charge of managing your own SMSF, you are responsible for making investment choices that correspond to the amount of money you will require during retirement. This indicates that you will require knowledge and abilities related to finance in order to make sensible judgments and manage a variety of legal responsibilities.

However, despite the fact that an SMSF can be a fantastic choice if you want to take control of your retirement assets, you will need to take into consideration the significant establishment and maintenance fees. You need to have a comprehensive understanding of these fees before you can even begin to think about whether or not an SMSF is the right choice for you.

What are the costs of running an SMSF?

Putting together and managing an SMSF will result in a lot of costs being incurred. These expenditures can be broken down into three primary categories: initial costs, ongoing charges, and investment management costs.

Costs of establishment

In order to manage a self-managed superannuation fund (SMSF), you must first correctly establish the fund. Acquiring a trust deed, selecting an individual to serve as trustee, and putting one's signature on a trustee declaration are all components of this process. According to research conducted by Rice Warner in 2013, these initial setup costs could fall anywhere from $345 and $990.

However, if you go with the option that is frequently recommended, which is to use a corporate trustee, and if all of the members of the SMSF are also directors of the corporate trustee, then the fees that are incurred from the Australian Securities and Investment Commission (ASIC) and the service provider can range anywhere from $916 to $2,035.

Operating expenses

Charges are linked with a self-managed super fund (SMSF), just as they are with any other type of super fund. Among these are the fees associated with making investments as well as satisfying the auditing and accounting requirements of your SMSF. You should keep in mind that these costs will reduce the amount of money you have saved for retirement.

Your SMSF's ongoing operational costs include:

  • An annual corporate ASIC fee;
  • ATO annual supervisory levy;
  • Audit costs;
  • Costs of preparing financial statements and tax returns;
  • If your SMSF provides an income stream, you must get an actuarial certificate (pension).
  • Fees for financial advice;
  • Asset valuations owned by the SMSF;
  • Legal costs, such as those incurred should the trust deed need to be modified;
  • Help with fund administration tasks;
  • SMSF members' insurance.

The level of complexity of your SMSF and the costs charged by third-party providers (accountants, law firms, and so on) that you contract to assist you in satisfying all of your ATO responsibilities can both have a significant impact on the fees that you are required to pay. You also have the option to choose between full-service providers who handle all aspects of fund administration for you and those who allow you to manage some of the funds on your own.

According to the findings of the research conducted by Rice Warner, the annual operational expenditures of an SMSF during the accumulation period may fall anywhere between $1,163 and $2,367. If, on the other hand, your SMSF contains a pension, this number can rise to $2,957 each year, while the whole administrative service charges can reach over $8,000 per year.

Expenses associated with investment management

SMSFs also utilize managed funds for a small number of their investments, therefore investment management fees are the third expense to consider. The magnitude of your investment in the managed fund will determine the range of these expenses. In spite of this, the analysis conducted by Rice Warner anticipated that SMSFs with a balance of $500,000 would have to pay annual investment administration fees ranging from $208 to $714.

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The Advantages of Investing in a Larger SMSF Balance

One advantage of an SMSF is the ability to compare fees on quantities.

Another reason you might choose an SMSF when your balance exceeds $500,000 is the level of control you have. When a balance approaches this amount, we normally pay closer attention to our super, as we want to ensure it's invested properly.

When your SMSF reaches a certain size, we advise our clients to create a proper financial plan. This enables you to understand where your super is likely to grow and what kind of lifestyle you might expect when you retire.

Taking an active role in your SMSF gives you greater control and makes your money appear more tangible. However, increased involvement comes at a cost that retail and industry super funds do not consider: your time. Managing your SMSF takes time, especially in the early stages, so you must be willing to put in the effort.

There's more to opening an SMSF than just having enough money

It is critical to note that having a super balance in excess of $250,000 is not a requirement for establishing an SMSF.

Starting an SMSF is about more than simply money. It is also important to consider whether it is appropriate for your personal financial condition.

When considering establishing an SMSF, you should consider the following:

  • Is this something I want to do?
  • Do I have the financial knowledge to handle my SMSF?
  • Do I have access to the right advice to assist me in running it?
  • Are there other super options that may be better suited to my situation?

In some circumstances, establishing an SMSF is not the best solution. A retail or industrial super fund may be a better fit for your goals and situation.

So, if you're thinking of establishing an SMSF, talk to your financial adviser first.

Potential disadvantages of SMSF formation

While SMSFs have numerous advantages, they may not always be the best option for your specific circumstances. This means that you should only set up an SMSF if you intend to actively manage your super.

Having an SMSF has a number of obligations; you are effectively the owner and operator of a super fund. As trustee, you are responsible for running the fund correctly and remaining in compliance with the Australian Taxation Office (ATO). Your responsibilities include the following:

  • submitting annual tax returns;
  • Every three years, an independent audit is performed;
  • Having a written investment strategy

You should also examine how much money you have available for your SMSF setup. In most circumstances, your SMSF will require at least $200,000 to be viable.

Finally, for SMSF setup and management, you should always seek professional assistance. Professional advisers can assist you in developing your investment strategy and handling all of the necessary regulatory obligations.

If you want to get the most out of your SMSF arrangement, you must prepare and plan ahead of time. If you don't have a clear answer to any of the above concerns, you should seek expert assistance before establishing your SMSF.

Even if you have a clear answer to each of these concerns, you should seek expert assistance to verify that your SMSF is compliant and that your investment strategy is sound.

Would you like to speak to a specialist? Book a complimentary discovery session by calling: (03)999 81940 or emailing

SMSF minimum cost-effective balance

  • SMSFs are simply not a competitive choice when compared to APRA-regulated funds for amounts less than $100,000.
  • $100,000 to $150,000: SMSF costs can be competitive with bigger retail super fund costs if trustees perform some administration chores. However, industry funds and personal super alternatives are less expensive options.
  • More than $200,000: SMSFs can compete with retail and industrial funds if the trustees are ready to shoulder some administration.
  • More than $250,000: SMSFs can be the most cost-effective alternative for balances of this magnitude if the trustees handle some of the management.
  • More than $500,000: If your balance is greater than $500,000, the analysis discovered that SMSFs can be the cheapest option, even if you choose full-service administration.

To summarize, the analysis discovered that if you're ready to undertake some of the administration yourself, you'll need a balance of at least $200,000 to $250,000, whereas full-service administration is only cost-effective if you have a balance of $500,000 or more.

Of course, operational costs can vary significantly from one SMSF to the next, so it's critical that you fully understand all of the potential costs before choosing whether an SMSF is a correct choice for you.

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