Setting up an SMSF
Emily Cooper No Comments

Setting up an SMSF

Self Managed Super Funds are not for everyone and setting up an SMSF does involve costs and quite a bit of work for the new trustees but in turn, the benefits can be considerable for the right investor. In the context of ongoing public debate regarding the appropriate minimum size for an SMSF, new research has been provided to provide insights into the true costs of running an SMSF. And the research shows SMSFs are cheaper to run than many people may think and can be far more cost effective for mid sized funds provided the trustees have a plan.

Why Research?What are the costs of Setting up an SMSF

The research on the costs of setting up an SMSF allows SMSF trustees and potential SMSF trustees to compare appropriate estimates of fees for differing SMSF balances with institutional superannuation funds and industry superannuation funds (commonly referred to as APRA regulated funds). The costs include establishment, annual compliance costs, statutory fees and some investment management fees. Direct investment fees have been excluded as these are totally dependent on what you choose to purchase within your SMSF. For example, an SMSF with direct property has the initial cost of Stamp Duty on the purchase of the investment property but there is no way to directly compare this to an industry fund as they do not provide direct property as an investment option.

What does the research tell us when Setting up an SMSF?

  • SMSFs with less than $100,000 are not competitive in comparison to APRA regulated funds (If you have a plan on how you want to invest and build your balance up then it may be worth setting up an SMSF for long term savings plans).
  • SMSFs with $100,000 to $150,000 are competitive with APRA regulated funds (SMSFs of this size can be competitive using our services).
    SMSFs with $200,000 to $500,000s are competitive with APRA regulated funds even for full administration. (SMSFs above $250,000 become a very competitive alternative).
  • SMSFs with $500,000 or more are generally the cheapest alternative regardless of the administrative options taken. (For SMSFs with only accumulation accounts, the fees at all complexity levels are lower than the lowest fees of APRA regulated funds).
  • This research highlights that SMSFs with a low complexity can begin to become cost-effective at $100,000. This is a significant departure from what many had believed to be the case. For simple funds, $200,000 is a point where SMSFs can become cost competitive with APRA regulated funds or even cheaper.

Comparing 2 member funds

From a cost perspective, the real benefit of an SMSF is when it achieves scale in balance and this can occur when members pool their superannuation savings. The below comparison can be used to grasp the ranges you might fall into. As the APRA figures are an average it may be worth looking at your own fund’s annual fees for a more accurate comparison.

Combined Balance Our Estimated Annual Fees – ex GST

(2 members)

APRA regulated fund Low fees

(2 members)

$50,000 $1,200 $503
$100,000 $1,200 $863
$150,000 $1,200 $1,216
$200,000 $1,200 $1,566
$250,000 $1,200 $1,942
$300,000 $1,200 $2,301
$400,000 $1,200 $3,013
$500,000 $1,200 $3,725

But it’s more than cost

When determining whether an SMSF is right for you, your analysis must go further than just a simple comparison of the costs versus APRA Regulated Funds. It should also factor in your retirement and income goals and whether you have the desire, time and expertise to take on the role of an SMSF trustee. It’s also worth factoring in SMSF members may not receive the same level of protection in the event of theft or fraud that members in APRA regulated funds do. You do however have much more flexibility in your investment options.

For a breakdown of the costs of setting up an SMSF checkout our Setup page.

How can we help?

If you would like to discuss whether an SMSF is right for you, please feel free to give us a call on 1300 392 544 or get in touch online and we will happily go over your options and help you understand your situation.