Can I start an SMSF with $100,000?

Superannuation law does not specify a minimum amount to start an SMSF. While you can start an SMSF with $100,000, it’s important to consider whether you should.

Historical research from Rice Warner and the University of Adelaide found that costs of operating an SMSF is proportionally higher than APRA funds and performance indicators decreased with balances under $100,000. Recent research coming out of the University of Adelaide International Centre for Financial Studies notes the performance indicators differed between large SMSFs and small SMSFs (balances under $200,000) ranged from 7% for large SMSFs to 0.4% for small SMSFs the research appears to support that SMSFs with lower balances do not perform as well.

The cost of operating an SMSF with SMSF Australia is not based on the SMSF balance but relates to the complexity of the fund. The operating costs can be the same for a fund with a $100,000 balance of with a balance of $1,000,000.

Hint – the performance indicators were based on analysed data from SMSFs for the period from 1 July 2018 to 30 June 2023 known as the five-year annualised rate of return (ROR).

When would you consider starting an SMSF with a balance under $100,000?

It is generally accepted that $100,000 would not be appropriate to start an SMSF.  However, there are circumstances when it may be viable. Starting with a low balance may be viable in circumstances where the members would:

• engage professional advisers to obtain strategic advice and ongoing financial advice which can include financial planners, legal advisers and SMSF specialist administrators or accountants
• not be near retirement age ensuring they can maximise contributions into super
• be expecting a future inheritance which can be contributed to an SMSF
• be selling a business or investment property and invest part or all of the proceeds into super
• own their own home or only have a small mortgage
• have knowledge and experience of financial markets and understand the concept of risk and return
• have assets such as listed shares, managed funds or property owned personally
• not have long term health issues
• high worth individual or be working in well paid professional, construction or other industrial employment or self-employed in a business
• have sufficient spare time to operate an SMSF

What amount is considered to be the minimum SMSF balance?

A balance of $200,000 is gaining traction in the superannuation industry as being the minimum SMSF balance needed for an SMSF to be economically viable.  Of course, SMSF Australia does not recommend any specific balance as legally we are unable to do this as it is solely the role of a financial planner. However, ATO statistics and research by Rice Warner and the University of Adelaide seem to support that the costs of operating an SMSF is less than an APRA fund when the super balance is $200,000 or more.

What are the set-up costs of an SMSF?

The set-up costs vary across different providers.  It is crucial to understand what is being provided. Some no-frills operators establish a new SMSF for very low prices but there is no assistance and no corporate trustee, and if done incorrectly, may significantly delay the registration of the fund. Low fees do not include a sole purpose corporate trustee which is what we highly recommend and is included in our set-up costs. We are always available to assist you in completing the data required to set-up an SMSF.

Our set-up costs include the ASIC fee for a sole purpose trustee company, registered office, legal costs of the SMSF trust deed and other associated paperwork, ATO registrations and our time to assist you with the set-up process and to organise transfer/rollover of existing super accounts.

What are the operating costs of an SMSF?

The ATO provided the average and median costs for the following operating expenses based on statistics collected from SMSF annual reports for the 2022/23 financial year.

Expense	ATO- Average	ATO– Median	SMSF Australia fixed fee
			Simple (GST exc)	Complex (GST exc)	Very Complex (GST exc)
	$	$	$	$	$
SMSF auditor fee	641	550	Yes	Yes	Yes
Management and admin expenses	4,861	3,166	Yes	Yes	Yes
Other deductions	3,170	334
Annual BAS for GST funds			Yes	Yes	Yes
Total costs	8,672	4,050	1,300	1,600	2,000
Additional fees
ATO Charged Supervisory levy	259	259	259	259	259
Actuarial Fee (pension funds only)			89	89	89
ASIC annual fee 2026 year (sole purpose corporate trustee)			65	65	65
Total plus additional fees	8,672	4,050	1,813	2,113	2,533

Note:

• Supervisory fee is additional and for a first-year fund which is $518 dropping to $259 thereafter and nil in the year the fund is wound up.
• This is for annual BAS, in the rare case a fund is registered for quarter BAS then the fees are $180 (gst exc) per quarter.

Our fees, unlike many other accounting practices, include our time to lodge the ASIC annual statement for a corporate trustee.