What does a SMSF actually cost?

Cara Brett 31 January 2015

Given that SMSF are the new black at the moment, I thought I would address a very important factor when it comes to starting and running a SMSF… the cost.

So many people love the idea of starting a SMSF but in many circumstances, it isn’t the right thing to do for the client. More often than not, the reason they want to open a SMSF, is because they believe they can access the funds to purchase whatever they want. It isn’t true.

There are rules and restrictions on what you can and can’t buy. So if you think that you can buy a house for your daughter to live in, rent free, then you better think again.

But I digress, that is another post all together.

Today I am going to outline the estimated costs associated with opening and running a SMSF so that you have enough information to make the decision for yourself.

(disclaimer: these figures are not exact, each SMSF provider will charge different fees. I have given estimates based on my research in the financial services industry, but in no way are these guaranteed)

The Set Up Fees:

New fund – individual trustee – establishing a trust deed – between $440 to $770

New Fund – corporate trustee – establishing a trustee incorporation – between $700 to $1,250

Yearly fees:

The administration service

In order to maintain a fund to the required standard, the following needs to be completed each year, usually facilitated by an administration service:

–          Bookkeeping and record keeping for the fund

–          Online reports

–          PAYG payment statements

–          Centrelink schedules for those who require them

–          Financial statements for the fund

–          Fund income tax and regulatory return

Between $1,650 to $2,650 per year and upwards

Yearly Audit fee: Between $440 to $900

Yearly ATO levy: $259 (for the 13/14 financial year)

The above fees are just the set up and running cost. It doesn’t take into account underlying investment fees that you may have and the costs associated, or any professional financial advice fees that you may need to pay.

Investing is complicated, so if you are going to all of the expense to have a SMSF, then it is also worth paying for the professional advice. Managing large sums of money is a profession, so assuming that you can ‘pick a good stock’ by browsing the paper on the weekend is a bit over confident to say the least.

Assuming you are not paying for financial advice, you are looking at between $2,789 to $5,059 in the first year, and $2,349 to $3,809 in the subsequent years to run a SMSF.

Most financial advice for a SMSF is going to start at approximately $2,000 pa and I have personally seen it up to $17,000 pa.

That’s a lot of money if your super balance isn’t particularly high. It is a common belief that it isn’t worth it to have a SMSF until you have a balance of $200,000, and it seems to be about right. If the cost of running a super fund is over 2% of the fund value, you need to reconsider.

So, with this information, does it make you think twice about getting a SMSF?

The post is from our resident Financial Planner Cara Brett, check out her details in the About Us section.

Posted in: Cara Brett, Superannuation and Financial Planning

About the author: Cara Brett

Cara Brett proudly heads up Bounce Financial - founded in 2014 after a successful, decade-long career in the financial services industry. Cara’s experience encompasses both the financial product and financial advice sides. This gives her a comprehensive and holistic knowledge of all facets of financial planning.