What are the setup and running costs for an SMSF?

In this guide

The research
Setup fee
Ongoing administration fees
Investment fees
Pension accounts versus accumulation accounts
Previous estimates by the regulators

One of the most hotly contested issues in the SMSF space – between SMSF experts and the regulators – is how much it costs to run your own self-managed superannuation fund (SMSF).

Only by answering this question can you then determine at what point an SMSF becomes cost effective compared to large public funds regulated by the Australian Prudential Regulation Authority (APRA).

For a long time, the Australian Securities and Investments Commission (ASIC) has said that the balance at which it became cost effective for SMSFs was $500,000. And in 2019, ASIC released a (now stamped expired) factsheet that suggested it would cost, on average, $13,900 a year to run an SMSF.

However, following lobbying and two major pieces of research commissioned by the SMSF Association, ASIC has released a new information sheet Tips for Giving Self-managed Superannuation Fund Advice (INFO 274) and removed references on its MoneySmart website to $500,000 as the point at which SMSFs become cost effective.

“We’re pleased to see that that reference has been removed,” SMSF Association deputy CEO Peter Burgess said.

The first of the two pieces of SMSF Association Research, conducted by Rice Warner and released in 2021, was on fees. The second, conducted by the University of Adelaide, focused on how SMSF performance at different fund balances compares to APRA-regulated funds.

The Adelaide University research, which looked at financial statement data from over 318,000 SMSFs for the period 2017–19, was released in March this year and found no material differences in performance patterns for SMSFs between $200,000 and $500,000.

The research

In its report – Costs of Operating SMSFs 2020 – Rice Warner looked at where SMSFs become broadly competitive and found $200,000 is a good indicator of where they become cost-competitive with industry and retail superannuation funds. At balances of $500,000 or more they are generally the cheapest alternative.

The Adelaide University Research confirmed that $200,000 was the most appropriate balance. What’s more, it found SMSFs with net assets of more than $200,000 that are not concentrated in cash and term deposits outperformed APRA-regulated funds in two out of three years between 2017 and 2019.

And, in more good news, costs for SMSF trustees may actually be falling.

“The biggest change is that the costs of running SMSFs, apart from the statuary levies, most of the other fees have fallen,” senior consultant at Rice Warner, Alun Stevens, said when launching the Rice Warner report.

So what fees apply and how much are they?

Setup fee

Setup fees are the costs incurred for establishing an SMSF and will include costs for things such as the trust deed, ATO application forms, investment strategy and general trust advice. If SMSFs decide to use a corporate trustee structure instead of an individual trustee there will be some additional establishment costs for setting up the company structure.

Learn more about corporate vs individual trustee structures.

Rice Warner has looked at fees across low-cost, mid-cost and higher-cost funds

As you can see in the table below, setup costs can start at as little as $1,541 and go up to $2,459 for more complex funds that might be paying pensions. Service provider fees refer to the fees paid for services provided by accountants, financial advisers, lawyers and administrators.

Table 1: Range of costs for establishment of an SMSF

Fee	Low	Mid	High
SMSF Setup	$330	$488	$695
Setup of corporate Trustee
ASIC fee	$507	$507	$507
Service provider fee	$704	$895	$1,257
Total	$1,541	$1,890	$2,459

Source: Costs of Operating SMSFs 2020, Rice Warner

Ongoing administration fees

There are fees that all SMSFs need to pay to cover their annual compliance requirements. These include the ATO supervisory levy, financial statement and tax return preparation and the cost of getting the fund audited by a registered auditor. The supervisory levy is $259 no matter the size or complexity of the fund but tax return and audit fee costs will vary.

Table 2: Range of annual compliance administration costs

Fee	Low	Mid	High
Annual ASIC fee (special purpose company)	$55	$55	$55
ATO supervisory levy	$259	$259	$259
Audit fee	$350	$495	$639
Financial statement and tax return	$525	$880	$1,500
Total accumulation	$1,189	$1,689	$2,453
Actuarial certificate	$110	$176	$285
Total pension (no certificate)	$1,189	$1,689	$2,453
Total pension (with certificate)	$1,299	$1,865	$2,738

Source: Costs of Operating SMSFs 2020, Rice Warner. Table 2 shows the range of costs for funds that are accumulation only and for those that pay pensions.

These fees don’t include the annual cost of administering assets such as real property, which could cost $220 per property and $350 per borrowing arrangement, according to Rice Warner. There are also regular ongoing fees for property maintenance and rental and tenant management for SMSFs that have real property.

Also, there will be additional costs if funds decide to use the full services of an administrator. In addition to compliance administration, these extra services can include investment accounting, access to online investment platforms and different kinds of investment reporting.

Rice Warner estimates fees for full administration, which would include the ASIC and ATO fee, financial statement and tax return preparation, the audit fee plus the additional services, at $1,200 for low-cost funds, $1,820 for mid-cost funds and $2,660 for high-cost funds.

Investment fees

Rice Warner says investment management fees can be difficult to estimate as they vary widely depending on the assets in the fund.

“The expense experience of those with direct property is very different to those without; [it can be] four or five times as much,” SMSF Association CEO John Maroney said.

But for less complex investments, including direct shares, exchange traded funds (ETFs) and other managed funds, Rice Warner compiled the following table of average annual investment fees paid for assets.

Table 3: Investment fee range

Fee level	Fee
Low	0.07% per year
Mid	0.47% per year
High	1.75% per year

Source: Costs of Operating SMSFs 2020, Rice Warner

For a fund with a balance of $200,000 with simple investments, annual investment fees would therefore work out at $140 a year. Combined with low administration fees of $1,189 and assuming the fund is totally in accumulation, you’re looking at annual fees of $1,329.

Pension accounts versus accumulation accounts

The research also looked at funds with pension accounts. While funds with both pension and accumulation accounts were generally more expensive to run, the annual fees incurred by SMSFs that had just pension accounts were usually cheaper than those funds with both and those with just accumulation accounts. Rice Warner put this down, partly, to pension funds having simpler investment arrangements.

Examining the total costs of all 100,506 funds in the sample, the total fees incurred for a fund in the 50th percentile with $300,000 in assets was:

$3,194 for a fund with both pension and accumulation accounts
$2,939 for a fund with just pension accounts
$3,182 for a fund with just accumulation accounts.

Previous estimates by the regulators

In February 2022, the ATO published information compiled from its collection of data on all SMSFs for the 2019–20 financial year (the most recent data available) and found:

The average total expense ratio was 1.16% or $15,300, down 4% from $15,900 in 2018–19.
Median total expenses were $8,200, the same as in 2018–19.

But, as the data from Rice Warner highlights, a compilation of all data on SMSFs, even with regard to median costs versus average costs, will be skewed by larger and very expensive SMSFs.

The SMSF Association is pleased that many years of lobbying the regulators, accompanied by its commissioned research, has finally paid off with ASIC revising the total SMSF balance at which an SMSF becomes cost competitive.

“There’s been a few significant changes to the guidance material [and] we welcome the release of this updated guidance from ASIC,” Burgess said.

“We still think it’s important for advice providers to be aware of the findings of the University of Adelaide research, which found that funds with balances under $200,000 are unlikely to achieve returns comparable with larger funds.”

While ASIC has not referred to a specific balance in its latest guidance, an attachment to that guidance looks at an example of a balance under $500,000 when an SMSF might be suitable.