In this guide
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
