In this guide
Self-managed superannuation funds are often referred to as do-it-yourself funds or DIY super. But how DIY can they really get? Is it even possible to do everything yourself and, if you did, how big would the potential savings be?
If you want to set up and run an SMSF for the lowest cost possible, you will have to consider the investment of your time, as this is where the real cost of ‘ultra’ DIY super lies. If you have time, you like investing and are perhaps a retired or semi-retired financial services professional, you could save significant amounts by doing most things yourself.
Otherwise, you need to weigh up the opportunity cost of spending a substantial amount of time on your SMSF. You should also consider how confident you feel about important DIY documents standing up in court if you were ever challenged by a third party. There are significant penalties for making mistakes when running your SMSF so, if you don’t have relevant experience, it may be best to at least pay money for some document templates, rather than going it completely alone.
Administration
To run an SMSF as cheaply as possible, the key is to keep it as simple as possible. It would be best to avoid complex investments, such as investing in real property and borrowing to invest in assets.
How you set it up will also dictate the cost. You can set up your SMSF with individual trustees or corporate trustees but if you use a corporate trustee structure the Australian Securities and Investments Commission (ASIC) will charge a fee to register a company for the first time (approximately $512).
There is an annual review fee but that will be lower (approximately $56 a year) if the company’s only purpose is to act as trustee for your SMSF.
Trust deed
Every SMSF needs a trust deed to operate. It is a legal document and is required to set out the rules for how the fund will be established and operated. It needs to explain the fund’s objective and who can be a member. It needs to specify what kinds of investments the fund will invest in and how benefits will be paid in pension phase. The Australian Taxation Office (ATO) stipulates the following around trust deeds.
The trust deed must be:
- Prepared by someone competent to do so as it’s a legal document
- Signed and dated by all trustees
- Properly executed according to state or territory laws
- Regularly reviewed and updated as necessary.
You can write your own trust deed but you need to be reasonably confident that what you are writing would stand up when tested by a third party.
You can read what needs to be in a trust deed in SuperGuide article Guide to SMSF trust deeds.
There are free templates available on the internet to help you and you can also buy cut price services – from around $150 to $250 – that will assist you to set up a basic trust deed. In the Northern Territory there may be stamp duty payable on the trust deed but this is nominal – $20 plus $5 for every subsequent copy of the deed. This is not payable in other states.
SMSF supervisory levy
The ATO requires that SMSFs pay a supervisory levy in advance every year. It is currently $259 but new SMSFs need to pay double in their first year – the levy for the year in which they register and a year in advance. This is part of your annual statement from the ATO.
Audit
You do need to pay a third party for your annual SMSF audit, which the ATO requires. The auditor must be registered with the Australian Securities and Investments Commission (ASIC) as an approved SMSF auditor. Check the ASIC’s database of approved SMSF auditors.
The most recent data (collated by the ATO for the 2018–19 financial year) has average annual auditor fees at $686 with the median auditor fee at $550.
However, audits for simple funds can be done for around $350, according to RiceWarner’s Cost of Operating SMSFs 2020 report.
