In this guide
In this cost-of-living crisis many of us are considering how we can reduce costs across a range of expenses, including our financial expenditures.
Some self-managed superannuation fund (SMSF) trustees may be considering how much of their existing costs they might be able to bring 'in-house' and do themselves. If you are about to retire and are rolling back your work hours, you might have a bit more time on your hands which could be put to use administering your fund.
If you want to cut costs as much as possible, you could also consider investing your time in managing your fund’s investments, 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 many investment tasks yourself.
You also need to 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.
How you set it up will also dictate the cost. You can set up your SMSF with individual trustees or a corporate trustee 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 $597).
There is an annual review fee but that will be lower (approximately $65 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 also needs to specify what kinds of investments the fund will invest in and how benefits will be paid in retirement 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.
Read more about SMSF trust deed rules and guidelines.
There are free templates available on the internet and you can also buy cut price services – from around $150 to $250 – that will help you set up a basic trust deed. In the Northern Territory there may be stamp duty payable on the trust deed but this is nominal.
SMSF supervisory levy
The ATO requires that SMSFs pay a supervisory levy of $259 in advance every year. 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
One task you do need to outsource to a third party is your annual SMSF audit, which the ATO requires. The auditor you choose 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 2021–22 financial year) has average annual auditor fees at $628 with the median auditor fee at $549. While the median has remained essentially the same over the past five years the average has actually fallen.
