What does an SMSF cost?

One of the most important questions to ask before setting up a self-managed super fund, or while running one, is what it actually costs. The answer matters a great deal, because the costs of an SMSF behave differently from the costs of a large fund, and that difference decides whether an SMSF is good value for you. This article explains the main costs in plain terms. Specific figures change and vary between providers, so treat this as a general guide.

Two kinds of cost: setup and ongoing

SMSF costs fall into two groups: the one-off cost of setting the fund up, and the ongoing costs of running it each year.

The setup costs are paid once when the fund is established. They typically cover establishing the trust and the fund, and, if a company is used as trustee, setting up that company. There is also a government charge involved in registering a company if you go down that path.

The ongoing costs are paid every year for as long as the fund operates. The main ones are the annual administration or accounting work to prepare the fund’s financial statements and annual return, the annual audit by an independent auditor, and the annual supervisory levy paid to the regulator with the return. Depending on the fund, there can also be costs for things like actuarial certificates where a pension is paid, and investment related costs.

Why the size of your balance matters so much

Here is the single most important point about SMSF costs. Many of the costs are largely fixed, meaning they do not change much whether the fund holds a small amount or a large amount. The audit, the administration and the levy cost a broadly similar amount regardless of the balance.

That has a big consequence. For a large balance, fixed costs are a small percentage of the fund. For a small balance, the same fixed costs are a much larger percentage, which can make an SMSF expensive relative to what you would pay in a large fund. This is why the question of whether you have enough in super to justify an SMSF comes up so often. The fixed nature of the costs is the reason.

Costs you can influence

Some costs depend on choices you make. A fund with simple, easy to value investments such as listed shares and cash is generally cheaper to administer and audit than one with complex assets such as property, unlisted investments or crypto, which take more work to value and check. Keeping good records also reduces cost, because a clean, complete handover makes the administration and audit faster. The more organised and straightforward the fund, the lower the ongoing cost tends to be.

Weighing it up

When you look at the cost of an SMSF, the useful comparison is not the dollar figure on its own, but the cost as a percentage of your balance, compared with what you would pay elsewhere, and what you get for it. If the control and flexibility of an SMSF are worth the cost for your situation, and the cost is a reasonable percentage of your balance, an SMSF can make sense. If the cost is a large slice of a small balance with no particular reason for the structure, a large fund may be better value.

The bottom line

An SMSF has one-off setup costs and ongoing annual costs for administration, the audit and the levy, plus extra costs for complex investments or pensions. Because much of the cost is fixed, it weighs far more heavily on a small balance than a large one, which is why your balance is central to whether an SMSF is good value. Compare the cost as a percentage of your balance, and get advice from a licensed professional before deciding.

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This article is general information and is not financial, legal or tax advice about your particular situation. SMSF costs vary and change over time, so get current figures and advice from a licensed professional.