In reality, cost alone is rarely the reason people set up SMSFs, so having a realistic sense of the numbers before you set up an SMSF is essential. Generally the question is more:
Will my SMSF be more expensive than my current fund? If so, by how much and is that worth it to me?
In 2020 Rice Warner released a “Costs of operating SMSFs” report commissioned by the SMSF Association. The actual amounts are obviously out of date now but some key points made in the analysis at the time probably remain true today:
- An SMSF might be less expensive than you think;
- Costs vary enormously depending on the choices you make as a trustee: what you invest in, whether you use an adviser, how complex your fund structure is, and who you engage to handle your administration;
- Cost effectiveness is broadly linked to balance size in most cases – in that a larger balance makes an SMSF more cost effective.
Below we will break down the key cost categories – both the upfront costs of establishing a fund and the ongoing annual costs of running one – so you can make an informed decision.
Is an SMSF worth the cost?
Before diving into the numbers, it helps to understand how SMSF costs are structured compared to the alternative.
Many of the typical SMSF costs are fixed. You pay a set fee for administration, compliance and audit regardless of how large your fund grows. In contrast, retail and industry super funds often have more fees expressed as a percentage of your balance. The bigger your balance, the more you pay. That’s why balance size often impacts how compelling the SMSF cost equation becomes.
SMSF set up costs
Establishing an SMSF involves a number of one-off costs. These include:
| Service | Description | Estimated up-front cost |
| Trust deed preparation | Your SMSF must be established with a legal trust deed. This document sets out the rules governing your fund and must be prepared by a specialist SMSF provider. | $500 – $1,200 |
| Corporate trustee establishment | While it’s possible to act as individual trustees, we recommend establishing a corporate trustee (a company set up specifically to act as trustee of your fund, for many reasons outlined here. Setting up a corporate trustee through ASIC involves a company registration fee plus additional fees for the preparation of the necessary documents. | around $1,000 |
| ATO registration | Once established the SMSF needs to register for an ABN and TFN with the Australian Taxation Office. This service is usually part of the set-up service fee charged by an accountant or SMSF Administrator. | $0 |
| Total | $1,500 – $2,000 |
If you choose Heffron as your SMSF Administrator, the costs to set up are wrapped up in the fee we charge at the time of establishment.
What does SMSF administration cost per year
Generally the fees an SMSF administrator will charge each year is based on the service they provide.
Ongoing annual SMSF cost
Once your fund is running, there are several recurring costs each year. The overall cost of your fund reflects the decisions you make about where you want support and where you're comfortable managing things yourself.
A simple fund – perhaps two members, listed share investments held on a platform, no property, and straightforward tax affairs – might look something like this:
| Service | Description | Estimated Annual Cost |
| Accounting and tax preparation |
Your SMSF is required to lodge an annual SMSF Annual Return with the ATO. Preparing this requires someone to compile the fund's financial statements, calculate taxable income, and lodge the return for you. The cost for this service is dependent on the complexity of the fund as well as the level of compliance support you require. A good administrator who can provide personalised service and technical support for any compliance requirements or questions you might have, is worth their weight in gold.
|
$2,000 - $3,000 |
| Independent audit | Every SMSF must have an independent SMSF audit conducted each year by an approved SMSF auditor. Straightforward funds with clean records and simple investments attract lower fees. Funds with complexity – or those that have had compliance issues – will be at the higher end. | $500 - $800 |
| ATO supervisory levy | The ATO charges an annual supervisory levy to all SMSFs. This is a statutory fee paid directly to the regulator as part of your SMSF Annual Return lodgement. | $259 |
| Investment related costs |
How much you spend on your investments depends entirely on what you invest in, and are the most variable part of the SMSF cost. Platform fees if you use an investment platform to hold and manage your assets.
|
$200 – $600 |
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Total
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$3000 – 4500
|
| Additional costs: | |
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Financial advice ongoing:
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Many SMSF trustees engage a financial adviser to help them manage their investment strategy, optimise their contributions, and navigate the complexity of the superannuation rules – particularly as they approach retirement. Not every SMSF trustee uses an ongoing adviser, but many benefit from it.
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Dependant on investment choices include:
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Property costs including rates, insurance, property management and maintenance if you hold real property in your SMSF. |
| A fund with a limited recourse borrowing arrangement (LRBA), or members in pension phase requiring an actuarial certificate will have additional costs on top of these. | |
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Dependent on other events of features of the fund:
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Funds with pensions might require actuarial certificates, periodically SMSFs need to update their trust deed or get documents prepared for particular life events. All these will incur additional costs. |
Heffron Fund Administration and set up service
We provide an SMSF establishment service to individuals who choose any of our Fund Administration annual tiers of service.
Learn more about Heffron's SMSF Administration service for Trustees here.
