Understanding SMSF Setup Costs in Australia

#SMSF #Retirement #SelfManagedSuperannuationFund

When thinking about creating your own Self-Managed Super Fund (SMSF), it’s essential to grasp the associated expenses.

These costs can be broadly categorised into two main categories: initial setup costs and ongoing operational fees.

Initial Setup Costs

• Professional Services:

• The complexity of your SMSF and the professional services you use will impact the initial setup costs.

• Generally, expect setup fees ranging from $2,000 to $5,000. These fees cover:

• Legal documentation

• Trustee establishment

• Advice from accountants, auditors, and financial experts

• Australian Securities and Investments Commission (ASIC) costs for the Corporate Trustee

• Australian Tax Office (ATO) registrations

• Accounting expenses, including transferring existing funds to the new SMSF bank account.

Ongoing Operational Expenses

After the SMS is established, there will be ongoing costs related to the administration and operation of the fund. These may include:

• Annual Auditing Fees:

Regular audits are necessary to ensure compliance with regulations.

Expect to pay for professional auditing services.

Supervisory Levy:

An annual fee payable to the ATO for supervising SMSFs.

• Investment Management Fees:

If you seek professional investment advice or management, there will be associated costs.

• Financial Advice and Tax Return Preparation:

SMSFs require expert advice for effective management.

• Tax return preparation is crucial to meet reporting obligations.

• Actuarial Certificates for Pension Funds:

If your SMSF includes pension accounts, actuarial certificates may be needed.

It is important to note that while there is a perception that SMSFs are only cost-effective for large balances, research shows that SMSFs become competitive with industry and retail superannuation funds at balances of $200,000 and are generally the cheapest alternative for balances of $500,000 or more.

SMSF Cost-Effectiveness

The cost-effectiveness of an SMSF depends on various factors, including the fund’s balance, investment strategy, and the trustees’ ability to manage the fund efficiently. SMSFs become cost-competitive with industry and retail super funds when balances exceed $200,000.

For balances of $500,000 or more, SMSFs are often the most economical choice.

Performance Potential:

SMSFs with net assets over $200,000, diversified beyond cash and term deposits, tend to outperform APRA-regulated funds.

Key Takeouts

Setting up an SMSF is a significant financial decision. Consider the costs carefully and seek professional guidance to ensure your SMSF aligns with your retirement savings strategy.

If you are new to SMSF, our team of specialist professionals can guide you to ensure that your SMSF is set up correctly, and provide advice around securing loans to buy commercial or residential real estate.

If you have an existing SMSF, you may qualify for our High Net-worth Client lower interest rates for real estate acquisition.

Talk to us today.