Key Costs of Running a Self-Managed Super Fund (SMSF)

All You Need to Know About a Self-Managed Super Fund (SMSF)

In a nutshell, self-managed superannuation funds, also known as SMSFs, are a means to financially plan for your retirement. Here, we uncover everything you need to know to get a clear idea about a self-managed super fund. As a second step, why not speak to our team of experts We can provide a no-cost, no-obligation consultation to understand if a self-managed super fund investment strategy is the best way to build your wealth.

Setting Up Your SMSF

Setting up an SMSF involves initial expenses to ensure the fund is established correctly and in line with regulatory requirements. Here are some examples of setup costs:

1. Legal and Financial Advice: Before establishing your fund, its wise to seek legal and financial advice to ensure you understand all implications.
2. Drafting the Trust Deed: This is a legal document that sets out the rules for operating your SMSF.
3. Corporate Trustee Setup: If you opt for a corporate trustee, there are additional setup costs.
4. Compliance Requirements for the Australian Taxation Office (ATO): Ensuring your fund meets all ATO regulations is crucial.

Key Tip: Do not acquire any assets for the SMSF before the fund is legally established, as this could breach compliance laws.

Ongoing and Operational Costs

Managing an SMSF requires ongoing administration, reporting, and compliance. These include both compulsory and optional costs. Examples of ongoing costs are:

1. Annual SMSF Supervisory Levy: A compulsory fee charged by the ATO ($259 in 2024/25).
2. Preparation of Financial Statements and Tax Returns: Necessary for annual reporting.
3. Audit Fees: For mandatory annual reviews.
4. Investment Advice and Asset Valuation Fees: To ensure your investments are performing well.
5. Amendments to Trust Documentation: If your circumstances change.
6. General Bookkeeping and Compliance Costs: Keeping track of all financial transactions and staying compliant with regulations.

Important Consideration: Outsourcing these tasks to professionals can ensure compliance and reduce the administrative burden on trustees.

Investment, Borrowing, and Insurance Costs

Investing through an SMSF involves specific costs related to acquiring, maintaining, and protecting assets. Examples include:

1. Transaction Costs: Such as stamp duty or capital gains tax on property purchases.
2. Documentation and Amendments to the Investment Strategy: To align with your financial goals.
3. Management Fees: For shares, properties, or other assets.
4. Insurance Premiums: For life, Total and Permanent Disability TPD, and income protection insurance for members.
5. Borrowing Costs: If the SMSF uses a limited recourse borrowing arrangement LRBA, additional costs include loan establishment fees, interest payments, and lender charges.

Wind Up Costs

When closing an SMSF, trustees must follow strict guidelines and meet all outstanding liabilities. Examples of wind up costs include:

1. Realising Assets: Selling properties or investments.
2. Completing Final Tax Returns and Financial Statements: Necessary for closing the fund.
3. Paying Any Remaining Fund Taxes and ATO Reporting Requirements: To settle all dues.
4. De-registering the Corporate Trustee: If applicable.

Key Tip: Ensure sufficient cash is retained in the SMSF to cover final expenses and tax liabilities before distributing remaining benefits to members.

SMSF Costs by Fund Size

The average annual expenses for SMSFs vary based on the funds size. Below is an overview of typical costs by fund balance:

Fund Size

Total Costs

$1–$50k: $4,225

$50k–$100k: $5,450

$100k–$200k: $8,650

$200k–$500k: $13,059

$500k–$1m: $13,417

$1m–$2m: $15,125

$2m–$5m: $22,045