News / Sep 22, 2021

The Ultimate Guide on Self-Managed Super Fund Costs – How Much Do You Need?

Mark Phillips
self managed super fund cost
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There has been much debate recently about Self-Managed Super Fund costs. 

The discussion was kicked off by a 2019 Fact Sheet from the Australian Securities and Investments Commission (ASIC). It put the average annual running costs for an SMSF at $13,900. It warned against starting an SMSF with less than $500,000. 

These figures were strongly disputed by SMSF practitioners and the SMSF Association.

If you are an SMSF trustee or financial adviser, the finer details of the debate and the regulatory implications should be considered.

What Costs are Involved for an SMSF?

SMSF costs can broadly be categorised as 

  • Setup fees
  • Ongoing costs
  • Investment fees
  • Winding down costs

We can also distinguish between unavoidable and optional costs. They are defined in ASIC guidelines for the disclosure of self-managed superannuation fund costs (Info206).

In summary, this is how ASIC classifies SMSF expenses:


Unavoidable: Trust Deed

Optional: Establishment costs for a corporate trustee and corporate identity


Unavoidable: ATO supervisory levy

Annual independent audit

Annual financial statements and tax return 

Annual actuarial certification (when required)

Optional: Amending the trust deed of the SMSF

Accounting and book-keeping fees 

Tax, legal, and financial advice

Personal insurance for one or more members is strongly recommended, and the ATO will closely monitor the advice given.


Unavoidable: Investment costs 

Optional: Professional advice on investments (unavoidable for some assets)

Investment management fees.

Winding up:

Unavoidable: Compliance costs

Cost of realising the assets

Brokerage or agent fees 

Optional doesn’t mean unnecessary. It might be that trustees are going to fulfil these functions rather than pay for a service provider.

However, they should consider their own level of financial and legal expertise and the “opportunity cost” of the time required for fund administration responsibilities. 

When Are Self-Managed Super Fund Costs Too High?

I know that tables and numbers make some people’s eyes glaze over. Please bear with me for a moment. 

These are some statistics from the Australian Taxation Office review of Self-Managed Super Fund Costs for 2018-19.

  • SMSFs had an average Return on Assets (ROA) of nearly 7%.
  • However, the average ROA by fund size paints a different picture:

Table 1: Average Return on Assets by fund size

Fund size2018-19
 $1 – $50k-20.6%
>$50k – $100k-8.1%
>$100k – $200k-2.2%
>$200k – $500k3.1%
>$500k – $1m6.0%
>$1m – $2m7.0%

Funds less than $200k are not doing well. And those below $50k are showing a negative return above 20%. This is not an anomaly, as the pattern has been consistent since 2014. 

The larger funds have skewed the results. Only those with assets above $1m are achieving the “average” return of about 7%.

Costs have a major impact on ROA. 

The problem, it turns out, is not how much money it costs. It is the ratio of the costs to the size of the fund. 

We can see this from the following table.

Table 2: Average expense ratio by fund size

Fund size2018-19
>$0 – $50k17.0%
>$50k – $100k7.7%
>$100k – $200k6.9%
>$200k – $500k3.8%
>$500k – $1m1.7%
>$1m – $2m1.0%

For funds above $500k, expenses represent less than 2% of their value. The percentage for funds smaller than $200k ranges from about 7% to 17%.

If the ROA is negative because of running costs, this might reflect on the SMSF trustees’ obligation to ensure that their decisions do not decrease the value of the fund. 

It is no wonder that authorities are concerned.  

  • The Productivity Commission has noted rising SMSF costs and their impact on smaller funds, compared to APRA-regulated funds.

They’re also concerned about the “questionable” quality of financial advice being given to SMSFs. especially because people with SMSFs were “significantly” more likely than others to trust their advisers.

  • Complaints to the Financial Complaints Authority have increased. In most of these cases, advice had not been in the clients’ best interests. 

Trustees and potential trustees should obviously be careful to choose reputable financial advisers. 

They should also carefully research whether the likely running costs will be significant enough to warrant not setting up an SMSF at all.

How Much Do You Need In An SMSF Fund?

If we look at the ATO tables above, $200k seems to be the minimum fund balance for a fund. ASIC suggests that an SMSF fund less than $500k will “in general” be uncompetitive against super funds regulated by the Australian Prudential Regulation Authority (APRA) and the Productivity Commission agrees. 

If this is how much money is necessary, then we must ask why there are so many small funds and why they continue to be established. 

These statistics from the ATO review of expenses seem surprising:

  • Funds showing negative returns represent 24% of the total SMSF market
  • 37% of the new SMSF funds established in 2018-19 had assets below $200k

Why is this?

Many people cite transparency, control of their own funds, the ability to consolidate the funds of partners, and other personal reasons for choosing to set up an SMSF.  However, the decision must also make financial sense.

Perhaps a different analysis of the data is required.

So, How Much Does It Really Cost to Run An SMSF?

The SMSF Association initiated its own review of self-managed super funds costs in response to the 2019 ASIC report. It published the key takeaways in November 2020. 

Unlike the ASIC review which provided “average” SMSF costs, this review took the special circumstances of SMSFs into account.

Why SMSF Fund Balance And Complexity Matter

In a comparison between the costs of SMSFs and APRA-regulated funds, these were some of the key findings:

  • SMSFs with less than $100,000 are not competitive with retail and industry funds. They  were appropriate only if balances were expected to grow within a reasonable time. (The report shows later that most of these funds do grow.)
  • SMSFs with $100,000 to $150,000 are competitive if trustees undertake some administrative tasks and make use of cheaper service providers.
  • SMSFs with $200,000 to $500,000 are competitive, even with full administration service cost. In fact, funds with $250,000 can be the cheapest of all options.
  • SMSFs with $500,000 or more are generally cheaper than any APRA-regulated fund.

A significant finding was that service provider fees are often reduced for small funds (this is a good reason for SMSF trustees to shop around to find the best advice at the best price). 

The complexity of the fund also has a bearing on costs. Complexity is determined by your investment strategy, rather than the size of your fund. For instance, interest and investment management fees may not apply to simple funds, while funds with direct property pay twice or three times more than those without.

For this reason, the review has provided a range of costs, with low, mid and high points, and for a number of scenarios. 

Simple SMSFs, where the trustees require only transactional services, will be at the lower end of the range. Costs increase as the funds become larger and/or more complex, and the trustees either need, or choose to use, more assistance.

For example, the costs for a $100,000 fund with no direct property are: 

  • $592 (low)
  • $2,220 (mid)
  • $6,337 (high)

The range for a similar $500,000 fund would be $1,029, $3,207 and $15,908.

If trustees (and advisers) understand which range they fall into, they will be better able to take control of their funds and compare fees.

There Are Additional Cost Factors To Consider

There are additional factors that impact on both costs and viability:

  • When individual member funds are combined, there can be significant benefits. 

It is important to get personal financial advice before making such a switch, but if members move their funds from an Industry super fund to their SMSF, funds as low as $100k could be competitive.

  • There is a difference in costs during the accumulation stage of an SMSF and the pension-paying stage. At the pension phase, SMSFs of whatever size are comparable to APRA-regulated funds.
  • Rental income and significant tax deductions associated with direct property ownership can offset the higher costs incurred.

Everyone’s situation is different, and mistakes in investment strategy can be costly. It is probably advisable to seek professional advice for your SMSF.

ASIC Scrutiny Of SMSF Financial Advisers

The Australian Taxation Office will scrutinise financial advisers’ initial advice when the fund size is lower than $500k.

They will be looking for

  • Why the adviser believes the client will end up in a better position
  • Why the investment strategy is appropriate and viable
  • Why setting up an SMSF is in the best interests of the client
  • What the likely costs are of setting up, operating and winding down the fund
  • The ongoing status of the fund, reported in subsequent Statements or Records of Advice

So the first consideration for a client is to choose an adviser with significant experience in dealing with SMSFs.

The second consideration is cost. The SMSF Association Review made the point that smaller funds can be competitive if service provider fees are low.  

How SMSF Engine Can Help

If expertise and cost of service are critical elements in selecting an SMSF service provider, then SMSF Engine meets the brief.

We’ve been in business since 2012, and offer the full range of SMSF administration services for setting up, operating, and winding down SMSFs of all sizes and all levels of complexity. 

SMSF Engine has been endorsed by the National Tax and Accountant’s Association (NTAA). We work in partnership and association with other experts for specialised legal, actuarial and audit services. 

Choose from a choice of packages starting with daily administration services, starting at $990 per year, or $2,200 for our administration plus service. Fees are itemised and completely transparent.

Legally, SMSF trustees are accountable to the Australian Taxation Office and other regulators. Getting independent advice and professional services ensures they are operating in the best interests of their members. 

Key Takeaways

Self-managed super fund costs are a critical element in decisions about the viability of SMSFs.

There are guidelines and projections of costs from ASIC, the ATO and the SMSF Association. However, individual circumstances and investment strategy will determine the SMSF costs and whether they are appropriate or not.

Both SMSF trustees and financial advisers should be aware of ATO’s scrutiny of costs as part of their evaluation of SMSF compliance.

If you are interested in assessing the suitability of SMSF Engine to assist your clients with their SMSF administrative needs, get in touch with us today. 

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