If you want to take charge of your superannuation and save for a more comfortable retirement, starting an SMSF may be the solution. However, before choosing the SMSF route, it’s important to not only be aware of the time and effort need to manage your investments but also the costs involved when doing it yourself.
Let’s take a closer look at how much it costs to run an SMSF and how much money you need to invest to make it a viable option for your retirement savings.
How do SMSFs work?
A SMSF is a private superannuation fund, designed to help you save for retirement, that you manage and control yourself. SMSFs can have a maximum of four members. The members of an SMSF are usually also its trustees, allowing them to run the fund for their own benefit. This means you’re responsible for all decisions relating to the fund and for ensuring that you comply with all laws and tax requirements.
But while an SMSF can be ideal if you want to take control of saving for your retirement, there are significant establishment and running costs to contend with. It’s vital that you are fully aware of these costs before deciding whether an SMSF is right for you.
What costs are associated with running an SMSF?
There are a range of costs associated with setting up and running an SMSF. These costs can be broadly separated into three categories: establishment costs, operating costs and investment management costs.
Establishment costs
If you wish to run an SMSF you will first need to formally establish the fund. This involves obtaining a trust deed, appointing a trustee and signing the trustee declaration. According to a 2013 report from Rice Warner, these setup costs can range from $345 up to $990.
However, if you choose the commonly recommended option of using a corporate trustee, where all members of the SMSF are directors of the corporate trustee, covering the resulting Australian Securities and Investment Commission (ASIC) and service provider fees can see establishment costs balloon out to anywhere between $916 and $2,035.
Operating costs
Just like any other super fund, there are costs associated with running an SMSF. These include the expenses associated with investing and taking care of auditing and accounting requirements for your SMSF, and you need to remember that these costs will eat into your retirement savings.
Ongoing operating costs for your SMSF include:
An annual ASIC corporate fee
Annual ATO supervisory levy
Audit fees
Costs incurred to prepare financial statements and tax returns
Actuarial certificates if your SMSF is paying an income stream (pension)
Financial advice fees
Valuations of assets held by the SMSF
Legal fees, for example, if you need to make changes to the trust deed
Assistance with fund administration tasks
Insurance for SMSF members
Some of these fees can vary widely based on the complexity of your SMSF and the costs charged by third-party providers (accountants, law firms etc.) that you hire to help ensure you comply with all ATO obligations. You can also choose between full-service providers, which take care of all the fund administration for you, or doing some of the administration yourself.
According to the Rice Warner report mentioned above, the annual operating costs of an SMSF in the accumulation phase can range from $1,163 to $2,367. However, if your SMSF provides a pension, this figure can rise as high as $2,957 per year, while if you opt for a full administration service costs can top the $8,000 mark.
Investment management costs
SMSFs also use managed funds for a small portion of their investments, so the third cost you need to contend with is investment management fees. These expenses vary depending on the size of your investment in managed funds, but for SMSFs with a balance of $500,000, the Rice Warner report calculated annual investment management costs of between $208 and $714.
Finder survey: How many Australians get professional help to manage their SMSF?
Response
No
50.46%
Yes
49.54%
Source: Finder survey by Pure Profile of 1016 Australians, December 2023
An SMSF establishment service can help you get started
SMSF establishment services exist to help you put all the initial pieces together, including setting up your trust structure and trust deed. They can also help open bank accounts and investment accounts for your SMSF, and connect you with legal, tax and audit professionals. You can see a snapshot of some key SMSF establishment services in the table below, and learn more about these services in our guide.
Thinking about setting up a self managed super fund? ESUPERFUND can help you create an SMSF and take control of your retirement. There is no minimum amount required and ESUPERFUND handles the annual compliance obligations for you.
SMSF Set up | Tax | Audit | Compliance | Admin
Special offer: Save $1,399 with free SMSF setup plus no annual fee for the first year (T&Cs apply).
How much does it cost to run an SMSF?
In December 2016, the ATO released its SMSFs: A statistical overview: 2014–15 report. The report revealed that the average total annual expense ratio of Australian SMSFs is 1.10%. With the average SMSF balance at $1.12 million, that’s an average annual cost of $12,200.
The table below, produced from ATO data, shows how SMSF expense ratios have changed over the past five years. The rise in expenses in 2013 reflects the fact that the ATO began including in its calculations the expenses that SMSFs in the pension phase are unable to claim as tax deductions.
2011
2012
2013
2014
2015
Administration and operating expense ratio
0.32%
0.32%
0.51%
0.52%
0.50%
Investment expense ratio
0.31%
0.35%
0.55%
0.58%
0.60%
Total expense ratio
0.63%
0.67%
1.06%
1.10%
1.10%
The report also revealed a few other interesting statistics:
45.7% of SMSFs have an estimated total expense ratio of 1% or less
59.7% of SMSFs have an estimated total expense ratio of 1.5% or less
SMSFs in the accumulation phase had estimated annual operating expenses of $11,700 while SMSFs in the pension phase had annual operating expenses of $12,600
How much money do I need to start an SMSF?
So what exactly do all these numbers mean? When deciding whether or not to establish an SMSF, the size of your investment matters. The simple fact is that many of the costs associated with running an SMSF are fixed expenses, so they remain exactly the same regardless of whether you have a balance of $50,000 or $2 million. These include costs such as the ATO supervisory levy, audit fees, accounting fees, and the cost of lodging tax returns with the ATO.
To illustrate this point, the ATO’s SMSFs: A statistical overview: 2014–15 report revealed that SMSFs with balances of under $50,000 had average operating expense ratios of 12.55%, while those SMSFs with balances between $500,000 and $1 million had operating cost ratios of 1.43%. The larger your SMSF balance, the less effect your annual operating expenses will have on its bottom line.
With this in mind, it’s important to calculate how large your investment amount should be in order to make establishing an SMSF a cost-effective proposition. In its 2013 report, Rice Warner crunched the numbers to determine the minimum cost-effective balance for an SMSF and produced the following findings.
Minimum cost-effective balance for an SMSF
Less than $100,000: SMSFs are simply not a competitive option when compared with APRA-regulated funds.
$100,000 to $150,000: SMSF costs can be competitive with the cost of larger retail super funds provided that the trustees undertake some of the administration duties. However, industry funds and personal super options are a cheaper alternative.
More than $200,000: SMSFs can be competitive with retail and industry funds if the trustees are willing to take on some of the administration.
More than $250,000: SMSFs can be the cheapest option for balances of this size provided that the trustees undertake some of the administration.
More than $500,000: If you have a balance of above $500,000, the report found that SMSFs can be the cheapest alternative, even if you opt for full-service administration.
To sum up, the report found that you would need a balance of at least $200,000 to $250,000 if you’re willing to do some of the administration yourself, while if you opt for full-service administration, this only becomes cost-effective when you have a balance of $500,000 or more.
Of course, operating costs can sometimes vary substantially from one SMSF to the next, so it’s important that you fully understand all the potential expenses involved before deciding whether an SMSF is the right choice for you.
Are SMSF setup and operating expenses tax deductible?
Yes. Many of the setup, admin and ongoing operating expenses paid by your SMSF are tax deductible with the ATO. Any tax deductions you claim for your SMSF need to relate to your assessable SMSF income (not your personal income). Here's some common expenses that your SMSF may be able to claim as a tax deduction:
Management and admin costs for the day-to-day running of the SMSF, such as office supplies and equipment.
SMSF auditor fees
Fees incurred for getting your SMSF tax return done with a registered tax agent
ASIC annual fee paid by a corporate trustee
Investment expenses including management fees paid to financial planners and brokerage fees
Fees paid to a financial planner for ongoing investment advice and portfolio maintenance
Fees incurred through an investment property such as rental property costs and property management fees
Costs relating to insurance and storage of investments like artwork, antiques and collectible items
How to claim SMSF expenses as tax deductions
You generally need to claim the expense as a tax deduction in the financial year that you incurred the expense. Like your personal tax return, SMSF trustees will need proof of receipts for the expenses they wish to claim. Any receipts that are in the name of an individual trustee rather than the SMSF's name generally cannot be claimed as a deduction. If an expense needs to be split between a personal expense and an SMSF expense, your tax agent can help with this.
Tim Falk is a writer for Finder, writing across a diverse range of topics. Over the course of his 15-year writing career, Tim has reported on everything from travel and personal finance to pets and TV soap operas. When he’s not staring at his computer, you can usually find him exploring the great outdoors. See full bio
Compare SMSF bank accounts in Australia to manage your self-managed super fund’s expenses, place trades, accept member contributions and earn investment income.
An SMSF service can help you establish your self-managed super fund, and assist with ongoing admin and management of the fund. Here are the pros and cons.
Learn how to develop a strong SMSF investment strategy and what assets you can and can't invest in. Want an SMSF investment property? There's a few things to consider first.
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Important information about this website
Finder makes money from featured partners, but editorial opinions are our own.
Finder is one of Australia's leading comparison websites. We are committed to our readers and stand by our editorial principles
We try to take an open and transparent approach and provide a broad-based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labeling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
We make money by featuring products on our site. Compensation received from the providers featured on our site can influence which products we write about as well as where and how products appear on our page, but the order or placement of these products does not influence our assessment or opinions of them, nor is it an endorsement or recommendation for them.
Products marked as 'Top Pick', 'Promoted' or 'Advertisement' are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment when you click on those buttons or apply for a product.
When products are grouped in a table or list, the order in which they are initially sorted may be influenced by a range of factors including price, fees and discounts; commercial partnerships; product features; and brand popularity. We provide tools so you can sort and filter these lists to highlight features that matter to you.
Please read our website terms of use and privacy policy for more information about our services and our approach to privacy.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
