How Much Does It Cost to Set Up and Run an SMSF?
Setting up a self-managed super fund (SMSF) gives you more control over your retirement savings, but it also comes with costs and responsibilities. Before deciding whether an SMSF is right for you, it’s important to understand both the initial setup expenses and the ongoing cost of running the fund.
In Australia, setting up an SMSF can cost approximately $1,000 to $3,500, depending on the structure you choose and the services included. Annual running costs for a straightforward fund commonly range from $2,000 to $5,000, although funds with property, pensions or more complex investments can cost considerably more.
So, what will you actually pay, and when does an SMSF start to make financial sense? Let’s look at the main costs and the factors that should influence your decision.
What Does It Cost to Set Up an SMSF?
The cost of establishing an SMSF depends largely on whether you use individual trustees or a corporate trustee.
With individual trustees, the initial setup is generally less expensive. You still need a trust deed, trustee appointments, registrations and the necessary documentation, but you avoid the cost of establishing a separate company.
A corporate trustee costs more initially because you need to register a company with the Australian Securities and Investments Commission (ASIC). There is also an ongoing annual company review fee.
Here are the main setup costs to consider:
Setup item | Individual trustees | Corporate trustee |
|---|---|---|
Trust deed | Required | Required |
Trustee appointments and documentation | Required | Required |
Company registration | Not required | ASIC fee applies |
ABN and TFN registration | Required | Required |
Trustee declarations and initial minutes | Required | Required |
Electronic service address | Usually required | Usually required |
Bank and investment accounts | Established by trustees | Established by trustees |
Some providers advertise very low establishment fees, but check exactly what is included. A quote may exclude the ASIC registration fee, important documentation or assistance with registrations.
It’s worth comparing the complete package rather than choosing the cheapest advertised price. You can also read our guide to setting up an SMSF in Australia for a closer look at the establishment process.
Is a Corporate Trustee Worth the Extra Cost?
A corporate trustee involves additional expenses, but it can offer practical advantages over individual trustees.
Keeping asset ownership simpler
If a member joins or leaves the fund, or a trustee changes, assets held by a corporate trustee can generally remain registered in the company’s name. With individual trustees, changes may require property titles, bank accounts and other ownership records to be updated.
Managing trustee changes
A corporate trustee can make changes in membership and trustee arrangements easier to manage. This can be particularly useful for funds that expect changes over time.
Considering a single-member SMSF
A single-member fund has specific trustee requirements. A company with the member as its sole director can provide a straightforward corporate trustee structure, subject to the applicable rules.
Holding property or borrowing
A corporate trustee is often preferred when an SMSF invests in property or uses a limited recourse borrowing arrangement. Borrowing arrangements have additional legal and compliance requirements, so the structure should be considered before purchasing an asset.
The trade-off is that you will pay ASIC registration costs upfront and an annual company review fee. For some funds, the additional expense is worthwhile; for others, individual trustees may be sufficient.
If your SMSF is intended to hold business premises, read our article on SMSFs and commercial property for small business owners.
What Should a Professional SMSF Setup Include?
Setting up an SMSF involves more than signing a trust deed. The documents, registrations and decisions need to work together.
Depending on your circumstances, a professional establishment service may include:
Preparing and executing the SMSF trust deed.
Registering the corporate trustee and preparing its constitution, if applicable.
Documenting trustee appointments, member applications and initial decisions.
Arranging the required trustee declarations.
Applying for the fund’s ABN and TFN and making the relevant regulatory election.
Arranging an electronic service address for eligible SuperStream transactions.
Preparing an investment strategy that reflects the fund’s circumstances.
The investment strategy deserves particular attention. It should consider diversification, liquidity, the fund’s ability to pay benefits and expenses, and whether insurance should be considered for members.
A generic document may not adequately reflect the assets the fund actually holds or the risks it faces.
You will also generally need to arrange the fund’s bank account and investment accounts. Banks and investment providers may require trustees to complete identity checks and provide supporting documents themselves.
The important point: a low setup fee is only good value if the fund is established correctly for its intended purpose.
What Does It Cost to Run an SMSF Each Year?
The initial setup fee is only part of the picture. An SMSF has ongoing obligations, even if it makes few investments or has a relatively quiet year.
For a straightforward fund, annual running costs commonly fall between $2,000 and $5,000. Property investments, pension arrangements and more complicated assets can increase the total.
Typical expenses include:
Accounting and administration
This usually covers preparing the financial statements, member records and annual SMSF tax return, together with ongoing compliance work.
Independent SMSF audit
Every SMSF must undergo an annual audit by an approved SMSF auditor. The auditor must meet the relevant independence requirements. Audit fees are generally charged separately unless they are included in an administration package.
ATO supervisory levy
SMSFs pay an annual supervisory levy through their annual return. New funds generally pay their first year's levy in advance, which can make the first return more expensive than subsequent years.
ASIC annual review fee
This applies where the fund has a corporate trustee. Check that the company has been registered in the appropriate category and that you understand the ongoing fee.
Actuarial and investment costs
Some funds need an actuarial certificate, particularly where pension and accumulation interests are involved and the relevant calculation method requires one. Other costs may include brokerage, investment platform fees, property expenses, insurance and land tax where applicable.
These expenses can vary considerably between funds, so ask for a clear breakdown before signing an annual service agreement.
Guidance Accounting offers an SMSF support package for $200 per month, or $2,400 per year, according to the current package details. Check the service inclusions and any separately charged expenses before comparing it with another provider.
It’s also important to stay on top of deadlines. Late lodgment can lead to penalties and, in serious cases, compliance consequences. Our guide to SMSF annual return deadlines and penalties explains why getting the timing right matters.
Are SMSF Setup Costs Tax Deductible?
Generally, the initial costs of establishing an SMSF are capital expenses rather than deductible operating expenses. This can include costs associated with creating the trust and registering the trustee company.
Ongoing expenses may be deductible where they meet the relevant tax requirements and relate to producing assessable income. These can include accounting fees, audit fees, the supervisory levy, company review fees and certain investment-related expenses.
However, the treatment is not always straightforward.
If the fund earns exempt current pension income, expenses may need to be apportioned between assessable and exempt income. Where a fund is wholly in pension phase, deductions may provide little or no benefit against assessable income.
There can also be complications if a member pays an SMSF expense personally. Depending on the circumstances, the payment may be treated as a contribution and count towards the member’s contribution caps.
The correct treatment depends on the expense, the fund’s circumstances and the applicable tax rules. For more information, see our article on SMSF tax leakage and how it happens.
What SMSF Balance Makes the Costs Worthwhile?
You may have heard that an SMSF generally becomes more cost-effective once its balance reaches around $200,000. This is a useful starting point for a comparison, but it isn't a universal rule.
The real question is how your SMSF’s total costs compare with the fees you would pay in an industry or retail super fund.
Consider a fund with annual running costs of $3,000:
With $150,000 in assets, the annual costs equal 2% of the balance.
With $500,000, they equal 0.6%.
With $1 million, they equal 0.3%.
Because many SMSF expenses are relatively fixed, the percentage cost generally falls as the balance grows. By comparison, percentage-based fees in other super funds can increase as your balance increases.
However, balance alone doesn't determine whether an SMSF makes sense. The type of investments, the services required and the time you are prepared to spend managing the fund all matter.
For example, an SMSF holding business property or pooling the balances of several family members may have a different cost structure from a simple fund investing in listed shares and cash.
You should also consider the value of your own time. Trustees are responsible for keeping records, reviewing the investment strategy, making investment decisions and meeting their legal obligations.
Our article on whether adding family members can reduce SMSF costs explores some of these considerations.
What Are the Risks of Choosing a Cheap SMSF Setup?
Saving money upfront can be tempting, but an SMSF is a long-term structure. A poorly considered setup can cost much more to fix later.
Common problems include outdated trust deeds, unsuitable trustee arrangements, generic investment strategies and errors in the execution of documents.
These issues may become apparent only when you want to start a pension, make a binding death benefit nomination, purchase property or change the fund’s membership.
You should also consider insurance before moving money out of an existing super fund. If you cancel existing insurance when rolling over your super, replacing that cover may be difficult or expensive, depending on your circumstances.
Before choosing a provider, ask what happens when your situation falls outside the standard setup process. A good provider should understand what the fund intends to own, who its members are and how the structure may need to change in the future.
There is a difference between an accountant who focuses solely on compliance and one who helps you understand the broader implications of your decisions. Our article on compliance versus advisory accounting explains the distinction.
How Do SMSF Costs Compare with Industry and Retail Super Funds?
Industry and retail super funds commonly charge administration fees, investment fees and other costs, some of which are calculated as a percentage of your balance.
An SMSF works differently. Many of its administration expenses are fixed, so the percentage cost can decline as the fund grows.
At higher balances, an SMSF may offer greater control over investment choices and the timing of certain decisions, alongside potential cost advantages. But those benefits need to be weighed against the extra administration, responsibilities and professional fees.
Make sure you compare like with like. An SMSF's quoted administration costs may not include every investment expense or the value of the trustee's time.
Our article on how people with larger super balances can benefit from an SMSF looks at the potential advantages in more detail.
Frequently Asked Questions
Can an SMSF pay its establishment costs?
Initial expenses are often paid personally before the fund has a bank account and available money. Whether the fund can subsequently pay or reimburse a particular expense depends on the circumstances and the nature of the expense.
Keep clear records and obtain professional guidance before arranging a reimbursement.
How long does it take to establish an SMSF?
The documents and company registration may be completed relatively quickly, but ATO processing and registration checks can take longer. Allow time for the fund to be established and appear as complying on Super Fund Lookup before expecting a rollover to be processed.
Does the ATO supervisory levy depend on the fund balance?
The levy is generally a flat amount per fund rather than a percentage of its assets. New funds may have two levy amounts payable around the first annual return because the first year's levy is paid in advance.
Check the ATO's current requirements for the relevant year.
Can the same accountant prepare the accounts and perform the audit?
The SMSF auditor must meet the applicable independence requirements. Your accountant can coordinate the audit, but the audit must be conducted by an appropriately approved and independent auditor.
Check whether the audit fee is included in your quoted annual package.
What happens if I decide to close my SMSF?
Winding up an SMSF can involve final accounts, an audit, a final tax return, asset transfers or sales, potential tax consequences and the closure of the trustee company.
These expenses can be significant, which is why it is important to consider the long-term purpose of the fund before establishing it.
Is an SMSF Right for You?
The cost of setting up an SMSF is only one part of the decision. What matters most is whether the structure suits your super balance, investment plans, circumstances and willingness to take on trustee responsibilities.
Before committing, compare the initial costs, ongoing annual fees and potential exit costs. Consider what you want the fund to achieve and whether the additional control justifies the extra work.
Talk to Guidance Accounting
Not sure whether an SMSF makes financial sense for you? Guidance Accounting can help you understand the compliance requirements and ongoing costs involved, so you can make a more informed decision.
Contact Guidance Accounting to discuss your SMSF requirements, or visit our SMSF pricing page to learn more about our support package.
Disclaimer
This article is provided for general information purposes only and does not constitute financial, investment, tax or legal advice. The information is general in nature and may not be appropriate for your individual circumstances. SMSF establishment costs, government fees and taxation requirements can change. Actual costs depend on the fund's structure, investments and individual requirements. You should seek advice from suitably qualified professionals before establishing, operating or winding up an SMSF.