How Much Does A DIY SMSF Cost?

There are some SMSF members who like the control that comes with managing their own super fund. However, taking control involves been responsible for managing your retirement funds, which will require significant time and effort.

If you’ve understood your legal responsibilities, and have enough time to dedicate to it, you can consider running your SMSF by your own. But how much does a DIY SMSF cost? Well, the cost of establishing a SMSF is not the only important thing you need to investigate. The annual running costs of your SMSF are actually more important (to the long-term viability of your fund) than the set-up costs and can play a great role on your investment returns and the size of your SMSF account over time.

The operating expense ratio (OER) is calculated by dividing the costs of running a SMSF by the value of the fund assets. According to the ATO, the OER average has declined over time up to 1012, with an average annual of 0.66% over the 4 years.

It is important to mention that the annual cost of a SMSF will depend on the value of the fund assets. That is because most SMSF costs are fixed costs like preparation of accounts, fund audit and the ATO supervisory levy. Plus, the average fund balance is quite high, meaning the fixed costs are divided over a larger value of assets.

Here is an example so you can better understand: If you have a small SMSF fund balance, that means you can expect to spend a higher percentage of your fund assets to annual expenses. But if you have a larger SMSF balance, then you can expect for your expense ratio to be much lower then the average.

Here is the minimum cost-effective balance for an SMSF.

  • Less than $100,000 – SMSF members who have fund balances of less than $ 100,000 usually don’t have a cost-effective SMSF, specially when compared to larger super fund.
  • Between $100,000 and $ 200,000 – SMSF with fund balances that range from $100,000 to $200,000 may be competitive with the most expensive type of large super funds. But this only if the SMSF members undertake some investment functions and administration by themselves.
  • More than $200,000 – SMSF with fund balances of $200,000 or more are competitive with either cheaper or more expensive large funds when the SMSF members undertake some of the administration.
  • More than $250,000 – SMSFs with fund balances of $250,000 or more are the cheapest alternative when SMSF members undertake some of the fund’s administration.
  • More than $500,000 – When SMSF members need full service from SMSF administrators, then a fund balance of $500,000 or more is needed to be more cost-effective than a large super fund.
  • Pension funds – A SMSF in pension phase is more expensive to run.