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When you set up you must develop and maintain an investment strategy and manage all the contributions and withdrawals. You also need to comply with superannuation and tax laws, record keeping obligations, lodge annual statements and have the fund independently audited each year. This means you may want to engage an accountant to help administer the fund, as well as an approved SMSF auditor. You may also want specialist tax advice and perhaps investment advice as well. But remember, even if you employ professionals to help, ultimately you are responsible for complying with the rules regarding SMSFs.2
The set up and running costs for a SMSF can be considerable, so it’s most cost-effective if your super balance is $200,000 or more. The start-up costs can range from being free to up to $2,200, although typically the start-up costs are somewhere in between these two figures.3
How much money you have in a SMSF makes a difference to the cost of running it, because there are some fixed costs that remain constant whether you have $50,000 or $500,000.
These include the ATO supervisory levy, audit and accounting fees.4 Usually a balance of $200,000 or more is needed to make a SMSF cost competitive with a mainstream super
Before setting up a SMSF, there are some key things to consider. For instance, do you have the time, expertise and motivation to actively manage your super? Are you confident you can do better than professional investment managers? Do you have enough money to make it worthwhile? If your aim in setting up a SMSF is to have more control over your super, have you checked if there are opportunities to select investment options within your current super fund? These can give you some of the control over investments that you want, without the legal and administrative responsibilities of running a SMSF.3
If you'd like more information about ESSSuper call the Member Service Centre on 1300 650 161 (Emergency services) or 1300 655 476 (State super).
1. Robert M C Brown, ‘The SMSF time bomb' 2. MoneySmart, 'Self Managed Super Funds' 3. SuperGuide, ‘SMSFs: How much does a DIY super fund cost?’ 4. According to the Rice Warner report, account balances larger than $200,000 are competitive with larger super funds, subject to some qualification.
The information contained in this article is of a general nature only. It should not be considered as a substitute for reading ESSSuper’s Product Disclosure Statement (PDS) that contains detailed information about ESSSuper products, services and features. Before making a decision about an ESSSuper product, you should consider the appropriateness of the product to your personal objectives, financial situation and needs. It may also be beneficial to seek professional advice from a licensed financial planner or adviser. An ESSSuper PDS is available on our website or by calling 1300 650 161.
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