Before creating an SMSF, it’s important to understand what your SMSF cost is likely to be. Once you know this, it may help you decide when the time is right to make the swap from your existing retail fund.
SMSF cost is generally split into two categories:
- Setup fess
- Ongoing fees
In this blog we will discuss the two categories of SMSF cost to hopefully give you an idea of what to look for when thinking about establishing an SMSF and choosing a provider.
Setup fees
Setup costs commonly start around $2500 and generally rise from there.
The costs incurred to start an SMSF include items such as the drafting of the trust deed, registration of a corporate trustee, rollover requests with your existing fund, procurement of insurance, and the time taken for your service provider to facilitate the establishment of your SMSF.
Lower fees may result in a less than adequate trust deed or higher ongoing fees to recover the costs over time.
Be careful when chasing a bargain when planning for your retirement. Pay careful attention to what services are provided in the setup fees. If costs are low, the burden may be on you to complete several key steps with little knowledge of how things work. Additionally, low set up cost may be recovered by the provider by higher fees elsewhere.
High costs should mean that your service provider takes care of all aspects of the setup and you simply need to give them your details and sign the documents they provide.
The set up fees are generally charged to the fund, and the cost is shared by all members of the fund.
Jarospace chose the middle ground with our setup fee of $2750 including GST. With our onboarding process, we explain the details of what an SMSF is, and take care of several key steps such as creating the trust deed and corporate trustee.
We take the time to go through your investment plan and ideas with you and inform you of what the likely compliance requirements will be, and if we can foresee any concerns we will let you know.
We leave the SMSF bank account creation up to you, but guide you through the process. This keeps our costs down and gives you the flexibility to choose the bank of your choice. We also provide advice on bank selection if you need.
If you like the idea of setting up an SMSF for a reasonable price:
Ongoing fees
The basic ongoing costs are annual accounting to prepare your taxes, mandatory external auditing, and government fees including ASIC registration and the ATO supervisory levy.
Ongoing fees for administration vary on what level of service you are getting and the business model of your service provider are.
If for example, you purchase a property with your SMSF, you may incur higher fees as a result of GST registration and BAS lodgement.
The extent of ongoing fees also depend if you are paying for investment advice, or investment management.
In managed schemes or a service including recommendations on what to invest in, expect higher ongoing fees as a result.
Again Jarospace chose the middle ground with our annual administration fees of $2200 including GST. Jarospace doesn’t offer SMSF investment advice, or investment management. We believe in getting out of the way and allowing you to manage your own super investments. This allows us to stay impartial and focus on providing best in class administration and accounting services. It also allows us to keep our costs down.
Our goal is to partner with you on your investment journey and provide accounting and compliance instruction based on your investment decisions. We focus on what we’re good at and try and make the SMSF journey a smooth one.
Conclusions
The setup fee portion of total SMSF cost is reasonably easy to break down as it is a one off. You can take the quoted fee, and divide it by the number of members and also by the estimated remaining lifetime years of your fund (30 or 40 years, etc).
You can then take this number and divide it by your current fund balance (or combined if you are planning on having multiple members) to get a rough value for the annual percentage cost of set up. It will most likely be quite a small percentage. Increases to your fund balance and inflation will both further reduce the annualised setup fee percentage.
The ongoing fee portion of total SMSF cost is simple to break down, just divide it by your fund balance to get the annual percentage fee. The hard part is deciding on the value of the ongoing fees. Low fess may indicate high risk or limited service. High fees come with high expectations.
Whether you think the SMSF cost it is worth it depends on your fund balance and your motivations, check out our other blog where we discuss if it’s worth setting up an SMSF.
CONTACT US
You can also write to us at
info@jarospace.com
Or call us on 0489 074 123
Business hours
9 am – 5 pm
Monday – Friday
We will respond to your enquiry
within 2 business days.
