Self-Managed Super Fund Costs

As with any super fund, there are costs associated with setting up and running a Self-Managed Super Fund, and it is important to know what they are and how they accumulate during the operation of the fund. When it comes to the financial aspects of the fund, the starting point is to discuss how large a balance is needed at launch to make setting up a Self-Managed Super Fund worthwhile?

 To be absolutely accurate, there are no legal restrictions on the minimum amount invested at the launch of the fund, however, there are practical reasons why a reasonable investment is recommended. The up-front costs of establishing the fund are such that if the investment is not significant, then costs can outweigh the returns, which is bad news for any investment, never mind a retirement fund.

With that in mind, most industry advice suggests that $200,000 is the minimum amount to invest in a Self-Managed Super Fund, although data show that nearly 20% of all Self-Managed Super Funds hold less than that. The precise amount that makes a fund viable will depend on the rate of return on its assets. In a self-managed approach such as this, essentially, it depends on the member's ability as investors and the returns they are expecting. There are successful funds with less than $200,000 certainly, but with the costs involved, a significant sum is required all the same.

The reason that a Self-Managed Super Fund generates significant costs at launch and during operation is the need to comply with regulations. This is a double-edged sword, superannuation programs are tightly regulated to maintain fund protections, but that inevitably brings in advisor and legal fees that add to the overall cost of the fund. This applies to commercial and retail fund options as much as it does to the self-managed approach.

Setting up a Self-Managed Super Fund incurs a number of one-off costs, including the Trust Deed (minimum of $200) and, if applicable, Trustee Company used to administer the fund (Up to $1000). In addition, legal fees, banking fees for setting up an account, and fees for advisors to take you through the process and ensure all legal responsibilities are covered, can significantly increase this total.

However, as we discussed, it is the ongoing fees to maintain a Self-Managed Super Fund that matter over time, and here there are several annual costs:

• Accounting Fees - approx from $1000 to $2000 depending on the service
• Auditor Fees - approx from $1500
• Annual ASIC Fee - $50
• Investment Costs – This is dependent on the type and frequency of investments
• ATO Levy - $518

In total, fees can range from around $1500 to over $2000 per year. With most investors targeting 1% for fees in superfunds, we can see where the $200,000 minimum idea came from, and why even at $150,000 the costs can go over that 1% target.

With regular additions to the fund each year, Self-Managed Super Funds can quickly overcome those fees and provide a balanced approach to retirement investment.

For the full breakdown of Self-Managed Super Funds check out our article: The Self-Managed Super Fund and why you should have one

We welcome you to give our team a call to discuss your investment goals and objectives.

You can call Walker Capital Australia on +61 2 8076 2210, and we’ll see how we can help you achieve your investment goals.