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Retirement

Why it costs less than expected to set up an SMSF

  • June 23 2020
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Retirement

Why it costs less than expected to set up an SMSF

By Cameron Micallef
June 23 2020

Freshly released figures from the ATO have shown that it cost four times less to run a self-managed super fund than an estimate released by ASIC last year.

SMSF

Why it costs less than expected to set up an SMSF

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  • June 23 2020
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Freshly released figures from the ATO have shown that it cost four times less to run a self-managed super fund than an estimate released by ASIC last year.

SMSF

A fact sheet released by the corporate regulator highlighted that it would cost members $13,900 to operate a self-managed super fund, as well as a 100 hours a year time commitment.

The ATO has refined these figures, showing operating expenses are closer to $3,923 a year.

SMSF Association CEO John Maroney has welcomed a far more realistic assessment of what it costs to run an SMSF fund.

“We have been encouraging the ATO to publish more granular expense data and are extremely supportive of the updated data that has now been released,” he said.

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Mr Maroney highlighted the analysis used for the ASIC fact sheet relied on the use of averages that ignored the significant distortion caused by large SMSFs and funds choosing to use borrowings and buy extensive administrative insurance and investment services.

“High total average expense figures have not reflected the reality of the typical SMSF, and we acknowledge the ATO’s willingness to listen to our concerns and to present the data in a more transparent and meaningful way.”

The CEO explained that it has always been difficult to clearly determine the basic operating expenses of an SMSF due to these larger funds.

“This was recently highlighted in an ASIC SMSF Fact Sheet that we believe was well intended to help people consider whether an SMSF was a suitable choice for them but lacked balance and would have benefited from more context about optional expense components,” Mr Maroney continued.

Mr Maroney believes the ATO’s views are fairer due to its factsheet tables, breaking down costs using median and average expenses by type of funds, as well as streamlining operating expenses to include auditor fees, management and administration expenses, other amounts and the SMSF supervisory levy.

“What these revised tables clearly show is how SMSFs exceeding $2 million had a significant impact on the weighting of the costs allocated to an average figure. In addition, the impact of expenses such as investment expenses, insurance and interest on investment borrowings were attributed to the average when many SMSFs choose not to use these services,” he said.

“The data allows us to take a fund with a typical establishment balance of between $200,000 to $500,000 and, if we only include the basic operating expenses, we can estimate the median operating expense to be around $3,400 for these SMSFs.”

Mr Maroney added that the overview paints a healthy picture of the SMSF sector, with an average investment return of 7.5 per cent compared with the 8.5 per cent return for the APRA funds, maintaining the strong run of positive returns by SMSFs and the continuing comparable performance with APRA-regulated super funds.


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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

Join The Nest Egg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

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