How Much Money Do You Need To Set Up A Self Managed Super Fund?

How Much Money Do You Need To Set Up A Self Managed Super Fund?

So you’ve decided to research setting up your own self managed super fund but you want to know exactly how much money you need to start. Unfortunately there is no right or wrong answer to this question and it all comes down to how much it will cost to run and administer your fund.

According to the Australian Securities and Investment Commission (ASIC), there is no legally required minimum amount to set up an SMSF but it all depends on whether it will be viable financially and your own personal choice. You see, many people have decided to set up their own SMSF because they want more control over their super and how it is invested.

Many financial advisors will suggest around $200,000 as a guide as this will make the fund viable from the outset when all costs are considered. In saying that however, there are many people who have started their SMSF with much less and have increased its value quickly over time by making greater contributions.

It can also be advantageous for two or more people to combine their superannuation into one SMSF trust fund to share the costs and of course reap the financial growth of the fund. You can set up an SMSF with up to four people,

What Are The Costs Of Running A Self Managed Super Fund?

Firstly, you need to consider the cost of setting up an SMSF which can vary depending on who sets up your fund. An average figure is likely to be around $2,500. These fees include:

  • Setting up the Trust Deed
  • Establishing an SMSF Sole Purpose Trustee Company

To add to the set up costs, there are also annual costs which must be considered. Most of these are legal requirements as set down by ASIC and the Australian Taxation Office. If you want to manage all your own investments the minimum costs you’ll still have to pay include:

  • Accounting administration and auditing fees
  • The annual ASIC Corporate fee
  • The ATO Supervisory Levy
  • Plus the cost of share trading if you are investing in shares as part of your portfolio

If however, you choose to have your SMSF totally managed by a third party company, then your annual costs will significantly increase. The table below shows the statutory fees which must be paid regardless of whether you choose to administer your own fund or have it totally managed by an outside administrator.

As you can see, some of these fees can vary in cost depending on who you choose to do the audits and prepare your financial statements and tax returns.  The second table illustrates the estimated costs if you choose to have your fund fully administered by a third party.

Now let’s look at how these costs will relate to how much money you have in your SMSF. The table below show the average annual costs in 2013. It shows both the full managed fund fees and the fees you can expect to pay if you manage your own SMSF.

In this table you’ll see that the pink boxes signify fees which are higher than retail and industry super funds and the green boxes show fees which are lower than retail and industry funds. The costs in the grey boxes are comparable to industry and retail funds.

What we can then learn from these figures is that having a low balance in your SMSF may not be viable due to the high fees which will cut into your fund’s growth. On the other hand, if you choose to do all your own administration and intend to make contributions which are far greater than the annual fees, then it may still be viable to start an SMSF with a lower start up investment.

Do The Benefits Of An SMSF Outweigh The Costs?

When deciding on whether it’s viable for you to set up an SMSF no matter how much money you have to start with, you also need to consider the benefits of an SMSF. Some of these benefits include:

  • Having total control of the investment strategies that you use to grow your superannuation.
  • Having the ability to decide what you want to invest your funds in.
  • Having the ability to borrow funds with your SMSF to purchase an investment asset such as a residential or commercial property.
  • If you own a business, having the ability to purchase a commercial property with your SMSF money and borrowed funds, which your business can then rent from your SMSF. This also has some tax benefits for your business as rental payments can be claimed as a deduction.

Getting Professional Advice Is Highly Recommended

Before you make the final decision to set up a self-managed superannuation fund, it is highly recommended that you seek professional financial advice. A financial advisor who is well versed in SMSFs, can look at your personal situation and discuss with you what your best options would be.

There’s also a lot of information available online so if you do a little research, you’ll most likely find all the answers for any questions that you may have.

In conclusion, there is no statutory minimum amount of money that you need to set up your own SMSF. It really all depends on whether it is viable cost wise to set up your own super fund or whether you would be better off leaving your super in an industry fund until it has grown to a more substantial level.

However, if you want more control over your super growth and are planning to make substantial contributions, then an SMSF may just be the right choice for you.


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About Author


Collins Mayaki

Collins Mayaki is the Managing Director of Wealthy You – helping Everyday people, Businesses and foreign investors navigate through the competitive and ever-changing mortgage landscape to find the right loan for them. Wealthy You goes into bat and negotiate on your behalf, making the process as simple as possible for you, geared up to deliver fast results. Our Mortgage Brokers help you avoid the pitfalls, and we'll find loan features to suit your personal circumstances. Collins has more than 12 years of sales, management and marketing experience across a diverse group of companies.

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