The effectiveness of the internet in revolutionising business has not been lost on the superannuation industry, and it has
allowed web-based fund managers and service providers to render services at a lower cost than traditional operators.
This has meant that, in many instances, a superannuation balance well below the $200,000 threshold is more than adequate
for transitioning into an SMSF, which in turn is opening up self-managed super as a viable option for a higher proportion
of Australian workers.
Distribution of SMSF assets
The latest ATO figures on SMSF activity reveal that nearly one in five (19.1 per cent) of all self-managed superannuation
funds contained less than $200,000 worth of assets. Somewhat surprisingly, 6.1 per cent of SMSFs had assets totalling
less than $50,000.
While the data does show a slow decline in the proportion of SMSFs with assets totalling less than $200,000 over the
survey period, this could easily reflect the advancing wealth of Australia’s ageing population rather than be an
indication of SMSFs requiring a higher rate of capital to remain viable.
Determining whether or not an SMSF is right for you will depend more on the rate of returns you can achieve after the
deduction of operating costs, as well as your skill and ability to manage your assets effectively, than the amount
of start-up capital you have. As such, it is important to understand the various costs associated with managing an
Management costs of SMSFs
The costs for the establishment and ongoing maintenance of self-managed funds are largely due to the strict governmental
oversight of SMSFs and superannuation in general. These costs include ongoing audit and accounting fees, insurance,
and expenses associated with making and managing investment decisions. There are also establishment costs, wind-up
expenses and the value of your own time in managing the fund.
Additionally, the administration fee to operate an SMSF can be fixed or portioned to the superannuation balance, providing
some flexibility to manage running costs.
ATO explains that the estimated operating expenses ratio on SMSFs is at 0.50 per cent, providing anyone contemplating
an SMSF with a guide as to how much cost to factor into their plans. However, the ATO points out that those funds
with higher balances had significantly lower operating cost ratios than those with balances below $50,000.
Bear in mind that $200,000 is nothing more than a suggested guide as to the amount required to establish an SMSF. It
is clear that the more important consideration when investigating an SMSF is ensuring the investment returns, and
even more so the start-up balance, are not consumed by operational fees and expenses.
If you want to learn more about SMSFs, download an