Setting up and managing a Self-Managed Super Fund (SMSF) can be an attractive option for small business owners and finance enthusiasts looking for more control over their retirement savings. However, it’s essential to have a clear understanding of the costs and time commitments involved to ensure it aligns with your financial strategy and lifestyle.
What Is an SMSF?
Before we jump into costs and time management, let’s quickly recap what an SMSF entails. An SMSF is a private superannuation fund, regulated by the Australian Taxation Office (ATO), which allows members to manage their retirement savings. With this control comes the responsibility of complying with regulations, making investment decisions, and managing day-to-day operations.
Average Costs of Managing an SMSF
While the costs of managing an SMSF can vary, here are some typical expenses you should consider:
1. Set-Up Costs
- Trust Deed: Establishing an SMSF requires a trust deed, which can cost anywhere from $500 to $2,000, depending on the service provider.
- Initial Advice Fees: Seeking professional advice during setup can cost between $3,000 and $10,000.
2. Ongoing Management Costs
- Annual Audit: An annual audit of your SMSF is mandatory, typically ranging from $300 to $700.
- Accounting and Tax: Expect to pay between $1,500 and $10,000 annually for accounting and tax services.
- Investment Fees: These fees depend on your investment strategy and can vary widely. Consider brokerage fees, fund management fees, and any other costs associated with managing investments.
- Insurance Costs: Many SMSFs choose to purchase life and total permanent disability insurance for members, which adds to ongoing expenses.
3. Regulatory Fees
- ATO Supervisory Levy: This levy costs around $259 annually.
Overall, the average cost to run an SMSF can range from $3,000 to $20,000 per year. Larger funds may face higher costs due to more complex investment strategies.
Time Commitment for Managing an SMSF
Apart from the financial commitment, you’ll need to invest time in managing your SMSF effectively:
1. Initial Setup
Setting up an SMSF can generally take anywhere from 4 to 6 weeks, including gathering documentation, setting up a trust deed, opening bank accounts, and creating investment strategies.
2. Ongoing Management
- Investment Management: Regular monitoring of your SMSF investments can require several hours each month, depending on the complexity of your portfolio.
- Record Keeping: Keeping accurate records is crucial for compliance and may take an additional few hours each month.
- Annual Obligations: Completing annual returns, audits, and compliance checks can take a few days each year.
On average, managing an SMSF requires around 100 hours per year, equivalent to roughly 2 hours per week. However, this can vary based on the complexity of your fund and the level of professional support you engage.
Is Managing an SMSF Right for You?
Deciding to set up an SMSF is a significant commitment. It’s important to weigh the costs, time investment, and potential benefits against your personal financial goals and investment expertise. For many, the ability to tailor investment strategies and potentially reduce fees is worth the effort, but it’s not for everyone.
Before taking the leap, consider consulting with a financial adviser or SMSF professional to ensure it aligns with your long-term financial strategy. If you’re already managing an SMSF, regularly review its costs and time requirements to ensure it remains a beneficial investment vehicle for your future.
The road to retirement is unique for everyone and having the right plan in place can make all the difference.
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