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How Much Does It Cost to Set Up a SMSF?
11 May, 2018

Anyone showing interest in setting up a self managed super fund wants to know how much it will cost. There is, in fact, no definitive answer to this, as the actual cost in setting up the trust depends on a number of aspects.

There is a lot of information available to give potential members an idea on what to expect and, as far as this information goes, it is highly recommended that roughly $ 200,000 is the minimum amount required to establish a self managed super fund. This amount is estimated based on the operating costs of a self managed super fund versus the administration costs that are charged by various retail and industry superannuation funds.

Compared to a superannuation fund, a self managed super fund allows its members complete control, flexibility, and the freedom to choose investments based on good wealth building strategies. So even though a superannuation fund will ultimately cost less to run, it doesn’t offer the same benefits in the long run. Paying more to set up a self managed super fund is acceptable based on what potential it has for its members.

However, this doesn’t mean that potential members need to fork out exorbitant amounts. The more money saved on establishment costs and administrative costs, the more money members have to spend on investments.

What to Consider When Determining Costs

There are two aspects to consider when estimating what it will cost to set up a self managed super fund. These are diversification and quality. Having enough money to diversify means splitting the money over a variety of assets. This essentially means more stability and consistency with capital growth and income. Quality investments are important because they too offer stability and consistency over the long term.

In order to know how much it will cost to set up a self managed super fund, it is important to understand what is expected in terms of the costs and what kinds of investments are going to be considered. It is also important to remember that up to four members are allowed, which can increase investment costs and ease operational costs.

It is wise for potential members to know whether they will opt for high-quality investments or the latest trending investment schemes. They need to know how much is needed to make the high-quality investments that have more potential than others, and they should have a basic idea of how much the annual administrative costs will be. It is pointless being unrealistic about the amount that is going to be spent versus what is going to be paid out, but it’s acceptable to have a substantial set up cost that deems the annual operating costs worth it.

As far as the annual operating costs go, they can be managed to make them more affordable. Finding advisors that cost less and finding ways to streamline the costs are examples of how to do this. Corners don’t need to be cut either in order to cut costs.

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