This SMSF setup form enables the establishment of a self-managed super fund online.

SMSF Setup

An SMSF set up involves the following key steps:

1. Understand how professionals can assist you to set up an SMSF
2. Determine the members and trustee of your SMSF
3. Obtain the SMSF trust deed and associated documents
4. Register the ABN and TFN for your new SMSF
5. Set up a bank account for your SMSF
6. Transfer your existing superannuation accounts to your SMSF
7. Implement your SMSF investment strategy

How much money do you need to set up a self managed super fund?

The most common method to answer this question is to look at the average SMSF costs and fees per year and compare to another type of superannuation fund such as a retail or industry super fund account.

If for example your retail or industry super fund costs you 1.00% per annum for the administration and management cost (excluding insurance premiums), then based on the average SMSF fees from the ATO an SMSF with a starting balance of $393,400 would on average be a reasonable amount of money to set up a self managed super fund.

However, it’s not quite as simple as that. If you plan to outsource the investment management of an SMSF to a financial planner or investment adviser, the SMSF costs and fees will increase, therefore to make the self-managed super fund costs similar to APRA regulated funds, you would need significantly more.

ASIC previously reported that SMSFs with balances under $500,000 had lower returns after expenses and tax and are often uncompetitive compared to the larger APRA-regulated funds. There is an element of truth to this, however average fees and average balances often hide other variables.

Analysis by the SMSF Association shows that the average amount of money to set up an SMSF in the 2018 financial year was $408,750 with a median amount of $268,664.

We believe it may be appropriate to set up an SMSF with at least $200,000 however it might be lower depending on the investment strategy used and service provided selected.

SMSF Setup Costs

The Future of SMSF Survey undertaken by Smarter SMSF looked at average SMSF setup costs in their 2018 report.

The average SMSF setup costs were found to be $1,050 for a generalist accountant or $935 for a specialist SMSF provider.

This amount includes the documentation including SMSF trust deed but does not include the cost of the trustee company registration with ASIC which is $495 (increasing to $506 from 1 July 2020) and associated legal document costs for the constitution.

This means the average SMSF setup cost for the establishment of a self-managed superannuation fund with a company trustee would be circa $1500.

SMSFs don’t necessarily need a special purpose trustee company for a new SMSF setup, however it’s more robust and the best choice for most new SMSFs.

Free SMSF setup

Setup fees for an SMSF with individual trustees are typically lower, and can be anywhere from $0 (free setup) or up to $900 with an average around $500.

It’s important to understand what you get as many low cost providers basically provide a documentation ‘kit’ for a truly DIY SMSF set up. Most providers who charge a fee will often undertake more of the work including explaining all the relevant documentation and minutes, completing the ABN and TFN applications for the SMSF as well as ensuring the trust deed document for your new SMSF is up to date for all laws, compliant and of high quality.

Are SMSF setup costs tax deductible?

No. The costs to setup an SMSF are not tax deductible and this has been confirmed by the ATO. The SMSF setup costs including legal expenses, document expenses, accounting fees and the fees to register a trustee company with ASIC are all capital in nature and a deduction cannot be claimed for these establishment expenses.

Some accountants may record the SMSF setup costs in accounts of the SMSF and amortise (write-off) over 5 years however this is unnecessary. SMSF establishment fees should be treated as a tax deductible expense in the accounts.

Who pays SMSF setup costs?

The individuals who will be the members of the SMSF typically pay the SMSF setup costs.

If the accountant or provider who completes the SMSF setup issues an invoice in the name of the new self-managed super fund, it’s possible for the fund to reimburse the members who paid the establishment costs once the SMSF has money in it’s bank account from contributions or rollovers.

Setup costs if paid by a member of an SMSF are not tax deductible to the individual (or to the SMSF itself – see above).

SMSF Establishment

The SMSF Establishment process is very easy and conducted online.

It’s best to work with professionals when it comes to setting up your SMSF.  Stay away from cheap online operators who use the ‘free SMSF setup’ to hook you in as you always spend more in the long run and often don’t get the personalised support or service you need.

The SMSF setup process is critical to get right.  It can cost a lot in time and fees to fix errors if the setup of your SMSF is done incorrectly.