The cost of operating SMSFs has been a very hot topic for all the right and moral reasons and the regulator (ASIC) that governs advice around establishing SMSFs and the advice community have made steps to educate the wider community, that SMSFs are not for everyone.
The Productivity Commission in its report Superannuation: Assessing efficiency and competitiveness found that on average SMSFs with balances below $500,000 have lower returns after expenses and tax compared to APRA-regulated funds.
The SMSF Association retained Rice Warner to update its report prepared for the Australian Securities and Investments Commission (ASIC) in May 2013, Costs of Operating SMSFs, in the context of ongoing public debate regarding the appropriate minimum size for a Self Managed Superannuation Fund (SMSF) and ASIC advice regarding fees paid by SMSF Trustees.
The research will assist to determine the minimum cost effective balance for SMSFs. It should aim to:
- Provide insights into the true costs of running an SMSF.
- Allow industry to compare appropriate estimates of fees for differing SMSF balances.
- Review the comparable costs of holding superannuation in an Australian Prudential Regulation Authority (APRA) regulated fund.
- Consider the various products issued by APRA regulated funds, including default options and likely MySuper costs.
- Consider the situations where there is more than one member in an SMSF (which would result in multiple accounts in an APRA-approved product).
- Consider the opportunity cost of the time spent by an SMSF trustee in managing the fund.
- Have some regard to the fact that the SMSF cost-effectiveness debate must extend beyond an analysis of costs to consider the different and varied motivations that SMSF members have in wanting to
have their superannuation in an SMSF. For instance: control, asset allocations, age and growth prospects,
- Capital Gains Tax (CGT) rollover costs, difference in cost methodologies, etc.
- Provide case studies of SMSFs starting small and growing over time.
We enjoy helping our clients achieve their financial objectives and at the core of our values is education. Making informed decisions drives better outcomes. If you would like more information about superannuation and SMSFs and how they can play a significant role in achieving your retirement goals, contact us at firstname.lastname@example.org or call 07 3421 0100 to have a chat with our advisers.