Until recently, the Australian Securities and Investments Commission (ASIC) stated that the average yearly self-managed super fund (SMSF) running cost was $13,900—a figure hotly contested by practitioners. The impact of this significant fee was that the financial regulator also cautioned against establishing an SMSF with less than $500,000.

“SMSFs with balances below $500,000 have, on average, lower returns after expenses and tax compared to industry and retail super funds,” a 2019 ASIC fact sheet said. This had flow-on effects, including many financial advisers being extremely cautious about setting up SMSFs for clients with less than $500,000.

However, research commissioned by the SMSF Association from the University of Adelaide has recommended a revision of this guidance to balances above $200,000. This revision gives advisers more confidence to set up SMSFs above this lower range and may encourage self-advised investors to self-manage sooner. The results of the research using data from more than 300,000 funds concluded that the investment performance (net of fees) of SMSFs with balances of more than $200,000 was able to compete with much larger funds. ASIC updated its guidance, stating balance size is ‘only one consideration of many.’

Industry bodies, including the SMSF Association, long refuted the eye-watering fees that ASIC had tied to SMSF administration. Data from the Australian Taxation Office (ATO) has provided some vindication for these criticisms. The latest SMSF data from 2020-2021 show that median operating expenses for an SMSF is $4,139, including deductible and non-deductible expenses such as the approved auditor fee, management and administration expenses, and the SMSF supervisory levy.

The SMSF Association’s former chief executive John Maroney described the data as “a far more realistic assessment of what it costs to operate an SMSF.”  Previous analysis relied on the use of averages that ignored the significant distortions caused by large SMSFs and funds choosing to use borrowings and buy extensive administrative, insurance, and investment services,” he said. Contrasting operating expenses, the average total expenses of funds in the 2020-2021 financial year (the latest data available) were $15,507.

SMSF costs

When starting an SMSF, there are several costs to consider. These include one-off establishment fees, ongoing management costs, investment-related fees for trading and fund management, plus any additional legal, financial advice, and insurance services that you may need. According to the ATO’s latest stats, median annual SMSF operating costs are around $4,139 per year, but this can be much higher or lower depending on circumstances.

Some digital providers are making SMSFs more accessible without employing the services of a personal accountant. Automation and digitisation have streamlined the process, reducing the costs for investors.

An overview from the ATO showed that the median operating expenses of an SMSF are about $4,000. Low-cost SMSF administrators are offering an alternative for around $1,000 a year. However, in exchange for the lower fee, the no-frills option comes with less support. Not only will users miss out on an annual review by professionals to ensure everything is running smoothly, but there is little capacity to answer questions.

With an SMSF, it is common to have a tax and administrative specialist plus a financial adviser for support. The accountant or SMSF specialist helps with the administration of the fund as well as ensuring that the trustees are operating in the most tax-effective way subject to super regulations. They also prepare the annual tax return. The financial adviser may provide a review of the investment holdings and assist with compliance as part of a broader advice relationship.

It may seem counter-intuitive but there is a lot of assistance required for a ‘self-managed’ super fund. Usually, complexity increases with lifestage transitions (for example, operating both accumulation and pension accounts in retirement) or the addition of more trustees. The ability to have six members means that flat fees can be spread across multiple people, lowering the per-person balance required to make an SMSF cost effective. However, this also adds even more complexity. There may be four different retirement goals, trustees with four different ages, lifestages and perspectives to consider. This is where professionals may add value.

Median SMSF costs

Expense by expense type

Median expenses by expense type, 2020-2021 Source: ATO

There are many hidden costs to managing and maintaining your superannuation that investors do not consider.

The above table runs through the median expenses by expense type. This does not mean that an average SMSF will incur all costs included in the table but can show that expenses aren’t always like for like when it comes to SMSFs and industry/retail superannuation funds.

For example, insurance. I’ve written previously on whether you should take out insurance in super. One of the benefits of insurance in a retail or industry superfund is that it is group insurance. This lowers the cost significantly for investors.

One of the largest attractions of SMSFs is more control over your investments. Stake’s research shows that many investors open an SMSF to invest in property. Investors should carefully consider the costs associated with a real asset as well as the ongoing interest expenses.

Lower cost SMSF administration

There have been great strides made by the financial product and service industry to make SMSFs more accessible for individual investors. One such provider is Stake Super, with their packages costing $990 a year. This covers the essentials, including SMSF set-up (included in the first annual fee), the annual preparation of financial statements, performance reports, independent audits and tax return lodgment. For those with residential or commercial property in their fund, the cost increases to $1,690, and adding alternative asset classes such as precious metals, private equity and managed funds increases the cost to $2,490.

Motivations for people switching

Traditionally, SMSFs were viewed as a way for sophisticated investors to pick their investments and manage their own retirement portfolios – often the second largest asset that they hold, behind their residence. We’re seeing this change.

We’ve seen an influx of SMSF establishments in recent years. Ciara Conway, SMSF Product Lead at Stake shares that signups have increased 77% YoY for Q2 of FY2025, with overall assets under administration growing 67% over the past six months. More investors are becoming engaged with their financial futures and are embracing the democratisation of investing information and products. Data from Stake’s Ambition Report shows that of the investors that are establishing SMSFs, the top reasons are the desire to gain more control over investments and the ability to buy property in super.

The accessibility of ETFs has also made it easier for a broader set of self-directed investors to construct and manage their portfolios. The top holdings of these self-directed SMSF users are the Vanguard Australian Shares Index ETF VAS, iShares S&P 500 ETF IVV, and the BetaShares NASDAQ 100 ETF NDQ.

‘Pick your accountant wisely’

Industry practitioners concur with the lower cost estimates provided by the ATO data. “Drawing an average cost between all my clients, I budget the operating expense for an average size SMSF of $750,000 to be around $6,000,” said Jonathan Lee, chief operating officer of private wealth and corporate advisory services firm Solomons Group.

The cost is higher than the cost of an online SMSF administrator like Stake, but also includes personalised accounting and structuring advice.

Lee advises trustees to “pick your accountant wisely” with accounting fees ranging from $2,000 to $6,000 for the same amount of work. He suggested a balance of “at least $700,000” was necessary for an SMSF to be a superior option to an industry or retail fund.

“SMSFs are complex and definitely not for the fainthearted. Fees are also highly variable depending on how much professional services the SMSF trustee has to obtain,” he said. However, while the cons include onerous reporting and other requirements for trustees, the benefits of SMSFs include flexibility in investing in direct assets and alternative investments, together with a high degree of control.

And with the ATO now providing some more detailed data on operating expenses, those contemplating their own SMSF can now make a more accurate assessment of the likely costs together with the benefits.

Other considerations when setting up an SMSF

SMSFs are not independent creatures that can be left to graze. They need constant monitoring, maintenance, administration, and trustees need to keep up to date with market and regulatory changes. An ASIC factsheet stated that on average, trustees spend 100 hours managing their SMSF. Although the balance at which an SMSF makes sense may have lowered, investors must consider if they are up to the challenge of the obligations that come with managing their retirement savings.

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