How much money do I need to start a self-managed super fund (SMSF)?

Self-managed super funds (SMSFs) are the fastest growing sector of the superannuation market and it’s no wonder why, with so many benefits to be had.

They provide individuals with greater control over their finances, flexibility and investment options, but there are also responsibilities and costs to consider.

How much is needed to start an SMSF?

LDB’s senior financial planner Chris Payne said $200,000 to $250,000 in super savings was a good starting point.

“If anyone has less than $200,000 in super, we don’t usually recommend it,” he said.

“Some of the costs associated with an SMSF are fixed costs, because you’ve got to do the financials every year and you’ve got to get an audit.

“(With smaller funds) the fixed costs become a larger percentage of a smaller balance, so it’s harder for the fund to grow beyond the fees.

“Once it gets up to $250,000 to $300,000, then you’re amortising those fees over a larger investment base, so it’s easier to outperform the fees.”

Mr Payne said multiple people could combine their super to create an SMSF – a popular option with couples.

What fees are involved?

Mr Payne said a company was usually set up on the client’s behalf and appointed as a corporate trustee for the SMSF, and common costs included company documentation, trust deeds, fees to set up banking and broking accounts, and financial planning advice fees.

He said LDB charged $2500 to set up an SMSF, and the ongoing fees on the most popular package were 1% of the fund balance, plus GST (applicable to the first $500,000 then decreasing on a sliding scale), which covered compliance, tax returns, auditing, administration, and financial planning advice.

The benefits

Mr Payne said SMSFs gave people greater control, flexibility and investment options.

“The big attraction is for people to invest in non-financial assets, so if you want to invest into direct property or put artworks, antiques, or coin collections into your fund, you can only do that in an SMSF (as long as it meets the sole-purpose test of providing retirement benefits to the members),” he said.

Mr Payne said people can also borrow money within a super fund to buy property.

“A very popular reason for business owners to have an SMSF is that they can purchase their own commercial premises inside their own SMSF and rent it from their super fund,” he said.

How LDB can help

LDB will provide advice about the cost-effectiveness and appropriateness of starting a self-managed super fund, and will take care of the administration and compliance obligations for you.

Our property experts can also help you with finding and acquiring property, if required.

To find out more, call LDB on (03) 9875 2900 or send us details via the contact form below.