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Phillip K.
Phillip K.
Elsternwick, VIC

What do people recommend as a starting point to set up a SMSF... I understand there is a fair bit of work involved so would $200,000 be worth it?

9 months ago


The ATO rule of thumb has always been $200k......any less than that and they may well look at the risk of it being set up as an early access scheme.
This is based on a rough assumption that most industry funds charge somewhere around 1% of the members balance as admin charges, so the logic is that $200k x 1% = $2000 which equates to what many firms traditionally charge in accounting and audit fees.
BUUUT.......there are many funds out there with a LOT less than $200k in them. I know this as a SMSF auditor, I get to review lots of them. If the fund has a genuine investment strategy and conforms to the rules there is no reason why a fund cannot be set up with very small member balances......its just that it doesnt make sense to set up a fund with a member balance of (say) $50k, because the cost of administering THAT fund is still going to be around that $2000 mark, and that makes the fund rather expensive......so the investment return would want to compensate the members for this high cost.
oh, and if you set one up with $50k, I give you a solid gold guarantee: you WILL get audited by the ATO.....they are sick of people setting up super funds to pinch the cash and pay off their mortgages......
have a chat with a good advisor, tell them what you want to do and why...and the advisor should tell you whether you are on the money or not.
PS SUPER IS THE BEST THING EVERRRRRR!!!!!!! It is seriously and truly a legal tax haven and anyone who isnt doing everything they can to maximise their own super balance needs their heads read!!! (just sayin is all).
good luck

Brendan is 100% on the money here.

There are many reasons why you may set up an SMSF with less than $200k. Control of your money and complicated estate planning together with insurance arrangements are one.

To set it up and put your money in bank shares - there are far cheaper and less complicated options.

Talk it through with an adviser who has SMSF experience and they’ll give you an answer.

All the best.

03 9909 5800

Hi Phillip,

I think there is no amount of money in super that suggests 'it's now a good idea to start a SMSF'.

I've had clients come to me with a SMSF with $1M, paying fairly large accounting/audit fees, plus then had the money invested in an investment product paying administration fees and also investment management fees and financial advice fees. Lot's of snouts in the trough where he could have been in a low cost retail superannuation fund and achieving the same result (well actually, achieving a much better result).

A lot of the time, SMSF's end up investing in the same thing you could invest in through a normal superannuation fund, but the total cost is more. And another bulk of the time is people setting one up to borrow and purchase a property. Again, huge costs - and 99 out of 100 times, doesn't produce an outcome better than a simple low cost diversified fund and in fact, many times a lot worse.

Not to mention the ongoing burden to you for managing your SMSF and also the handcuff you'll have to it (not easy to get out of it) - and the service providers who are providing the ongoing service. And in regards to estate planning - in a lot of cases they are a massive pain in the a** for the executor/beneficiary, particularly when it is the person in the relationship who didn't really manage the money who is left with it.




Well i cant say that this has been my general experience. I have seen people with SMSF set up and money just sitting in TD earning kow interest but then again that couple were well into their 80s and the overriding objective was asset protection not investment returns. I also know many many investments that provide a fantastic return and minimise risk and i guarantee no industry fund will touch it.....because its commercial property leased to a related party.
So whilst the investment return is a PART of the equation its not the only consideration.
I would argue that there are a LOT of fees that members of low cost industry funds are blissfully unaware of. The thing with a self managed fund is that the members actually decide what they are spending their money on. So if (for example) they dont want to pay for a certain service, or make a donation to a political party, or pay for life insurance they may not need, then they can choose not to waste their retirement money on the things they dont need or want

So SMSF may not be for everyone, they are a viable, flexible, cost effective platform to fund retirement. And for many people it is a very sensible decision.

I would really have to question the need of the complexity of a SMSF for a couple in their 80's with all their money sitting in cash. They would likely be able to achieve the same result with a far more simple arrangement and at lower cost, not to mention the simplicity for estate planning which may not be too far away.

The costs on industry funds are far more transparent these days with the introduction of RG97 and we've seen the disclosed costs increase to reflect that. But yes, industry funds aren't all that transparent on actual costs and investments and perhaps some of the fees are being siphoned off to fund unions and political interests - but if it's cheaper than an alternative and suitable - does that really matter? But industry funds aren't all that cheap. I can achieve, in many cases, a transparent, suitable investment at lower costs than an industry fund in a retail superannuation fund which clients have full control over.

Insurances can be cancelled in any regular industry or retail superannuation fund so that point is really not relevant.

Sure, setting up a SMSF to purchase a physical asset such as commercial property can be great and work well. But, it is complex, can be expensive and I'd argue, probably not suitable for a lot of people.

SO there you have it Phillip. Ask two people: get two completely different answers!!!! The thing to do is get as much information as possible, and educate yourself as much as you can on what you CAN and CANT do. I have said in other posts that super is the BEST thing since sliced bread, and is really and truly a legal tax haven, and EVERYONE should look at their super more than they do. I suspect that Glenn will agree with me on that hahahaha!!!
the more experts you talk to, and the more research you do off your own bat, the better infomred you will be......and the decisions you make about super will also be better suited to your own needs!!!!
good luck

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