Further analysis of the running costs of an SMSF has found they can be run for less than $3000 a year at an average cost of 1.34 per cent a year for a $200,000 fund and 0.5 per cent for a $500,000 fund.
The figures were calculated by mSmart, a fintech firm that produces retirement planning models and apps, and given to the House Economics Committee in August, following the recent release of the SMSF Association’s research on the cost competitiveness of SMSFs.
MSmart managing director Derek Condell said analysis conducted by the firm found costs ranged from around $2200 a year up to $3800 a year, depending on the use of financial advice and the use of accounting and fund administration software.
“By use of the accounting software technology, [such as Practical Systems Super] in the SMSF sector, funds can be operated at very, very, low fees, such as say $2200 to $3000 per annum, including investments and brokerage,” Condell said.
He said given the difficulty of comparing like-with-like fee structures across a range of service providers in the SMSF sector, it was not possible to produce “scientifically robust” results, but mSmart’s comparison showed costs could be held below $3000 a year.
“The low costs are a major reason for the explosion in numbers of SMSFs that has occurred in the last 10 years,” he said, adding the sector has been innovative, efficient and made use of high-speed processing in its systems.
“This has occurred in a sector that is often labelled as ‘fragmented’ and ‘a cottage industry’. By comparison, the non-SMSF sector – retail sector in particular – has an abundance of excess capital and resources to create efficiencies, but rarely shakes itself loose from the legacy systems that it created 30 years ago.
“These efficiencies, speed and innovation are largely as a result of the widespread use of accounting software in the industry and its move ‘to the cloud’, and the low costs that accompany the software.
“This software effectively brings ‘straight-through processing’ by linking stockbrokers, fund managers, banks, accountants and administrators all for the benefit of the SMSF trustee. This remarkable software cuts out many costly and inefficient services that APRA (Australian Prudential Regulation Authority) funds are so heavily wound into.”
The mSmart figures echo those released earlier this year by the ATO, which found the median annual operating expense level for an SMSF in 2017/18 was $3923.