More Australians are looking for ways to take greater control of their retirement savings, and self-managed super funds are becoming an increasingly popular choice. An SMSF gives individuals control over how their superannuation is invested and can provide more flexibility in choosing assets such as shares, property, term deposits or other investment options.
For many first-time trustees, one of the most common questions is: how much money do you actually need to start an SMSF in Australia?
In this guide, Trusted Finance Solutions walks you through the potential setup costs, ongoing fees, suggested minimum balances, and key factors to consider so you can make a well-informed decision about whether an SMSF could be the right fit for your financial goals.
Is There a Minimum Amount to Start an SMSF?
There is no legislated minimum balance required to establish an SMSF in Australia. The Australian Taxation Office (ATO) does not set a specific threshold. However, ASIC, along with many industry experts, generally considers a balance of around $200,000 to be more cost-effective when compared to traditional superannuation funds.
This amount is not an official requirement, but rather a commonly recommended guideline based on how fees can affect smaller fund balances. With smaller balances, particularly those under $150,000, fees can represent a larger portion of the fund and may reduce the overall returns, especially if professional services are used for administration and compliance.
That said, every situation is different. Some individuals choose to start an SMSF with a lower balance because they plan to combine superannuation savings with other members, as SMSFs can have up to six, or they expect the fund to grow quickly through contributions or rollovers.
How Much Does It Cost to Set Up an SMSF?
Setting up an SMSF involves some upfront expenses, which can vary depending on whether you use a specialist service provider, accountant, or online platform. Common setup costs may include:
- Trust deed preparation (the legal document that establishes your fund)
- Appointment of trustees (either individuals or a corporate trustee)
- Australian Business Number (ABN) and Tax File Number (TFN) registration
- Establishing a bank account in the SMSF’s name
- ASIC registration fees, if you opt for a corporate trustee
Overall, the setup costs for a new SMSF may range from around $1,500 to more than $3,000, depending on the provider and whether a corporate trustee is used.
While individual trustees are often cheaper to set up, a corporate trustee structure may offer benefits such as simpler membership changes and potentially more streamlined asset ownership.
How Much Does It Cost to Run an SMSF Each Year?
Once established, an SMSF will incur ongoing annual costs. These expenses are generally required to maintain compliance with super laws and support investment activities. Common fees include:
- Accounting and tax return lodgement
- Annual independent audit (required by law)
- ATO supervisory levy (currently $259 for the 2023–24 year)
- Investment expenses, such as brokerage, ETF fees, or property-related costs
- SMSF administration platform fees, if you use a service to manage compliance and reporting
The total costs may vary significantly based on whether you manage the fund independently or choose to outsource most responsibilities. On average, annual running costs can range from $2,000 to over $7,000, with simpler funds at the lower end and more complex ones (e.g. with direct property investments) at the higher end.
Importantly, these costs are typically paid from the SMSF itself, not from your personal bank account.
How Fund Size Affects SMSF Cost-Effectiveness
One of the most important factors in determining whether an SMSF is a suitable choice is the size of your super balance at the time of setting up the fund. The overall cost-efficiency of running an SMSF often improves as the fund grows, largely because fixed costs like auditing, accounting and compliance become a smaller proportion of total assets.
Here’s a general comparison of how annual fees may impact funds of different sizes:
| Fund Balance | Annual Fees (approx.) | Fee as % of Fund |
| $100,000 | $2,500 | 2.5% |
| $200,000 | $3,000 | 1.5% |
| $500,000 | $4,000 | 0.8% |
At lower balances, such as $100,000, the percentage of fees relative to the fund size is relatively high. As the balance increases to $200,000 or more, the same or slightly higher costs account for a smaller portion of the total assets. At $500,000 and above, SMSF fees may align more closely with those of many retail and industry super funds.
This trend helps explain why many advisers suggest a starting balance of around $200,000 or more. Larger balances allow SMSFs to operate more cost-effectively and may support better long-term outcomes, particularly when expenses are shared between multiple members.
That said, for individuals with simpler investment strategies or lower balances, APRA-regulated super funds may still be more suitable and cost-effective.
Factors That Influence How Much You’ll Need
There isn’t a fixed amount that applies to everyone when it comes to setting up and managing an SMSF. The total amount you may need can vary depending on several important factors that influence both setup and ongoing costs:
1. Number of members
SMSFs can have up to six members, and combining balances allows expenses to be shared. This can make the fund more cost-effective per person, especially when covering fixed costs like accounting and audit fees.
2. Trustee structure
Whether you choose individual trustees or a corporate trustee will impact your upfront and ongoing costs. Corporate trustees involve additional setup and ASIC annual fees but may offer greater flexibility, particularly when adding or removing members in future.
3. Investment strategy
The types of investments you plan to hold in your SMSF can significantly affect overall costs. For instance, purchasing direct property may come with extra expenses such as legal advice, property valuations, loan setup fees, and ongoing property management.
4. Administrative preferences
Choosing to outsource tasks like SMSF accounting, annual compliance, or reporting to a specialist provider can save time and reduce administrative stress, but it will also increase your annual running costs.
5. Complexity of assets
A more diversified or actively managed investment portfolio, such as international shares, unlisted assets or alternative investments, may require extra record keeping, asset valuations and professional support. These added requirements can contribute to higher overall fund expenses.
Other Potential SMSF Costs You Should Consider
Even well-structured SMSFs can face unexpected expenses. Below are some hidden or occasional costs that you might encounter along the way:
- Legal fees for changes to trustees or compliance issues
- Investment platform subscriptions
- Insurance premiums within the SMSF
- Regulatory penalties for reporting errors or late lodgements
These costs may not be part of your initial budget but could affect the long-term sustainability of the fund. That’s why it’s often advisable to maintain a cash buffer within the SMSF to handle unforeseen expenses.
Can You Start an SMSF with Less Than $200,000?
It is possible to start an SMSF with a balance below $200,000, but it may not always be the most financially practical choice.
Some service providers offer SMSF setup and administration for starting balances around $100,000. However, with a smaller fund size, the cost of running the fund can take up a larger proportion of your balance. This can make it more difficult to achieve value for money, especially when factoring in accounting, auditing, and compliance expenses. It may also limit your ability to diversify investments within the fund.
There are a few scenarios where a lower starting balance might still be considered appropriate:
- Combining super balances with a partner to reach a higher total fund value
- Focusing on specific strategies such as direct property investment
- Seeking more personal control over super investments and decision-making
In any case, it is often a good idea to seek professional guidance to assess whether an SMSF suits your individual circumstances.
Considering an SMSF with a smaller balance? An SMSF mortgage broker can help you assess whether property investment through your fund could be a suitable strategy. Reach out to learn more.
Estimating Your Total SMSF Capital Requirements
Here’s a basic formula to help you gauge how much you might need to start your SMSF:
Setup Costs + First-Year Running Costs + Buffer for Investments + Contingency Reserve
Example:
- Setup: $2,500
- First-year admin and compliance: $3,000
- Minimum investment capital: $150,000 (diversified portfolio)
- Buffer for market movements, fees, or insurance: $10,000
Estimated Total: ~$165,000+
Remember, this is a simplified example. Your situation may require more or less, depending on your investment preferences, trustee structure, and choice of service providers.
Tips to Help Reduce or Manage SMSF Costs
If you’re set on establishing an SMSF, there are ways you could manage costs more effectively:
1. Consolidate balances from multiple members
Including up to six members in your SMSF can allow you to pool superannuation balances, helping to increase the overall fund size. This can make fixed costs like audits and administration more cost-effective per member and provide more flexibility for investment strategies.
2. Compare SMSF admin platforms
Not all SMSF administration providers are created equal. Comparing SMSF platforms based on pricing, service levels, compliance support, and reporting tools can help you choose one that suits your fund’s needs and keeps overheads manageable.
3. Shop around for accounting and audit services
Accounting and audit fees can vary considerably between providers. Look for experienced SMSF professionals who offer competitive pricing while still delivering accurate and timely service. This can help you remain compliant without overpaying.
4. Keep clear and organised records
Well-maintained records can reduce the risk of compliance breaches and simplify the annual audit process. Documenting all trustee decisions, transactions, and investment activity can also save time and money when it comes to tax and reporting obligations.
5. Avoid overcomplicating your investment strategy
While diversification is important, overly complex investment strategies can drive up administrative workload and costs. Maintaining an investment approach that matches your goals and experience can help make your SMSF simpler to manage and more cost-effective over time.
Want to make your SMSF more cost-effective from the start? Our mortgage brokers in Melbourne can help you set up with confidence. Get in touch today!
Explore Your SMSF Options with Expert Support
Starting an SMSF can offer more control over your super and greater flexibility in how you plan for retirement. However, it also involves higher costs, added responsibility and a complex regulatory framework that requires careful management.
While it’s possible to begin with less than $200,000, many industry professionals and regulators suggest this as a practical benchmark for cost-effectiveness. Whether you’re aiming to diversify your investments, purchase property using an SMSF loan, or take a more hands-on approach to building your retirement savings, it’s important to ensure your fund is set up to align with your long-term goals.
Trusted Finance Solutions, your premier mortgage broker in Moonee Ponds, works alongside experienced SMSF professionals to provide clear guidance and help you choose a path that aligns with your goals.
Take control of your super with confidence—get in touch today.
Frequently Asked Questions (FAQs)
No, you generally cannot use borrowed money to boost your initial SMSF balance. The money must come from your existing superannuation accounts or personal contributions that follow the official limits. While there are some borrowing options available to SMSFs, these can only be used after the fund has been set up and must follow specific rules.
Each member can contribute up to the annual limits set by the ATO. This includes both before-tax and after-tax contributions. In some cases, members may be able to contribute a larger amount by using future limits early. Rollovers from existing super funds are treated differently and are not counted towards these contribution limits.
Yes, many SMSF-related expenses are tax-deductible within the fund. Costs such as accounting, auditing, tax return preparation, and investment-related advice that is specific to the fund can generally be claimed as deductions against the fund’s income. However, not all expenses qualify, so it’s important that costs are incurred in line with ATO guidelines and directly relate to the operation of the SMSF.
With a smaller balance, it helps to keep things simple and limit unnecessary expenses. You could reduce costs by taking a more hands-on approach to fund management, using low-cost admin platforms, and limiting investment complexity. Consolidating your super with other members, like a spouse or family, can also help spread costs across a larger base. While $150,000 is below the often-recommended threshold, some people may still find value in managing their own fund if they keep fees low and grow the balance over time.
Yes, you can set up an SMSF with up to six members, and it’s common for spouses or family members to combine their super into one fund. This can help reduce the overall cost per person, as expenses like audit fees and accounting are shared across the fund. Combining balances can also increase the fund’s investment potential and improve cost efficiency, particularly when starting with lower individual balances.
