How Much Money Do I Need to Setup an SMSF? – Introducing the 200K Myth
There seems to be a general belief amongst accounting circles that one would need $200,000-$250,000 at the very least to launch a new SMSF. This is simply a myth (an urban myth if you may). It is true that a relatively large amount of money is helpful when setting up a self-managed fund as it lowers the percentage of your SMSF’s average expense ratios.
Here’s the Facts:
- In the most recent ATO Statistical Report, 18% of SMSF’s held assets were less than $200,000.
- The Australian Securities and Investments Commission (ASIC) hasn’t stipulated a specific figure or amount. The $200,000 that most people believe is the required minimum amount is a guess or a suggestion at best.
That being said…
The internet and its revolutionary effect on businesses hasn’t been lost on the superannuation industry and as such, web based fund managers and service providers are now available to render their services at a significantly lower fee than the traditional operators. This means that with a lot less than $200,000, it’s becoming more feasible to operate an SMSF.
Average SMSF assets
As revealed by ATO, 19.1%, which is almost one in every five self managed superannuation fund doesn’t contain up to $200,000 in assets and even more surprising is the fact that up to 6.1% of the self managed super fund contained assets not worth up to $50,000 in value.
SMSF Running Costs
Stringent governmental oversight of SMSFs has meant that there are regulatory requirements (e.g. Annual Audits, and for some SMSF’s Actuarial Certificates, Regular (TBAR) Transfer Balance Cap reporting requirements and other determining factors which have made it more expense for administrators to manage SMSFs.
Other things like the Accounting Fees, the ATO Supervisory Levy and the cost of insurance also needs to be considered (amongst other things) when working out how much running an SMSF will cost you every year.
To wrap things up, $200,000 is more of a suggest rather than a hard and fast rule and there are other factors which are also important that need to be weighed up when setting up an SMSF.
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