A senior consultant from actuarial firm Rice Warner has offered some clarification regarding the cost analysis of SMSFs performed by his company, on behalf of the Australian Securities and Investments Commission (ASIC) sector taskforce, in the wake of criticism from certain quarters of the industry.
The results of the analysis had been widely reported as concluding an SMSF employing a full external administration service would only be cost effective if the asset balance of the fund was $500,000 or above.
However, Rice Warner senior consultant Alun Stevens said the findings of the research actually made no such inference.
“What we’re saying there is [when the fund balance is $500,000 or above] that’s when the SMSF is the cheapest alternative,” Stevens said.
“So with a balance of $500,000 you can take a full service approach and that will still be cheaper than pretty much any alternatives in the APRA (Australian Prudential Regulation Authority)-regulated space.”
“So for funds with $500,000 and above, clearly the SMSFs show up as the cheapest alternative.”
He reiterated the analysis did, however, reflect SMSFs with asset balances of less than $100,000 were not competitive with APRA-regulated funds based on base-level costs.
“For the SMSFs we were really looking at what I call the compliance costs, so the things people have to pay to get done,” he said.
“For example, they have to have an audit, they have to have a tax return, they have to pay the ATO (Australian Taxation Office) levy, the trustee company has to pay an ASIC fee, so they’re essential statutory costs if you like.
“So for the SMSFs with lower balances, even if you add up the statutory costs, they are more expensive than superannuation funds you can find in the APRA-regulated space.”
