#016 - How Much Does It Cost To Set Up An SMSF 🧐💰

In this episode of SMSF Insider, host Troy discusses the costs associated with establishing a self-managed super fund (SMSF). He outlines the range of costs that can vary significantly based on providers, from as low as $1,000 with online services to $10,000 for comprehensive financial advice. Troy explains the factors that influence these costs, such as the choice between individual and corporate trustees, the need for a bear trust, and the implications of purchasing multiple properties. Additionally, he emphasizes the importance of having an investment strategy to ensure compliance and avoid potential opportunity costs. Tune in to gain insights into managing the complexities of SMSFs and taking charge of your financial future.

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Please note: The information provided in this recording is for coaching and educational purposes only. It should not be considered personal financial advice. Everyone’s situation is different, so before acting on any of the content discussed, please seek independent financial advice tailored to your specific circumstances.

Timestamps:

00:00:00 - 00:00:00: Introduction

00:01:03 - Costs of establishing an SMSF

00:05:52 - Property investment strategies and costs

00:08:30 - Purchasing property in SMSF

Episode Transcript

(00:00):
If you do establish an SMSF with your spouse and that relationship
does break down, you can actually wind the fund up. When you're establishing an
SMSF, you'll also need an investment strategy because without
one, your SMSF won't be compliant. There may be some things that you
might miss and so it's not just the low cost of setting it
up, there might be some opportunity costs and missing out on purchasing a certain asset

(00:21):
and the fund not being compliant. Welcome to SMSF Insider, where
we help busy professionals to gain financial independence using
an SMSF. Hi, I'm Troy, founder of Blue Chip SMSF Services.
And over the last 20 years, I've helped thousands of Aussies manage the
complexities of self-managed super funds. And in this podcast, I'll
answer your questions, break down the myths, so you can take charge of

(00:42):
your financial freedom. Let's get into it. Just a quick disclaimer and just a
reminder that this is not personal advice. So make sure
you speak with a licensed advisor before making any investment decision.
Hi, guys. Welcome to SMSF Insider. Today, we'll be talking
about costs of establishing an SMSF.
That cost does vary between providers. We've

(01:02):
seen as little as $1,000 from an online provider
to all the way up to $10,000 for a full SOA,
a statement of advice, and from a
financial planning firm. And obviously, there's a
happy medium somewhere in between. So it also comes down to,
the cost will depend on a couple of things. Do you have individual

(01:24):
trustees or are you going to have a corporate
trustee? And also, are you going to require
a bear trust? If you're requiring a bear trust, you'll also
need a second corporate trustee. And also, if you're
buying more than one property, you'll need more than one bear trust.
So, it really does depend on the complexity of

(01:46):
your individual circumstances, but certainly if you have a
strategy in mind, please reach out and we'd be more than happy to provide
you a quote. Drop a comment in the comment section below or just reach out
to us and we'd be happy to assist. So if you are setting up an
SMSF yourself and you're doing it through an online provider, there
may be some things that you might miss. And so it's

(02:07):
not just the cost, the low cost of setting it
up, there might be some opportunity cost and missing out on purchasing
a certain asset and the fund not being compliant. In
addition to that, there are providers that will do a basic service,
just providing your trust documentation, but they
might not do the rollovers, they might not set up the bank account, so

(02:30):
it really depends on the level of service that you're being provided.
receiving a full turnkey service where you're receiving not
only the trust documentations but you're getting assistance with establishing the
bank account and the investment strategy and the rollovers and
also reviewing any insurance requirements then

(02:51):
certainly that level of service may
be higher than certainly an online provider that's just providing
you with trust documents. I mean, anyone can really do that. So
it really does depend on, firstly, the
trustees, whether you're having two individuals or corporate,
and then the level of service over and above that with bank

(03:13):
account establishment and the rollovers. So if
you are doing it yourself, there is certainly might be
a lower cost provider online. But
as I mentioned before, that might present opportunity,
the loss of opportunity with purchasing into
a certain asset class. In addition to establishing the fund, if

(03:36):
your strategy includes purchasing property, for example, you
may need your provider or somebody to be liaising with
your solicitor, with your mortgage broker, with your existing super
fund. Now, an online provider is probably not going to do
that for $990 or thereabouts. So
if you are requiring a full turnkey service and

(03:58):
you are purchasing something like property, you may
want to consider a more high-end solution or high-touch solution
or premium service that's going to help you purchase that
asset in a compliant way and also getting the
fund set up with and
having your fund provider liaise with the other professionals, including

(04:19):
the solicitor and mortgage broker. So when you are purchasing property
as well, the solicitor may require certified
trust documents. Again, a low cost provider
is probably not going to do that for you. So when you are talking to your
SMSF provider, just ask them if they are able to certify
your documents and liaise with your solicitor, because typically

(04:41):
they will require those documents if you are purchasing property. Another
one is when you are setting up your SMSF, be
sure to ask your SMSF provider if
you are able to pay for your establishment costs from
once your fund is set up, as opposed to upfront and being an out-of-pocket expense,
and then the fund having to reimburse you later on. If

(05:04):
you can, find a provider that will help
pay for those costs once or carry that cost all the way through to
the very end of the process, and then they can deduct their fees right at
the very end. That also might
save you the out-of-pocket expense. So the range does vary
in cost depending on the level of service that you require, but if

(05:26):
there's something, if there's a specific case that you have for us, please
drop us a line and we're more than happy to help. Just quickly guys, if
you're a busy professional fed up with traditional super funds and overwhelmed by
the setup of your SMSF, we can help. Book in a call with my team
using the link in the show notes and let's build your future on
your terms. Now, back to the episode. So the costs will

(05:47):
vary depending on what assets you have, more
specifically around property because if you have some gearing inside
your property or have an LRBA or a limited recourse borrowing
arrangement, to purchase property, then you will require
a bear trust, so the cost will naturally be higher, because in
addition to the bear trust, you'll also need another company to sit in

(06:08):
there as a corporate trustee, otherwise the lenders
won't lend to that entity. So
yes, if you do have a strategy that includes property and gearing, the cost
will naturally be a little bit higher. So the major benefit when
using a premium service offering as opposed to an online provider is
that you will have the ability

(06:30):
to ask questions and obviously have someone hold your hand through that process. You
also have a premium provider that's helping
you establish your fund, whether it be a financial planner or
a premium investment service, they will
be more than likely going to help you with establishing a bank
account or helping you with your investment strategy, helping you with your rollovers.

(06:53):
So that's the main benefit of using a premium service is that
you will get more assistance when establishing
your fund. When establishing your SMSF, there's a few things that you'll need. You
should have your tax file number handy. You'll need to provide
your place of birth. You'll need 100 points
of identification. And you should need

(07:15):
some recent super statements. So, with
all of that information handy, it will make the process of
establishing your SMSF much easier for whoever is
doing that for you. But essentially, those are the key items or key pieces
of information that your SMSF provider will need when establishing your
SMSF. When you're establishing an SMSF, you'll also need an

(07:36):
investment strategy. So with an online
provider, I'm not sure whether that you'll receive an
investment strategy, whereas with a more premium service you
should be receiving, they should be helping you with establishing your
investment strategy because without one, your SMSF won't
be compliant. So your investment strategy is essentially a document that outlines

(07:58):
where your assets or where your money is going to be invested and
what percentage of your money is going to be invested in those assets. So
without that investment strategy, the fund will
be deemed non-compliant. It also needs to cover off that you've also
considered insurance coverage within your SPSF. And
without that document and all that information, as

(08:20):
I said, your fund will be deemed non-compliant. So
make sure your investment strategy is included in the establishment of
your SPSF. We do get asked a lot whether purchasing property
through your SPSF is the right strategy. So probably
one of the first things you should do is perhaps talk to a
broker around your borrowing capacity for your SPSF. Once

(08:41):
that's been established, then you can decide
whether purchasing a property inside an SMSF is
the right strategy for you. If your borrowing capacity comes in quite
low, and that's not really going to buy you anything, then
it's probably not the right thing for you. But if the borrowing capacity comes
in much higher and gives you a lot of property options, then

(09:03):
perhaps the strategy could be right for you. But certainly, before
making any investment decisions, seek personal advice, seek
some advice from your investment professional. So if you
do establish an SMSF with your spouse and that relationship
does break down, you can actually wind the fund up. So
you might have both of you decide that you wanna wind the fund up or

(09:25):
one member might decide to keep the fund open and one
might decide to go back to their existing super fund. So either
way, the fund can be wound up. Just speak to your SMSF
provider or specialist about how to go about doing that. Thanks for tuning in
to this episode of SMSF Insider. If you got value from this,
make sure you subscribe so you never miss the strategies we share to

(09:46):
help you take control of your financial future. Find us on socials at blue
chip SMSF or book a call with our team to see if