Q: I have noticed that SMSF auditors and administrators are charging what appears to be rather high costs, perhaps because of the mandatory nature of these audits. I have also noticed some online providers, including one that flatly refused to provide me with the name of their auditors. I wondered if through SuperGuide there would be an opportunity to offer more financially viable audit options through providers that are firmly placed in the community with appropriate reliability, integrity and transparency. I have spoken with a number of SMSF trustees where I discovered a range of concerns about the mounting costs of audits for smaller SMSFs. It cost me over $2000 last year for audit and income tax return for my fund that is in the accumulation phase and holding just over $200,000. That’s 1%, just for audit and the ITR. I have done some research but it seems cheaper options are not all that transparent.
A: Ah, you have tapped into a hot topic in the SMSF world. Your question, regarding the cost of audits is a timely one.
The cost of a fund audit for a DIY super fund can depend on many factors including the following:
- complexity of the super fund
- number of members
- number of investment strategies
- number of transactions
- complexity of investments
- whether the super fund is in pension phase
- whether the fund has members in both accumulation and
- whether the trust deed has been tailored for the specific needs of fund members.
Based on the research of 25 SMSF service providers that I conducted when writing
A fee of $2,000 for the audit and
You are right to be asking questions when you’re not sure about the cost of the service that you’re receiving. If a SMSF provider is not willing to provide the information necessary for you to make a decision, then don’t use them.
If you are concerned about how a SMSF auditor is charging for the service, you can also pass this information onto the ATO. I am also interested in hearing from other readers about the costs of running a SMSF.
Your excellent suggestion: In response to your suggestion that SuperGuide negotiate better deals on behalf of SMSF
In response to many requests from readers however, we have launched our SuperGuide Directory which includes many listings from SMSF service providers, such as SMSF auditors.
The main SuperGuide information site also provides plenty of interesting articles, and questions and answers on SMSFs, including a DIY super section in our free monthly newsletter (click here to subscribe).
You can also check out my book, DIY Super For Dummies (Wiley) which covers nearly (!) everything you need to know about starting and running a self-managed super fund.
See also
- SMSF: How much does a DIY super fund cost?
- SMSF audit: you must appoint an approved auditor
- SMSF audit: Where is your fund’s trust deed and investment strategy?
- SMSF basics: Wrap vs DIY super
- SMSF basics: Updating SMSF trust deeds
Like so much in the financial services area, costs for accounting & audit for SMSFs are way too high. The ATO should help us find cheap options because they make the audit mandatory. Having said that, it IS possible to get an audit of an SMSF, even with many share transactions, for under $400. Packages like BGL’s Simple Fund (about $375) will allow you to easily do your own accounts, and then it does not matter if you have hundreds of trades a year. A lot of auditors also use Simple Fund, and are familiar with the financial statements it produces. It just comes down to being organized, and keeping minutes (just a diary actually!) and regularly entering the trades as they occur throughout the year.
Hi
I have my own super fund and when it came to the end of the year I was supposed to withdraw $6,544. I only withdrew $6000 and can catch up this year. Is this a reportable breach to the Tax Office?
Hi J Mitch – I’ve answered your question here:
http://www.superguide.com.au/diy-superannuation/smsf-pensions-what-happens-if-i-don%E2%80%99t-withdraw-the-annual-minimum-pension-payment
Regards, Trish
In response to your question of audits being too expensive it does come down to the size, investment types and nature of the fund, if you have 50 investments and 3 wrap accounts in your fund you can not expect the audit to be done for $200. However, the amount you paid for your $200 000 fund is expensive in my opinion but you also must keep in mind that auditors also have professional indemnity insurance that is also on the increase as well and this also can attribute to higher costs in some cases. Trying to keep it short here I know that you are able to get an audit of an SMSF for approx $500 as this is the average price that we charge for our audits. Just trying to keep the perspective of the auditor here. Thanks
My son and I have setup SMSF Feb this year, and we have only 4 transactions that are all members’ contributions; with a total balance of less than $900, I don’t think it is justifiable for a $200 audit fee!
Given the popularity of SMSF, the ATO is understandably putting heavy reliance on auditors to provide that assurance (as well as the eyes and ears) on compliance of SMSF’s. However, I do wonder, in the “interest of keeping the cost of business down” if there should be a swing back to the sampling audits of higher risk SMSFs such as during the pension phase instead of during the accumulation phase (as this original post is at). Or at the very least, have a two-staged auditing compliance requirement that differientates between funds that have payouts to members and in-specie transactions, and those who are just accumulating AND have low value (perhaps <$100,000).
I have just been engrossed on reading the duties of a trustee for SMSFs as I'm just preparing ahead for to set up my SMSF. I'm sure I can perform better than my institutional trustees based on their average performance in the last 5 years, but I given I am accumulating only (less than 35 yo here), I dont think I should have to sustain what would represent a 4% charge on the total value of the fund in terms of mandatory audits. Perhaps an e-Super for low risk SMSFs Mr D'Ascenzo?
Matt Williams – we need more auditors like you – service at a reasonable price.
Reading these replies, there is a big understanding gap.
The reason for the audit, is for prudential reasons, including protection of tax revenues — as the income of the fund is taxed at 15% — and ensuring that funds are indeed put away for retirement and not accessed earlier by the trustee.
So it doesn’t matter if it is a $900 fund, a $200,000 fund or a $2m fund. In fact, research has shown there is a higher risk of incorrect use of smaller value funds, and newly registered funds from APRA and ATO research and reviews. Areas like illegal early access schemes and the like are quite common.
Unfortunately most of you will probably not like what I’m going to say.
I am an SMSF auditor. The burden placed on auditors is large. WE get into trouble if we get it wrong. There are procedures to follow that are placed on us by the accounting bodies that we are members of and by the ATO being the regulator of SMSF’s. The ATO is becoming increasingly concerned with the quality of Audits being done so the ATO are not only watching the trustees, they’re watching the auditors as well. Naturally, this makes auditors even more nervouse. I urge all trustees to research the actual roles and responsibilities of auditors and what they must do for EVERY fund whether it’s got a $1000 dollar balance or whether it’s got a $1 million dollar balance. Costs are only going to go one way I’m afraid – up. Trustees need to do their own cost benefit analysis of their funds to decide whether its worth them keeping an SMSF open – I certainly would not with a $900 balance unless I had plans to quickly increase that by rolling over from other funds.
Jing, I have to agree with Stephen – 900 would not even cover the audit fee. I am also hunting around for a value for money smsf audit – seeing prices from 500 – 1500. on with the hunt !
The $2k cost of accounting, tax and audit for an SMSF seems too cheap and at 1% of total fund balance it is cheaper than an industry or retail fund. You get what you pay for and if you think an audit can be done properly and accurately for less than $500 your kidding yourself. But then again people that dont value the audit & regulatory requirements the auditor must follow probably shouldnt have a SMSF because they probably dont appreciate the responsibilities they as trustees have. It is this end of the market that the ATO & ASIC need to focus their audit activity on. We along with the ATO dont recommend anyone sets up an SMSF unless they fully understand their responsibilities, role and the importance of the super funds. The ATO also have a minimum fund balance of approx $250k before setting up an SMSF.
At the end of the day a smsf is only appropriate for those with higher fund balances. These costs as a percentage of the fund are therefore a lot lower. When deciding on establishing a smsf trustees must way up these cost to decide whether having their super within a smsf is appropriate.
The only person to blame for the sky rocketing costs of SMSF audits is the government. The obligations placed on auditors is massive and in my view entirely mis-understood. Auditors play an important role in the SMSF arena but there are some cowboys out there offering to sign audit reports withouth really living up to their responsibilities. Depending of course on the mix of investments, it is simply not possible to prepare the accounting tax & audit for under $2K (unless the only investment is a few term deposits). Fees are transactional based so the more transactions (volume of, not value of) the more time and effort required to undertake the audit. I would say to anyone that if they want the freedom & flexibility to manage their own superannuation they could expect to pay anywhere between $2K to $5K to cover the compliance side of things. If people are looking to save money they should be looking at financial planners who are receiving asset based fees/commissions. You might find you are paying them more than you are paying your accountant/auditor.