Note: Every year, the ATO publishes the average audit fees incurred by SMSFs. This article contains data for financial year ending 30 June 2014 (latest available as at January 2016). We have retained all comments from earlier versions of article. The next update, for compliance data up to 30 June 2015, will be available in late 2016.
Q: SMSF auditors and administrators are charging rather high audit fees, perhaps because of the mandatory nature of these audits. It cost me over $2,000 last year for my super fund’s audit and income tax return 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. I have spoken with a number of SMSF trustees and I have discovered a range of concerns about the mounting costs of audits for smaller SMSFs.
A: You have tapped into a hot topic in the SMSF world. Yes, an annual compliance and financial audit of your DIY super fund (officially known as a SMSF) is a compulsory requirement and costs can vary between providers.
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 pension phase
- whether the trust deed has been tailored for the specific needs of fund members.
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 Australian Securities and Investments Commission (ASIC), which now regulates and registers approved SMSF auditors. I am also interested in hearing from other readers about the costs of running a SMSF – feel free to share your experiences in the comments section at the end of article (we do not publish the names of service providers or products in the comments section).
How much do SMSF audits cost, on average?
I can offer you two reference points for you to compare your SMSF audit costs with those costs incurred by other SMSFs:
- Analysis based on 32 SMSF service providers
- Statistics released by the ATO on SMSF audit costs
Based on the research of 32 SMSF service providers that I reviewed when writing DIY Super For Dummies, 3rd edition (Wiley), the fees charged for completing a super fund’s annual return and audit, range typically start from $600 and can cost up to $1,000, although competition among specialist SMSF auditors has lowered audit fees for simple SMSFs, to below $500. If a super fund has a lot of investment transactions, or complicated investments, some SMSF service providers charge up to $3,000 and perhaps more.
A fee of $2,000 for the audit and income tax return of a $200,000 SMSF may seem high, but it is difficult to comment without knowing what additional work (if any) the SMSF provider has done on the fund’s behalf. For example, costs may have been higher if the reports prepared by the SMSF trustees were not compatible with the accounting and reporting systems of the SMSF provider, requiring rekeying of data. The fee may also include the annual ATO supervisory levy of $259 payable by an SMSF.
The ATO has also published some interesting data on SMSF audit fees which may help you assess your SMSF’s audit costs. In the table below, you can find the average and median audit fees reported in the 2014 SMSF annual return. A median is simply the middle figure in the complete range of costs from highest to lowest. The average is the total audit costs for all SMSFs divided by the number of SMSFs who lodged the 2014 SMSF annual return.
The total average audit fee is $714 for the 2014 year, while the median audit fee was $550.
Warning: It is important to distinguish between the fund audit, and the preparation of fund accounts and lodgement of the income tax return. Note that the costs outlined in the table below do not necessarily include accounting fees for non-audit work.
|Table 1: SMSF audit fees (for year ended 30 June 2014, and earlier years)|
|SMSF auditor fees||Average audit fee||Median audit fee|
Source: ato.gov.au, ‘Self-managed superannuation funds: A statistical overview 2012-2013’, and ‘Self-managed superannuation funds: A statistical overview 2013-2014’
Have SMSF audit costs increased over time?
The ATO also provides data on the percentage of SMSFs that pay different levels of audit fees. Table 2 below lists audit fee ranges, and the percentage of SMSFs that pay those levels of fees.
Note: According to the ATO, over the 5 years to the end of the 2014 financial year, SMSFs reported they were paying more for audit fees. For the 2014 year, 37% of SMSFs paid less than $500 in approved auditor fees, compared with 52% of SMSFs in 2010 and 50% in 2009. Although audit costs at the upper end seem to be trending downwards: For the 2014 SMSF return, 2.8% paid $2,000 or more for audit fees, compared with 3.4% paying $2,000 or more for 2013 year, and compared with 3.4% in 2009.
Warning: In Table 2 below, it is true, over time, that the percentage of SMSFs paying $1,000 or more in audit fees has stagnated over the 5-year period from 2009 (11.3%) to 2014 (10.9%), although the percentage of SMSFs paying less than $500 has fallen from 50.1% (2009) to 36.8% in 2014. Further, the average auditor fee for 2014 was $714, compared with $659 for the 2009 year, and $623 for 2010 year.
Although not explored by the ATO, since SMSF auditors must now be registered by ASIC to operate as an approved SMSF auditor, this extra requirement may explain the higher cost of SMSF audits for the 2014 year (see Table 1 earlier). Audit costs charged to SMSFs in the future may increase due to the greater compliance costs associated with operating as an ASIC-registered approved auditor, although these extra compliance costs may be offset by specialist auditors streamlining the audit process.
|Table 2: SMSF audit fees: How much do SMSFs pay?|
|Audit fee range||2008||2009||2011||2013||2014|
|$2,000 and above||4.4%||4.0%||2.6%||3.4%||2.8%|
Source: www.ato.gov.au, Self-managed superannuation funds: A statistical overview 2013-14, Self-managed superannuation funds: A statistical overview 2012-2013 and Self-managed superannuation funds: A statistical overview 2011-2012.