Note: Every year, the ATO publishes the average audit fees incurred by SMSFs. This Q&A contains data for financial year ending 30 June 2012 (latest available as at June 2014). We have retained all comments from earlier versions of article. The next update, for compliance data up to 30 June 2013, will be available in December 2014.
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 SMSF auditors. I am also interested in hearing from other readers about the costs of running a SMSF.
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 25 SMSF service providers
- Statistics released by the ATO on SMSF audit costs
Based on the research of 25 SMSF service providers that I initially conducted when writing DIY Super For Dummies, 2nd edition (Wiley), and recently reviewed, 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. 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 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 2012 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 2012 SMSF annual return.
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.
Note: Two different averages and two medians are included in the table to highlight that those auditors who provide other services to a SMSF, generally charge higher audit fees. Although the total average audit fee is $556 for the 2012 year, for those who receive other services from their SMSF auditor, the average audit fee is $874.
|Table 1: SMSF audit fees (for year ended 30 June 2012)|
|Auditor provided other services||Average audit fee||Median audit fee|
|Total (overall average)||$556||$457|
Have SMSF audit costs increased over time?
The ATO also provides data on the percentage of SMSFs that pay different levels of audit fees. The table below lists audit fee ranges, and the percentage of SMSFs that pay those levels of fees.
Over time, the percentage of SMSFs paying $1,000 or more in audit fees has fallen over the 5-year period from 2008 to 2012, while the percentage of SMSFs paying less than $500 has increased.
SMSF auditors must now be registered by ASIC to operate as an approved auditor. Although not yet reflected in the cost tables in this article, 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.
|Table 2: SMSF audit fees: How much do SMSFs pay?|
|Audit fee range||2008||2010||2012|
|$2,000 and above||4.4%||3.3%||2.4%|