Note: Every year, the ATO publishes the average audit fees incurred by SMSFs. This Q&A contains data for financial year ending 30 June 2010 (latest available as at May 2012). The next update, for compliance data up to 30 June 2011, will be available in April 2013.
Q: SMSF auditors and administrators are charging rather high audit fees, perhaps because of the mandatory nature of these audits. I have also noticed some online SMSF administrators, including one that flatly refused to provide me with the name of their auditors. 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: Ah, 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 ATO. I am also interested in hearing from other readers about the costs of running a SMSF.
I can offer you two reference points for you 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 conducted when writing DIY Super For Dummies, 2nd 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. 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 does sound 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 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 2010 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 2010 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 $607, for those who receive other services from their SMSF auditor, the average audit fee is $882.
|SMSF audit fees (for year ended 30 June 2010)|
|Auditor provided other services||Average audit fee||Median audit fee|
|Total (overall average)||$607||$490|
In response to many requests from readers, 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, 2nd edition (Wiley) which covers nearly (!) everything you need to know about starting and running a self-managed super fund.