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Compliance & Regulation

ASIC undertakes SMSF cost analysis

Calculations written on chalkboard

Trustees in accumulation and retirement phases will now both be able to choose their preferred method of ECPI calculation.

The corporate regulator has embarked on a review of existing research on an indicative balance a person might need to make having an SMSF viable on a cost basis.

Australian Securities and Investments Commission (ASIC) commissioner Greg Tanzer revealed details of the review as part of a Parliamentary Joint Committee hearing in December last year.

“We are refreshing that advice at the moment and we are also conducting surveillance around [the issue],” Tanzer said.

In response to a question regarding the sorts of figures a person might need, he replied the figures varied.

“At the moment there are quite various figures. But the figures that I have heard quoted have been $200,000 or $250,000, based on what the normal cost of an audit is – the costs of running your accounts and so on,” he said.

“Compare that to what the cost would be if you were in a public offer fund of that size: if you get higher than that, then it becomes more economical; if you get less, then you have to ask yourself a question, basically. But there will be people with lower balances than that.”

As the research is underway, he could only speculate on an outcome, stating all would depend on changes in the market.

“One of the changes may well be that the costs of running self-managed super funds have actually dropped,” he said.

“But at the same time there are a number of public offer funds that are offering funds with the benefits of a self-managed super fund, with the control and much of the choice that you have with a self-managed super fund apart from the use of leverage or perhaps the ability to invest directly in real property.

“But you can invest in cash, term deposits, direct equities and all of that sort of thing and be purely self-directed at a very low cost. Some would say it is less than the cost of a self-managed super fund.

“I think that all of these developments that are taking place in the market suggest that the public offer funds are also reacting to the growth of self-managed super funds and seeing that as a source of direct competition to them.”

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