Expense Ratio (MER) in Australia: ETF vs Super Fees
An expense ratio is the annual cost of holding a fund, expressed as a percentage of your balance and taken out of returns. In Australia it goes by different names depending on the product: ETFs and managed funds quote a management fee or management expense ratio (MER), while super funds disclose it as 'fees and costs' under ASIC's Regulatory Guide 97.
For an ASX-listed ETF, the number to compare is the management fee (often labelled MER) in the Product Disclosure Statement. A broad Australian or global share index ETF typically sits well under 0.30% a year; actively managed funds commonly charge around 1% or more. Brokerage and the buy-sell spread are separate costs you pay when you trade, not part of the MER.
Super is disclosed differently. Under ASIC's Regulatory Guide 97, ongoing costs are split into three groups: administration fees and costs, investment fees and costs, and transaction costs. Some administration fees are a flat dollar amount per year rather than a percentage, so on a small balance the effective cost can be much higher than the headline percentage suggests. Add the three groups together, and the flat fee, to get the figure that is comparable to an ETF's MER.
The ATO's YourSuper comparison tool ranks MySuper products by fees and returns, with fees shown on a default $50,000 balance that you can change to your own. It also shows APRA's annual performance test result: a MySuper product that fails the test two years in a row cannot take new members until it passes again. That makes it the quickest official way to check whether your default super is expensive.
What 1% costs in super: take the $50,000 balance the ATO tool uses, earning 7% a year before fees for 30 years. At 0.04% a year it grows to about $376,000; at 1.1% a year it grows to about $279,000. The fee difference alone costs roughly $97,000, before any further contributions (simple model: fee deducted from the gross return each year, no tax, no contributions).
Because fees come out of every year's return, they compound against you in the same way returns compound for you. Returns are not in your control; fees are, which is why comparing the MER on your ETFs and the total fees and costs on your super is one of the highest-impact checks an Australian investor can make.
Richify factors expense ratios into all investment recommendations and flags high-fee super funds — helping you keep more of every return in your pocket.
