The Indirect Cost Ratio (ICR) is a fee component in superannuation that reduces your investment returns but does not appear as a direct charge to your account. It is one of the least understood fee types — and one of the most important for comparing funds accurately.
What Is the ICR?
The ICR represents the costs embedded within the fund’s investment returns — fees paid to underlying investment managers, custodians, and operational service providers that are netted off returns before they are applied to your account.
When a super fund invests in:
- Unlisted infrastructure assets
- Private equity funds
- External managed investment trusts
- Overseas sub-managers
…those underlying managers charge their own fees. These fees reduce the gross return before the net return is passed to your account. They are not deducted from your balance as a separate line item — they simply make the return smaller.
In short: If the fund’s investment option earns 9% gross, but 0.15% is consumed by underlying manager fees, you receive 8.85% net. The 0.15% is the ICR.
Why Does ICR Matter?
Because the ICR is not deducted as an obvious account fee, it can be overlooked when comparing funds. Two funds with the same headline administration fee and investment fee can have very different total costs if one has a high ICR.
Example:
| Fund | Admin fee | Investment fee | ICR | Total ongoing cost |
|---|---|---|---|---|
| Fund A | 0.15% | 0.35% | 0.04% | 0.54% |
| Fund B | 0.15% | 0.35% | 0.25% | 0.75% |
Fund B appears the same but costs 0.21% more per year. On a $200,000 balance, that’s $420/year — or ~$28,000 over 30 years (assuming compounding).
Where to Find the ICR
The ICR must be disclosed in the fund’s Product Disclosure Statement (PDS) in the “Fees and Costs” section. It should also appear on the MySuper product dashboard and the APRA heatmap under total fees.
Look for it labelled as:
- “Indirect cost ratio”
- “Indirect costs”
- “Other costs” (older PDS documents)
It is expressed as a percentage per annum of your investment in the option.
What Is a Normal ICR?
| Option type | Typical ICR range |
|---|---|
| Index/passive option | 0.00%–0.05% |
| Diversified (balanced/growth) | 0.04%–0.20% |
| Alternatives-heavy option | 0.10%–0.50% |
| Infrastructure/private equity option | 0.20%–0.60% |
Higher ICRs in options with significant unlisted assets (infrastructure, private equity) may be justifiable if those assets contribute to higher net returns. The question is always whether the ICR is offset by performance.
ICR vs Performance Fees
Performance fees are sometimes included within the ICR (disclosed as part of it) and sometimes separately disclosed. Check the PDS carefully to understand whether the ICR you are comparing includes performance fees or not.
Since 2017, RG 97 (ASIC’s fee disclosure guide) has standardised how ICR and performance fees are disclosed — but comparison still requires care.
Total Cost = Administration + Investment Fee + ICR + Performance Fees
For a complete cost comparison, always add all four components:
Total fee % = Admin fee % + Investment fee % + ICR % + Performance fee %
The APRA heatmap and YourSuper tool attempt to aggregate these into a comparable total — but always verify against the PDS if precision matters.
For more: How Are Super Fees Calculated?, Total Cost Ratio, Performance Fees in Super, How to Read Your Super PDS, APRA Heatmap Guide. For advice on your situation, speak with a licensed financial adviser via MoneySmart.