Is a Self Managed Super Fund (SMSF) right for you? Already have a SMSF but want to make it work harder for you?
Over 900,000 Australians run their own SMSF. But the news media is in a frenzy at the moment about SMSF’s and property investments. We understand that SMSF’s don’t suit everyone, so it’s important you get the right information to decide for yourself.
Is it expensive to set up a SMSF?
No, it isn’t. You need a SMSF Trust Deed (the document that contains all of the rules for running your super fund) and we recommend you incorporate a Company to be the Trustee (the decision maker) for the SMSF. Our price for this is $3,000 plus GST, which includes preparation of all required documents, establishment of a new Cash Management Account, and everything legally required for a SMSF. For example, if you have $200,000 in super, then the setup costs are 1.5% of your super balance – very low for setting up your financial future!
What are the ongoing running costs of a SMSF?
The ongoing costs start from as little as $200 + GST per month for the administration of your SMSF (includes tax returns, annual financial statements, minutes of Trustee’s meetings) plus $500 + GST for the annual audit of your SMSF.
How does a SMSF compare with standard super?
A comparison of an SMSF to a standard, off-the-shelf superannuation fund (i.e. one available through CBA, BT, etc through most advisers or the banks directly) would be:
|SMSF||Retail Super Fund|
|Super Fund size:||$150,000||$150,000|
|SoA Fee:||$1,200 – 2,000||$1,200 – 2,000|
|Establishment Fee:||$3,000||1-2% = $1,500 – 3,000|
|Ongoing Admin:||$2,400 pa||$1,050 pa|
|MER (managed funds):||Nil (if shares or property)||1.8% pa = $1,500|
|Annual Adviser Service Fee:||Nil (if property)||1% pa = $1,500|
|Annual Audit Fee:||$500||Nil|
|Total (in year 1):||$7,100 – 7,900||$7,950 – 10,250|
|Total (in year 2):||$2,900||$5,250|
Note: The fees are similar for setup and the first year, though the longer-term is where an SMSF may be more cost-effective than standard retail funds.
How much super do I need to set up a SMSF?
Some new media stories suggest you need at least $200,000 (or even higher) to make it cost effective to have a SMSF. We disagree. A SMSF is your family wealth creation vehicle. Even if you have as little as $100,000 in super right now, it may make sense to establish a SMSF and then set up life insurance (owned by the SMSF) on SMSF members while they are still fit and healthy. Also, in many situations using a SMSF can give you much better estate planning options.
As an example, if you have $100,000 in super and purchase a property (using a borrowing arrangement) valued at $400,000, then you would have a SMSF with $400,000 in gross assets. Assuming a capital growth rate of 5%, you would generally expect the larger amount of $400,000 growing would provide a better outcome than the smaller amount of $100,000 growing. This is why many people consider a borrowing arrangement for a SMSF.
What investments can I make in a SMSF?
Typical investments include shares, cash, term deposits, and property. There are specific rules about what you can invest in, so it’s important you seek our advice before you make any decisions.
General advice disclaimer
The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.
Only financial planning advice provided by Ceebeks Financial Solutions is associated with Avana Financial Solutions.
Christopher Beks (Authorised Representative no. 231937) is a director of Ceebeks Financial Solutions (Authorised Representative no. 344518) and an Authorised Representative of Avana Financial Solutions Pty Ltd AFSL 516325 and is authorised to provide personal financial advice.