Hi Everyone,
Just curious about Self Managed Super Funds (SMSF). I am keen to start one for myself, however I have no idea of the ongoing costs associated with one. I was chatting with a financially-minded friend, and he suggested not starting one until my super balance was at least $200,000 because otherwise the fees and costs associated with it would outweigh any benefits. Does anyone have any opinions on this statement?
Also is it wise to purchase properties through your SMSF? What benefits/disadvantages does this have over say purchasing through a discretionary trust or through a company?
Thoughts appreciated!
.
Hi aaabbbccc
Couple of quick answers.
You can start your SMSF with any amount however tend to find clients normally have circa $75,000 initially to make it worthwhile.
A SMSF has to submit a Tax return, be audited, lodge with the ATO a Superanuation Levy return all which cost money so when you consider the average retail fund would charge around 1 – 1.5% you can start to see why the minimum balance is required.
Now in answer to your question about whether you should buy in SMSF there are arguements both ways. Again one of the big downsides is the initial establishment costs for the Pty Ltd and the Bare Trust structure. The ATO review these regularly and love to find Trusts that are not complying so you need to make sure you use a legal firm who is expienced and not someone who sells off the shelf instalment packages.
Lenders limit LVR's to around 70% and in most cases they are treated as Commecial loans so the set up costs and legal review fees charged by the Banks are higher than they would be if you purchased in a standard Trust.
Richard Taylor | Australia's leading private lender
Hi Richard,
Thanks for the quick reply!
A starting balance of $75,000 seems much better than the $200,000 mentioned to me previously. Who are some of the leading firms who specialise in accounting and auditing SMSFs?
As for the property purchasing through your SMSF, is the process identical to purchasing through a trust? Or does it depend on how you setup the structure of your SMSF (on this point is there a defined structure for a SMSF, or can it be individually tailored?)
Cheers,
.
it is a little bit more difficult to borrow through a super fund (the law changed 2 years ago) you are borrowing through installment warrants. It's all a bit of black magic but if you speak to an accountant or advisor they shold be able to direct you in the right direction.
CBA lend to SMSF, there product is called Supergear, most/all banks will have something similar.
Hi aaabbbccc
Most accountants will establish a SMSF for you and probably have someone on board to undertake an Audit.
The property is not purchased in the name of the SMSF as a SMSF cannot borrow directly but purchased in the name of a Bare Trust through an instalment warrant. The Trust in turn borrows from the Bank.
After the last payment has been made the property is transferred to the SMSF by the Bare Trust.
BT has to have a Corporate Trustee hence the requirement for a Pty Ltd Company.
Due to the issues with the ATO in Trusts that are not set up correctly lenders will want their legal departments to assess the Deed and it is not cheap.
CBA's product is not particularly attractive in comparison to others.
Just watch out some lenders are requesting Personal Guarantee which under the SISA is verging on illegal.
Richard Taylor | Australia's leading private lender
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