Australian Super member direct

All of the industry fund offerings only support full transfer of direct ETF holdings to the pension phase. If your total balance exceeds the transfer balance cap (currently 1.7m) you must sell down below the cap before transferring, incurring 10-15% CGT.

Pooled funds don't have such issues but are less tax efficient as other investors actions can realise capital gains for all investors The problem with pooled funds — Passive Investing Australia

With a SMSF if you exceed the transfer balance cap you can proportionally apply zero tax to the part of the balance in pension phase without having to sell any assets Exempt current pension income

Note, you still need to have enough liquidity to meet the minimum annual payments for the income stream when in pension mode which for our SMSF we anticipate being able to meet the requirement via ETF distributions at least while there is only one pension.

 

Crikey, they really did make Super quite complicated ! Am I right in my understanding:

If you have over 1.7m in industry super funds direct ETF holdings by the time you transition to a retirement account you are *unable* to leave the amount above 1.7M in accumulation phase?

Did you go SMSF over direct ETF holdings with an industry super fund for this reason?

I was leaning towards direct ETF holdings over an SMSF circa 500k balance but looks like I may need to understand your last post better before I make that decision.

 

Correct, it is a limitation of the Industry funds offering rather than a super rule. Hopefully the upcoming Vanguard offering doesn’t suffer from this limitation, although at this point it is unclear if they will offer direct or pooled holdings.

This was one of many factors in our choice to go with an SMSF. Cost, transparency, flexibility, tax efficiency.

 

I've seen a few mentions of the Vanguard offering 'hopefully' fixing some of these issues that currently exist. I really do feel sorry for people who aren't as financially literate trying to figure it all out. It's also a shame a quite complex issue/consideration appears to pop up with whichever route you choose.

Trying not to derail/hijack this thread, but in other analysis I (think) I saw you produce, was the amount of $ in Super required to consider direct ETF investing or SMSF > pooled funds in the 300k range? (This was due to some of the complications of pooled funds, franking, divs etc. IIRC).

 

Any fool can make something complicated. It takes a genius to make it simple.

Welcome to the Australian government.

 

The 300k analysis came from this article (down the bottom) when comparing HostPlus ChoicePlus to some of the pooled options. It only really looks at costs and does not quantify the tax efficiency of direct ETF’s which I put at 0.5-1% depending on which funds are chosen (US domiciled funds can be more tax efficient due to the use of heartbeat trades to avoid internal capital gains)

The problem with pooled funds — Passive Investing Australia

 

Gimme a break. I try my best.

 

You designed superannuation @SatayKing Prawn? I'm fairly certain you would do a much better job.

Superannuation should be managed by the government whereby Australians buy units and receive a comensurate pension. No superannuation funds, no financial/superannuation advisors, and no tax concerns. It is currently too complicated and allows the careless, the idiots, and the scammers to "blow" the money, after which tax payers have to foot the bill.

It is a front for overpaying their Financial Services Industry buddies when it's time to put them out to pasture.

The structure suits people who care and are capable of accumulating wealth, who are also generally speaking the majority tax payers.

 

Things which were and could have been.

"1945

Chifley Government introduced an additional levy on personal income tax which, along with a payroll tax from employers, was credited to the National Welfare Fund. There was, however, no direct link between contributions and benefits and the pension. The National Welfare Fund, whilst set up as a means of establishing a base from which a national superannuation fund could be operated, was in practice merely an accounting device until its abolition in 1985."

Chronology of superannuation and retirement income in Australia – Parliament of Australia

The original legislation was in 1943 actually.

National Welfare Fund Act 1943

 

Hello after recently just learning about the tax inefficiency with pooled funds thanks to Eli from passive investing Australia and reading this entire thread it’s got me rethinking my strategy moving forward I’m hoping to lean on some of the experienced guys in this thread for some help/opinions/ guidance on what I am finding a challenging decision to make moving forward…

I have a super balance of 300k currently maxing my caps so there could be the possibility of reaching my TBC one day the way I see it is I have one of three options moving forward….

1)pooled fund with ART/ Hostplus/ rest
2)direct choice plus with HostPlus
3)SMSF something along the lines of STAKE

Host Plus Choice plus seems to be the best choice, but if we ever reach the TBC this method has disadvantages and or decide to change to a SMSF later on this will trigger a CGT event eroding any benefits from switching to choice plus now, would it seem not unreasonable for now to stick with ART in a pooled fund until my super balance reaches around the 700k mark and at this point switch over to a SMSF for complete flexibility and then avoid the unnecessary taxes in pooled funds?

Hoping to lean on some experience, I’m sure lots of you have tackled this problem and was wondering what the best work around for me could be.

 

Low cost DIY SMSF for an ETF portfolio

This thread is a great read, and credit to @Hockey Monkey for all of his work.