Australian Super member direct

Discussion in 'Shares & Funds' started by pippen, 19th Oct, 2019.

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  1. sash

    sash Well-Known Member

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    OK dunno...please do tell...otherwise you may get ignored as a troll.... ;)

    By the way I already own VAS...VGS....IOO ETF...but not in Zuper....:D

     
    Last edited: 21st Oct, 2019
  2. Snowball

    Snowball Well-Known Member

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    Appreciate your work on this. It’s quickly looking like this’ll make it into the ever-growing too hard basket.

    Only issue I can think of is urge to tinker, given its essentially an open platform/brokerage account. There’s a mental aspect of having it in a ‘locked away’ option.

    When I was using ING direct choice from memory when selling shares it did ask me which selling method I’d like to use (2 options only, can’t remember exactly what they were - first in first out or minimise gain maybe?)

    So maybe different super funds are different? And what’s to say this will stay constant over time?

    Headache already lol
     
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  3. sash

    sash Well-Known Member

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    I am scratching my head to understood the crypric messages from Dunno ..

    I see his point about ETF like VGS will grow more. But if it is under Super....my understanding under Aus Super.....when you move ETFs to pension mode...they will need to be sold? Is this your understanding also?
     
  4. ChrisP73

    ChrisP73 Well-Known Member

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    Same. The deferred CGT impact swamps the fees in a very low cost pooled fund like sunsuper with index equity options. I stupidly assumed there was a more equitable calculation of the unit prices (maybe not to the individual level but something more than full reduction by the CGT rate). Ironically, with greater interest in passive indexed assets in recent years, the deferred CGT 'liability' windfall in pooled super funds has likely become too big to not act, hence the intro of balance booster etc, but as @dunno points out, it's a token marketing effort only.

    This is one to ponder carefully and act slowly. We only moved from aust super to sun super this year as I found the fees for aust super we're not attractive for larger ($1M+) balances. Looked at direct options like Aust super members direct (meh) and SMSF (preferred was icaresmsf) but now it's clear I've probably missed something very significant. Damm.

    We're still 15 to 20 years from accessing super. I don't need to rush out today but I'm not going to throw significant $s away for the next 20 years. Just couldn't.
     
    Last edited: 22nd Oct, 2019
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  5. PKFFW

    PKFFW Well-Known Member

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    I'm with First State Super and while I do have some choice over how my money is invested, there does not seem to be a separate "member direct" pool as separate to the rest of the fund. Instead I can choose one of the pre-mixed options such as growth or balanced, etc, or I can choose my own mix of equities and bonds etc. I have chosen the "Equities International Index (unhedged)" option. Which is VGS as far as I can tell. So I'm not sure if this deferred CGT liability issue affects me. Searching the FSS website doesn't produce anything for retirement booster bonus or deferred CGT liability.

    @dunno sorry to be a pain but would you have any idea? Also, if you'd like to run one of those scenario things for me to see if it really makes any difference that would be great. ;) I currently have $263k, will be adding the standard 9.5% employer contribution (currently just on $12k pa) for the next five years. It will then sit there compounding for another 10 years before I can access it.
     
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  6. ChrisP73

    ChrisP73 Well-Known Member

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    @PKFFW i haven’t adequately researched this yet but intend to for sunsuper. Review the trust deed, annual reports and request info directly from the fund specifically about how actual and deferred cgt is accounted for in unit price calculations.
     
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  7. Zenith Chaos

    Zenith Chaos Well-Known Member

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    We're so lucky to have the encyclopedic knowledge from the Four Horsemen of the ApocoLICs: Ramsay, King Prawn, Mario Fenech and IDK.

    The younger you are the bigger the risk you take with Super being changed in terms of when you can get it and how much you can get. I don't think the government can push out the super preservation age so far that you can't use it. Therefore, what you can try to plan for is being close to dead broke the day you receive your super, which could then sustain you.

    If you are in a higher tax bracket the $25k per year makes sense generally, unless there is some strong reason to have the money now.

    The other thing to consider is early retirement, because if that's your plan you'll need enough to get you comfortably to preservation age.

    I'm using SunSuper because I was shafted by ing's exorbitant fee change on their Direct option and I didn't want to complicate Super. All I did was replicate something like VDHG but without cash. I rebalance for free every now and then and with inflows.

    Very simple.
     
  8. ChrisP73

    ChrisP73 Well-Known Member

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    I’ve contacted my super fund (sunsuper) for more information on policies for cgt allowances in unit price calculations and impacts to individual members. The pds offered very little. I’ll report back.

    I’m expecting to be both underwhelmed and disappointed. Looks like smsf might be on the cards again.

    In the meantime, educating myself by reading

    “Unit pricing Guide to good practice”
    Joint ASIC and APRA guide Updated August 2008. Not really much fun.

    https://www.apra.gov.au/sites/default/files/UP_GGP_082008_ex_final.pdf
     
    Last edited: 22nd Oct, 2019
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  9. ChrisP73

    ChrisP73 Well-Known Member

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    LOL. Agree
     
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  10. dunno

    dunno Well-Known Member

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    First State does not appear to have a members direct equivalent. They also do not appear to have any type of retirement booster. (indicates how much discretion is available in the allocation treatment of deferred tax liabilities and the earnings arising from those funds, some pay out thousands as retirement boosts, some nothing)

    Yes the issue does affect you - it affects anybody who invests through a pooled fund.
    The key issue is that pooled super member allocations are post tax. As a passive investor you will create lots of these deferred tax liabilities over time. The fund deducts these liabilities before they calculate the unit price, hence the liabilities become an actual expense to you. Under individual tax treatment you retain the capital despite building the liability (its like an interest free loan from the tax office) and eventually the liability is forgiven up to limitations dictated by the 1.6M cap.

    This issue has potentially large impacts. The powers of Indexing does not sit well within single entity accounting of super funds. Even zero cost index options are not going to cut it because of the tax structure. You would have to get above index returns from the index option (Maybe a possibility depending on the member allocation pollicises) to even things up.

    The plan above by @ChrisP73 to hasten slowly and investigate fully before taking action seems the way to go to me. A bit of work to understand and position here could "possibly" set you up for a much better long term result without any extra risk or ongoing effort.

    My take away from this latest trawl around the funds.
    If your going to join a pooled fund - go with their headline pre-mixed active fund - this is what they do best and they can probably do active better than you. This could diversify a passive outside super approach.

    If you want to go passive in super, the member direct options with more individual tax treatment is most likely a better environment. (so long as you stay passive and don't get tempted by the platform and tools). If you are likely to exceed the 1.6M cap by retirement - an SMSF becomes a valid option.

    the above summary is based on todays legislation - that could change tomorrow....

    The prelim model to see if investigating further may be warranted from the details you gave.

    Current First state situation.
    upload_2019-10-22_20-46-43.png

    Switching to members direct at Australian Super 100% VGS
    upload_2019-10-22_21-23-45.png

    Looks to be in the vicinity of 40K Future Value potential.

    I know I haven't really explained this whole issue well enough for it to be crystal clear to everybody, but some that are directly affected have certainly cottoned on. My goal was really just a heads up and I now look forward to some others taking over the discussion and hopefully blowing this wide apart so it becomes easily understood by a wider audience.

    Cheers
     
    Last edited: 22nd Oct, 2019
  11. RogTheBear

    RogTheBear Well-Known Member

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    BT Super Invest.
     
  12. Redwing

    Redwing Well-Known Member

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    @dunno

    Always thought provoking

    I have a SMSF through Super plus, the above has me considering whats happening there also

    Kudo's also to @Nodrog and the SMSF coach info
     
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  13. Zenith Chaos

    Zenith Chaos Well-Known Member

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    I'm very interested in that information being a SunSuper member investing in their index funds. I did wonder how they could get their fees that low.

    I am SMSF averse so my option could be moving across to the standard growth / balanced fund, but it has too much of a cash allocation for my liking, and it's active.

    I'm still not across this Super tax liability thingy. My understanding of passive market cap indices is that they minimise buy and sell transactions because the fund stays balanced by definition. Are these caused by members moving their money around? I have my own units, why am I paying for the way other members are taxed on their units? Yes, it's pooled, but they have all the transaction data to attribute the exact tax to each member. Something like AMIT for funds.

    I try not to learn any of this stuff as I'd prefer to use my brain on preferred pursuits, but it looks like I'm going to need to do some investigating.
     
  14. PKFFW

    PKFFW Well-Known Member

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    @dunno thank you for your post. As @Redwing said, always thought provoking.

    I will have to have a chat with FSS and do a little digging.
     
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  15. Greedo

    Greedo Well-Known Member

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    Enlightening thread so thanks for all the contributors and @dunno in particular.

    For someone a little slow on the uptake, can I please clarify this. I’m in the balanced pool with Sunsuper. Is it the suggestion, or fact, that the deferred tax on mtm movements or other cap gains on the pool assets are deducted from earnings and ultimately reflected in lower individual unit prices on some form of allocation basis?

    Second question, if I were to move to say the growth pool would I personally incur some of the realised cgt which would be reflected in my new unit prices or is this accounted for on a pool basis and then an allocation rule applies?

    Thanks again all
     
    Last edited: 23rd Oct, 2019
  16. RogTheBear

    RogTheBear Well-Known Member

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    BTW, the "pay CGT or buy/sell spread when going from accumulation to retirement" thing - if you're investigating various direct options, you're looking for what's called an "in-specie transfer".

    The reasons why a particular super fund can't do this come down to their internal structure and how much work they've done on their offering and its registry system - there's no reason why a fund shouldn't be able to do this - they just may not have "built" this option yet. Often businesses rush to market to get an offer out there, and build some of the "less important" functionality later - and if they run out of development money and the initial offering doesn't do as well as hoped, things can get booted down the corridor a very long way.
     
  17. Bigchrisb

    Bigchrisb Member

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    Interesting analysis. Not being able to get a clear answer on the cgt treatment was the final catalyst for me switching to a smsf about 6 years ago. I was with cbus before then. I tried to engage with them to understand how they treated individual cgt, but they didn't provide enough detail in their response. Hence I choose to switch to a structure where I have much better transparency and control.

    I'm interested to see where the discussion ends up, but I now have enough deferred cgt liability in the smsf that I won't be winding it up in a hurry.
     
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  18. ChrisP73

    ChrisP73 Well-Known Member

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    I'm no expert, but my understanding is as follows:

    First question, yes, that's what's being suggested. However there's such little transparency that it's proving very difficult to quantify the net impact for the pool let alone on an individual basis.

    On the second question,for pooled super funds my understanding is that as an allowance has been made for future realised capital gains in the unit price you're not going to realise any further impacts to your super balance (other than possibly the buy sell spread to nav of the investment options) when you change options. My issue is that the manager must be making provisions for this based predicted actions of members in the future. I don't want other members poor investing behaviour impacting my unit prices. They're also possibly paying more CGT in my passive option that I'm happy about due to grasshopper members. All of this impacts compounding over the decades I'll be invested.

    I think there's a lot more to this. For example there's potentially some benifits at the pooled level to avoid CGT - eg just because you swap options doesn't mean the underlying assets have to be sold and incur CGT, if the are sufficient infows into option to offset your swap ( much like share brokers optimise to match trades between clients to avoid exchange fees.

    The point is you don't really care about optimising returns for the collective. You want to maximise for one.

    In accumulation mode we know earnings are taxed at 15% and that there are credits for franking which we can estimate for index based options. I'm sure this is an oversimplification, but I'd really like to see pooled funds publish per member/unit what tax is actually payed and what CGT provisions have been put aside.

    This info might be available in annual reports at the group level, but I suspect not at the option level. Yet to fully determine.

    At least then individuals could make informed decisions about where are and how to invest.
     
    Last edited: 27th Oct, 2019
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  19. ChrisP73

    ChrisP73 Well-Known Member

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    My initial equiries were batted away. I've gone back with more specific questions. I'll probably need to eye ball someone with authority to get real progress.

    I'm also looking at historical unit prices against the index to see if I can reverse engineer an estimate of net impact. I suspect it isn't as significant as the full or even didcounted CGT rate , but really don't know, and that really really bugs me.
     
    Last edited: 27th Oct, 2019
  20. Greedo

    Greedo Well-Known Member

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    Cheers for the answer mate
     
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