Looking at setting up a SMSF – Max. $1,000 Annual Costs

Long time lurker, very good forum.

I have been using AustraliaSuper and their member direct for the last 6 years, with 70% of my funds in Member Direct and the balance in International Shares. 39, starting this journey late being a migrant.

Whilst the platform is good – it still has limitations in terms of what you can invest – not much in terms of Managed Funds, ETF’s and LIC’s

Not looking for ridiculous returns but can possibly achieve a better return by investing in products not within ASX 300. My self-managed portion has returned 13% last 6 years, though this has to do with some luck (bought BHP @21). I would like to have Magellan Global Fund, their Infrastructure active ETF and WAM Capital – but can’t add using their current option.

I had worked on the investment strategy sometime back but I need a return slightly higher than the Balanced Fund of an industry super. At the stage of life where I am passive ETF’s only will form a small proportion of my funds.

No property – just shares, managed funds and ETF’s

Current balance is around $160k and looking at annual costs of no more than $1k in absolute terms;

1. Accounting/Administration – will do this. $0

2. Tax – wife will do this $0

3. Audit - those cheap online audits $350, can be cheaper

4. Levy - $259

5. Corporate Trustee - $246

Not sure if am missing anything – at this point not interested in platforms, Commsec plus ShareSight will be okay

There is an opportunity cost in terms of my time but being a chartered accountant I am happy to do this.

What am I missing? Or anything I should be aware of? (My mind is made up on SMSF – but don’t need this to cost more because of my low balance).

 

My goal is to have a super balance of $1m in 11 years (when am 50), or at least $800k. Current contributions including SS are $19,000, will try increase this to $25k if income grows.

Maybe am being silly

 

Have you ever considered that one of the best bits of advice you can give to yourself and your wife is dont do it ? Being able to do something doesnt make it sensible. Most people think they can outperform a team of experienced and capable fund managers who have a range of strategies and tools at their disposal. My first suggestion is I would be using BGL Simple Fund 360 trustee edition not sharesight....

You didnt mention life insurances ? A SMSF will be double the cost IF you can get it. Who says you wont make a total meal of it and when the markets crash you may rue not having a 100% exposure.

Another option may be a different industry fund with better aligns with your interest in some more direct choices.

 

Run that through the ASIC calculator and I suspect the maths wont work without assuming a hell of a strong return each and every single year with no market impacts.

If a correction occurs once each 10 years (its overdue) then consider this:

If markets fall 30% it takes a 42.8% increase in the market merely to get back to the same point. When did that happen last ? After the GFC (2008) markets fell around 50% depending on the index and the point of reference (Nov 2007 was its high) and in 2014 the ASX 200 hadnt quite recovered that loss.

 

whats the significance if 50 yo here? You cant access until your 60.

while there are tax benefits, do you have assets outside super? Eg kids need help with a deposit.

 

I have looked at this over the last 5 years - and I think I regret not doing it sooner - remember only 30% of my super I don't manage. I would have invested it in Magellan Global Fund and would have been ahead of the Australian Super International Share Option.

Sought advice from a Financial Planner few years agnly insurance within super is life - linked to a Zurich plan. Not worried about this I will continue having IP, Trauma and TPD separate.

Will look into this.

Any other options?

 

I don't think this is my goal - obviously I don't have the resources. But I don't think sticking with an industry fund is the only option - I am actual wanting to invest in these managers directly.

 

Correct. I would need around 13% annual return. That may not be achievable.

Well - everyone will be in the same boat? I would be comfortable to have a majority of my funds invested in funds/assets that reduce concentration risk - and that can go cash?

I am not trying to to be a hero - just sensible growth with the attendant risk.

 

Young family then. I will be paying private school fees then so need to sort out super now - compounding will do it's thing till 60. Instead of waiting to add extra contributions to super later in life, am doing it now.

Superannuation is part of my wealth strategy - not just retirement. I do have an IP, PPOR with moderate mortgages which am chipping in slowly. Building a portfolio outside super as well. The tax benefits within super now make it a very good vehicle, but am not putting all my eggs in one.

 

$400 a year, thats 0.25% annual cost of my current balance I can't justify.

 

Did you include the ASIC company registration for the trustee of the SMSF? That's $267 a year plus accountancy fees for annual resolution of solvency

 

Annual fee for special purpose company as trustee of smsf is only $53 a year, so that is $190 less than expected.

I've found sharesight to be inaccurate on occassion so I would double/triple check all their figures.

 

Cool.

They stuff up a few things in my portfolio but reconcile at year end.

 

Do like frozen. Past performance is not a certainty.

 

I have this conversation often with clients

1. AMIT errors
2. Capital adjustment
3. Trust accrual errors
4. Brokerage mistake...a basic flaw for all users

 

You

You dont understand the time effort and complexity to smsf accounting. I have done this for 20+ years. Your experiment will teach you that costbase adjustments for smsf income are a costly complex tax and accounting issue. Corporate actions in bgl are automated.

 

Sillydad -

Re accounting for yourself, unless youre an accountant with smsf software (whoops just read you are), it just ain't worth it. The time and effort to produce accounts and perform the required tax calculations - when you can get a specialist smsf service provider to do it for you. The cost of accounting is deductible anyway. I see so many people asking me to do an audit when they send me a spreadsheet, I respectfully decline and after all the questions most just end up paying us to do the whole lot. Remember also the lodgement timelines are extended when you use an agent.

Cheers Ivan

 

Even if you are an accountant, unless you do super for a living.......

 

We refuse to accept engagements where the trustee self reports especially anything in Xero, MYOB or the like. No matter what we say they dont accept their efforts make it more complex not less. We cant advise people who dont want to receive advice. Often someone quite reasonable with accounting and reporting BUT maybe lacking in these areas:
- CGT costbase adjustments and corporate actions
- DRP and reinvestment in managed funds using incorrect values / dates
- Failure to adopt accrual basis for ETF and trust income entitlements and the income categories on a annual tax report
- Member taxed and untaxed elements
- Member preservation elements
- Death nominations, reversionary pensions, investment strategy and other compliance matters
- Pension compliance
- CGT discount issues esp where trust income is evident
- Incorrect allocation of income in a manner that is not consistent with SISR
- Incorrect tax allocation (eg shared and not specific to contributing members)
- Lack of technical clarify in some areas of income eg foreign income and application of non-refundable offsets etc

and when it comes to segregation or an actuarial certificate the complexities of DIY are unrivalled. Our software (BGL) generates an acturial certificate on the fly which used to involve hours of prep work. So easy we now just on-charge the $99 fee for the certificate.

 

OH does this, does that account? She uses BGL - and says it's good - but not a great product. There are other options she says are better targeted at SMSF Trustees - like Class.

I am looking at options now - but going with the most expensive, most sophisticated, with features I don't need - isn't a good decision.

For all it's worth I can afford the few hundreds they charge - it's the value I can't justify. Spoke to someone who does their accounts using spreadsheet from these guys DirectDocs - set-up packs, documents and advice for your SMSF