Low cost DIY SMSF for an ETF portfolio

Background, after being with UniSuper for many years, I’ve been exploring the best way to move to a low cost passively indexed super fund. I had been waiting for Vanguard Super, however it looks like they won’t support ETFs initially, don’t support VTS/VEU currently anyway and are unlikely to be lower cost than a DIY SMSF.

Goals include reduced fees, increased flexibility, transparency, and tax efficiency.

Hope others find it useful and would appreciate any feedback before I pull the trigger. Some great information on threads in this forum that helped me get to this point. Moving to ETFs really needs to be a permanent choice as switching later will trigger CGT.

Summary
Macquarie CMA
SelfWealth Broker
SimpleFund360 Trustee Edition
ETF portfolio VAS/VTS/VEU 20/47/33
$978 annual SMSF cost

Why these options
Macquarie CMA SMSF CMA

• SuperStream Messages support
• No limit on BPay transfers compared to ANZv2 which requires a fax to do large transfers
• I plan to rollover 20% of funds across at a time to always remain 80% invested in the market

SelfWealth

• Low cost rollover at $9.50 fixed fee regardless of trade size

SimpleFund360 Trustee Edition SMSF software?

• Great support for Macquarie and SelfWealth
• Simplified DIY tax

ETF portfolio VAS/VTS/VEU

• ETFs are more tax efficient as they avoid CGT provisioning The problem with pooled funds — Passive Investing Australia
• VTS/VEU are more tax efficient than VGS as the US doesn’t treat creation/redemption of ETF units by authorised participants as taxable events, further avoiding CGT Quantifying tax drag from US domiciled ETFs that hold non-US assets (eg VEU) - Bogleheads.org

SMSF Cost
$978 / year + 0.18% MER
$220 - SimpleFund360 Trustee Edition ($440 in the first year)
$259 - ATO supervisory levy
$385 - Audit SMSF Audit | Self Managed Super Fund Auditor Services
$114 - Brokerage (12 x $9.50)

For a simple 20/47/33 VAS/VTS/VEU portfolio, investment costs are 0.06%, although VEU has a some tax drag from lost level 1 withholding tax and franking credits bringing the effective MER to 0.18%

The lowest cost direct super option for comparison is HostPlus Choice Plus. For two people cost is $994.80
$516 - Admin fee ($258 x 2)
$478.80 - Brokerage (12 x 19.95 x 2)

HostPlus is less flexible with 80% total limit for ETFs/20% per ETF and you cannot do a partial ETF transfer to pension phase if you exceed the transfer balance cap.

UniSuper on the other hand is $156 ($78x2) + 0.59% for a 20/80 Australian/International Equities portfolio and over 12 years has not outperformed a simple passively indexed portfolio

 

Good writeup and certainly useful! No feedback but plenty of questions:
- Did CBA get a look in for the CMA? Reasons for excluding?
- What's the advantage of superstream support with the CMA? Do you still need a separate ESA or does the Macquarie CMA provide this?
- I assume you've decided against a company trustee? Is that purely to minimise setup costs? Where there any other considerations that you weighed up?
- Have you decided who you will go to for a trust deed?
- What's your strategy if you or partner become unable to administer?
- What's your strategy if you or partner become unable to fulfill responsibilities as trustees?
- What have you determined are the total non-recurring/setup costs in your case?
- What sort of difference do you think this is going to make to your after tax returns in the long term? (Noting all the factors including preferred choice of investments, asset allocation, tax drag, fees, compounding associated with deferred CGT). Or is this more about transperancy, flexibility and control for you?

 

Honestly, I didn't look too closely at CBA. The CMA's I have heard the most about is Macquarie and ANZ. I expect Macquarie popularity is more about their close relationship with advisors.

CBA default BPay limit is $100k, but is able to be bumped to unlimited on request What's the transfer limit in NetBank

Macquarie comes with an ESA. BGL also offer a service for ESA but this will cost $50 p.a., so Macquarie choice is lower cost.

The plan is for an individual trustee structure to both minimise setup and ongoing costs. Given the simple portfolio (eg no property), I didn't see the need for the complexity.

iCare Super provided our trust deed and we plan to use them for audit.

The trust deed includes a section "In the event of death or loss of legal capacity of a Trustee, his LPR shall act Interim Trustee till the time a new appointment is made."

In the first year, there is a double cost for both BGL and the supervisory levy so an extra $479 (220+259). Other than that, no setup costs I've identified.

- Lower cost than UniSuper (although you could also achieve lower costs through an indexed pooled fund like SunSuper, HostPlus etc)
- Increased tax efficiency via avoidance of CGT provisioning. This is proving difficult to quantify Australian Super member direct
- Transparency, flexibility and control are also a big factor.

An example of flexibility. Mrs Hockey Monkey can convert to pension phase 9 years before I can. Within an SMSF, we can remain 100% equities and fund her tax free pension via my concessional contributions + ETF distributions.

Thanks for the questions. I'm also trying to test this decision and avoid any bias

 

I'm sure you are already aware of this but just in case.

Choose individual trustees or a corporate trustee

All I can say is when my wife died thank goodness the SMSF was under a Corporate Trustee. I didn't need an additional layer dealing with a host of administrative financial issues at the same time.

 

It's a really important consideration @SatayKing and probably the most significant factor in my mind - not necessarily for me but you know what I mean. Thanks for sharing. I think as long as there is a rock solid executable plan with a phone a friend all pre-primed then I'm assuming it would be managable.

 

No problem. I'll throw this into the mix as well for what it is worth.

 

Just did our tax return and salary sacrifice with moving to smsf is the recommendation for buying prop or shares.

So going to read all about SMSF and property purchase vs Share investment.

Thank you @Hockey Monkey for starting the thread. I am with Aus super and my partner with Hostplus, combined balance approx 250K but we may not pull all out as our insurances are from those funds.

 

icaresmsf seems to offer a great setup service!

Also for others reading, Jeremy Gordon's directdocs site provides a couple of great resources for evaluating individual vs corporate trustees.

 

I attempted to quantify the difference at Australian Super member direct

ETF option outperformed SunSuper Indexed option by 1% p.a. over the past 10 years.

 

Is it the intention to keep this split as static allocation for all time or will you let the % move with changes in global market cap?

 

Static allocation to VAS but VTS/VEU moving with global market cap. Closest option we have to VT in Australia.

 

Have you considered StakeSMSF?

 

Thanks for the suggestion. I had looked at them in the past and discarded them as they we US shares only, but now they have ASX shares I might reconsider.

Still slightly more than the costs I've calculated above $770 + $259 + $3*12 = $1065, but it does look like a nice simple option where they take care of everything.

 

I thought Unisuper has been among the top performers, why switch? Just curious

 

Slightly expensive yes ! But you also get cheapest access to direct US shares as well as ETFs like ARK invest - which you may want to do in future as you become more comfortable with direct shares investing. Something to consider. Disclaimer- I might be biased here, I am with StakeSMSF. Just find it powerful and easy to use.

 

While it will never, ever happen, the site does not mention one small issue should things go wrong.

SUPERANNUATION INDUSTRY (SUPERVISION) ACT 1993 - SECT 166 Administrative penalties in relation to self managed superannuation funds

I believe where individual trustees the penalty unit applies to each to be paid out of their own pocket where as if corporate only hit up once.

It never seems to be discussed a lot.

 

This discussion highlighted to me that UniSuper has matched but not beaten SunSuper in the past 6 years (they are the dot on the red line)

Australian retirement funds: general reinforcement for Bogleheads and specific thoughts for Australians [updated again] - Bogleheads.org

A tax efficient VTS/VEU portfolio has beaten sunsuper by around 1% p.a.

The industry funds compare themselves to each other and talk about outperformance to SuperRatings median, not to the market.
International Shares

 

ARK is not my thing. Unless you had early money invested, you likely underperformed a simple VTS

https://www.reddit.com/r/investing/comments/p86gx0/internal_rate_of_return_for_investments_in_arkk/

We have seen all this sort of thing before where funds managers have a lucky outcome, all the money rushes in and they go out in a blaze of glory


Stake’s 0.7% FX doesn’t excite me too much either. I already invest in the US AVUV/AVDV small cap value ETFs outside of super using Interactive Brokers 0.002% FX rate.

How did you find the StakeSMSF setup experience? Did you go with an individual or corporate trustee?

Stake appear to be just a wrapper for GrowSMSF. Is the whole experience integrated well with their app (CMA, brokerage, reporting etc). Note, price post beta is $990 + supervisory levy etc.

StakeSMSF | We've answered all your questions in our FAQs
Who is the tax agent for Stake SMSF?
Stake SMSF has initially appointed Grow SMSF Pty Ltd (Tax Agent Number 26057627) to act as the tax agent for all SMSF customers. Grow SMSF Pty Ltd is owned and controlled by Kris Kitto who is the Stake SMSF Head of Product.

 

By FAX, really

 

According to this yes SMSF Bank Account - Fax Authority | ESUPERFUND

Maybe someone with an ANZ CMA can confirm but this mentions a $50k transaction limit on BPay

Pay BPAY bill | | ANZ