Minimum In SMSF

I've been examining a number of non-property solutions for my very minimal super balance.

I'm wanting to know what's the absolute minimum to consider having in super before switching to a SMSF?

Having mostly been self employed my balance is only $30k. I know I can generate a monthly return on my money of 1.5-4% on a few different options investor friends of mine have been using.

My question is - at only $30k am I wasting my time?

Obviously there's strict rules and regulations in place- however I'm now contributing $15k plus a year into my super and am also willing to have the costs of setting up a SMSF and all of the regular accounting come out of my own pocket and view this more as experimenting and learning before the balance is too big.

What set up and annual fees can I expect to be dealing with?

 

$200k is asics suggested minimum - or was it $250k

Audit fees and tax returns would be at least $1000 pa which would be 1/30th of your balance.

 

I would be very skeptical of any investor friends who claim you can generate a monthly return of 1.5 to 4% without very high levels of risk. Which would blow your account up at some point presumably.

Think about it. That's 18 - 48% per annum, which would put you well above Warren Buffet as an investor

 

Unless you're already over 50 the earliest you will be able to access Super is at 60. Much younger than that God knows what age access will be when you want to retire. I would think a minimum of 65 plus.

I have had a SMSF for years and I am now retired drawing a pension. I was one of the lucky ones just managing to scrape in with access at 55.

There was a stage when I tried many activities that "supposedly" generate the returns your friend is referring to. For that level of return the activities are likely to be time consuming, high stress, very risky and for most likely to eventually result in you losing much/all of your capital. I also knew a number of others that have tried it. Most gave up in the end deeming it to be one of those "stupid" things you try in the hope of getting rich quick.

Those figures you quoted are way too low for considering setting up a SMSF. Even though I have a SMSF given the direction both sides of Gov't are taking with Super if I was young again I wouldn't take the SMSF route. A low fee Industry/retail Fund offering flexible investment options would be much more appealing with the added advantage of cheap insurance.

Not advice, general info only.

 

Do your friends all have multi million dollar accounts? With $100,000 which I have read is the minimum I've seen quoted for a SMSF to be viable (most say more), they would have multi million dollar accounts in 10 years - minimum to prove any kind of long term viability.

Still my curiosity asks what kind of strategy do you plan to follow? General ideas would be enough.

If the main idea is to learn, assuming it is done kind of options or Forex, there are plenty of free trial accounts to practice on while you build up your super balance and don't need to risk real cash.

 

ASIC suggested minimum SMSF balance is 200K in this article..

http://www.solepurposetest.com/news/asic-200000-minimum-balance-smsf/

 

Check cbus i think minimum is 60k you can play with yourself, but with them watching

 

There's no minimum amount requirement for setting up a SMSF, however common sense should prevail. Too small an amount and too few regular contributions and the SMSF might go backwards just in paying a monthly bank account fee ($10 usually), paying annual ASIC fees (circa $46 for the corporate trustee) and paying for tax year-end tax return and audit (circa $1100 for a small fund if your record keeping is good and your SMSF accountant charges kindly.)

 

I had been thinking about going down the SMSF route. I have the balance to make it potentially worthwhile. Was considering using a portion focused on another IP and putting the remainder in shares / ETFs.

@sash posted in another thread that he was looking at using the direct investment option in his super to invest in ETFs. That approach seems much simpler than setting up an SMSF. The challenge is an investment mix that will provide a relatively reliable return without significant risk.

I still need to look at the cost / fee differences and the pros / cons of various options. The way I see it, the options are:

1. Super - Leave my super untouched ( Mercer Super Trust ) and tweak the investment mix.
2. Super - move my funds ( or a portion of my funds ) into a mix of direct investment options ( ETFs )
3. SMSF - Invest in an IP ( will need a loan in the SMSF), invest remaining funds in shares / ETFs

What are the pro/cons of the approaches above? (E.g. Cost, Tax, Administrative overhead, flexibility )
What are the advantages on having an IP in an SMSF?
Are there other options worth considering?

 

For Option 2, if you only plan on investing in ETFs you could consider a super fund that offers index options. Due to brokerage costs, I feel that direct investment options are only worth the hassle if you can outperform the index through direct shares and/or LICs.

Edit: Fees wise they are roughly the same for smaller super balances
Edit2: You will also need to consider additional brokerage costs for rebalancing unless you rebalance as part of your quarterly purchasing cycle.

 

You can use the direct approach via the Australian Super fund.

The fees are about $360pa.....plus fee for getting in and out. That looked attractive to me.

 

@wombat777

Being a property forum I'll probably cop it for saying the following.

Given the high potential for adverse changes to Super I could never understand those wanting to purchase a "lumpy" investment such as an IP in Super. Unlike shares etc it can't be sold off in whatever amount you choose for better planning both personal and tax wise. And one is choosing a poor environment for leverage in the hope that years down the track CG and income will all be tax free. To risky a bet is my view as shown by the proposed budget changes.

Add to this that many younger investors might have to wait till 65 plus to access their Super. Stuff that for a joke!

IPs can be a great investment outside of Super where high leverage can be taken advantage of. And importantly where there are no age restrictions to access. Let's be honest how many here want to wait till potentially 65 or more before they can enjoy the benefits of their hard earned Savings?

Super is perfect for shares, Bonds, A-REITs, Cash and the like. From what I understand owning ones business premises might still be ok in some cases but others might like to comment.

In summary, assets in your own name and / or Family Trust can be accessed at any time so early retirement is possible. Assets locked up in Super don't offer this attractive option. An idea, build enough assets outside Super for potential early retirement till Super kicks in then Super can become an additional source of income to continue a comfortable retirement from that point onward!

A few examples of real life horror stories that are a result new Super changes:

Importantly the $500,000 lifetime non-concessional cap is effective from Budget night.

Note: not advice, general information only.

 

Thanks for the detailed input @austing . I've been tossing the idea around for over 6 months. Distractions associated with travelling have prevented me from making any progress on getting an SMSF established. The complexity and cost of it has been putting me off.

The discussion of shares and ETFs elsewhere on the forums has opened my eyes to other investment options to consider. Still need to better understand LICs versus ETFs. Have not even looked at other investment choices available in super. To date I've just stuck with a mix of super 'balanced', 'conservative' and 'growth' type options.

 

This s going off topic from the OP , but in response to austing comments that super is not a good place for property , I'll describe our experience .

We currently have four properties in super .

We already have a significant property portfolio outside super . Investing in property in our super has enabled us to gear up further at a time when there was an opportunity to buy in Sydney when we felt it was the right time .

As a result we have had a significant boost in our capital in our SMSF over the last 3-4 years ( just under a doubling )

We are going to sell one property .

We were going to go into TRIP , prior to selling on of the properties so there was no capital gains tax , but the budget changes have brought the CGT level up to the same level as accumulation ie 10 % , which is still lower than holding it personally or in a trust .

With selling this one property we will be able to pay off one other property and come close to paying another which we can pay off in the next couple of years .

The advantages of property in super are accessing capital to gear further which otherwise you would not have access to .

Further down the line we will start putting additional funds into other asset classes , but while we good opportunities in property and we can still do it , I'm happy to gear into property in our super .

Cliff

 

I have only scratched the surface in terms of reasons for my previous stance. But being a property forum I know any effort I put into doing this is likely to be in vain. Hence I'll refrain from any further comment on property in SMSF discussion.

Cheers

PS: incase of hate mail I won't be checking my inbox.

 

Just signed up with HostPlus for their "indexed balanced" option which is 75% equities. 0.03% MER and an annual admin fee of $78.

Pretty amazed when I came across this. Source:
Super(annuation)Freak

 

Yes, quite good info there.

He still occasionally posts at this site:

http://forum.mrmoneymustache.com/investor-alley/australian-investing-thread/

For better or worse be warned though of the risk of becoming a Boglehead convert.