Should we close our SMSF?

A bit stuck and not sure what to do.

My husband and I have a SMSF, set up about 4 years ago. We purchased a unit in Brisbane (Stafford) using the funds. Looking back we shouldn't have done this as we had under $100,000 and the yearly costs are so high I think we are going backwards..We are wondering if it's best to cut our losses, sell the unit and close the SMSF. We don't have the knowledge and time to run it and i'm not sure when the market will move considering the amount of units currently available in Brisbane.

Any help greatly appreciated

 

Hi Ems
Please seek advice from a financial planner to work through this.

I understand your predicament. SMSF comes with a lot of compliance costs. Whilst the Limited Recourse Borrowings enabled people to buy property in SMSF, I think there would be a number of funds with similar balances and compliance costs.

 

To answer this would be giving financial advice so licensing would be needed.

I would be interested to learn what it is costing you and how you ended up starting a SMSF to begin with.

 

You could potentially sell the unit to yourselves as well. It is just a thought as part of a greater strategy.

Your licensed investment advisor who helped you start should help you now. If they are conflicted get a second opinion.

 

Have you valued the unit recently? Stafford is gentrifying nicely.

 

So Ems I am a financial planner and this is one of the points I bring up with clients who are looking at SMSFs.

Lets say I was in your position (without knowing the exact numbers)

I would consider

1. cut loses and go back to a standard super setup with far lower fees ongoing PA with the understanding of what I would be looking at once I reach preservation age.

2. is there any options to make this work and is that more favorable than option 1.

3. can I buy property in my own name and make that work, what do the numbers look like

4. is there an alternative way to boost income
Airbnb - SMSF Warehouse

5. look at the numbers, time and energy and weigh up what you understand and feel comfortable with.

I hope this at least provides the clear options I see.

 

Hi Ems,
Having a chat with a licensed financial planner who specialises in dealing with SMSFs would be of great benefit to you.

As you pointed out, operating a SMSF its pros and cons, but one of the most important questions is to consider what your personal retirement goals are.

Superannuation is an investment vehicle and tax structure to help you grow your investments, but defining a clear goal and then mapping out your steps as to how you get there is important. Again, if you're stuck, a good licences financial planner can help you get there and avoid unnecessary mistakes.

Here's a good site to help you identify a good financial planner

Choosing a financial adviser | ASIC's MoneySmart

 

Hi there,

Better late than never....the below is not personal advice and is general only.

In terms of winding up an SMSF attached is some valuable detail Winding up

Generally some common things are:

You would want to check your SMSF Trust deed to determine the powers of wind up, safe to say if your fund was set up in the last 4 years there should be no hiccups.

I doubt a capital gain has been made on a unit in brisbane, its probably fallen 25 per cent overall.

I also doubt you received advice four years ago, and if you do receive advice on wind up, there will be a cost involved as well.

In saying you don't have the time or expertise to manage the SMSF and it sounds like your accountant is not "partnering" with you, so its a no brainer. You can instruct your accountant to wind up the fund under after the potential sale of the property and once done a final audit can be done after a rollover benefit statement has been provided for each member.

I'd say with a sale of property you are looking at 6 months or so.....

All the best

Cheers Ivan

 

This has all the signs of why a SMSF should not have progressed to a limited recourse borrowing. Would not happen now.

- Liquidity is too low so gearing is high
- Neg cashflow PLUS
- Contributions are maintaining the fund and the cash is being consumed by the neg cashflow
- If rents stop - What is the strategy ??
- Fees v's (no) return
- Potential double costs if industry funds are being retained
- Lost life insurance (?)

Many people think buying "more property" makes $$$. It doesnt. SMSF property purchases are very different. The days of 3-4 years back when people went all-in are now causing some hurt and may continue to do so for a while

Common issues in early days that lead to this:
- Failure to seek professional advice before going ahead OR
- Spruikers and peddlers convinced members it was a good idea
- Bad lending practices back then.
- SMSFs dont incur fees but pay costs which are largely fixed. Whether there is 200K or $600K it wont affect cost much. The annual costs are probably $2500+ and that could reflect as a high 2.5% v's say an industry fund which also has some diversification and professional skills running it.

eg Accounting / Tax $1500, Audit $450, SMSF Levy $260, ASIC fees $200

It would be wise to review exactly what the fund cashflows are like and your longer term views. This would require financial advice. There are some strategies incl to reduce the loan balance using other super balances as a rollover to bring the fund gearing towards somethings more positive.

 

What and how much are your yearly costs?