I know there are many BBers who are much more financially savvy than me. (Which is probably most BBers..) And also there are many working in the Super industry.
Without asking for personal advice or anything else that may be construed as a conflict of interest, what are your opinions about the avalanche of SMSFs being reported these days? And said SMSFs buying up a zillion dollars of property across our wide brown land?
What is the likely governmental response? Will any such response lead to a crash in capital city property values?
Would you advise others to take up an SMSF? If the answer is "no" do you have one yourself? If so, why say no (recognizing that many advisors these days are touting to set up SMSFs)?
Finally, any non-conflicted advice for those thinking about going where so many have gone before?
Just in short, I think a lot of the avalanche is misguided and people are basically being sucked in by dodgy financial advisors and property developers.
If I were the ATO, I'd be savage on people who invest the funds for their own personal use, rather than to give them retirement income. I keep hearing of relatives and friends who've "cashed in their super" to buy a development property. Firstly, you generally don't get your money back on these properties for upwards of 10 years...the developer and his agents take a massive cut (viz Docklands). Secondly, it's not a prudent spread of investments. If the property market collapses and you can't rent it, you're cactus.
I keep hearing that you need much less than the normally advised $300K to make it worthwhile. I don't believe it. Compliance and accounting costs alone are about $2000pa.
If you're sufficiently dispassionate to invest for your own future, which should be predominantly income-producing investments, then go for it. But I'd reckon that covers about 5% of SMSFs.
I don't have one myself, but I probably will start one as I approach retirement, which is currently heading towards me at a million miles per hour.
Personally, I think financial advisors are desperate to make sure they get everything that's coming to you. But, I'm a cynical ■■■■■■■.
I agree with everything you say… (and would not dare to challenge your last sentence).
I think the ATO has pretty strict rules that do not allow people to invest the funds for their own personal use. (Sure, the mega-rich could get around this, but not most people likely to take up a SMSF).
But the reason for posting was not only to get some discussion from knowledgeable BBers like yourself, but also to see what the likely political reaction would be to the way these are currently (and are likely to further) distort the property market. There was an article in the Age a couple of days ago that touched on this, and it looks like Fairfax may run with this issue. Especially since there have been no recent Essendon-Mexican dealings.
I thought SMSFs aren’t necessarily property though. I read recently Lego and Vintage cars had out performed plenty if other options. At least you can enjoy that stuff
I thought SMSFs aren't necessarily property though. I read recently Lego and Vintage cars had out performed plenty if other options. At least you can enjoy that stuff
You've got to keep them offsite to prove they're not for your personal use.
And no...they don't have to in property...income-producing shares, deposits etc.
Noonan, would you consider buying a warehouse using your super as a deposit and then running your business out of it as personal use?
Has to pay commercial rent to the fund....i wouldn't be too sure you could do that. I don't really know all of ins and outs of that sort of thing. I work in standard super.
If you try to abuse the rules, I hope they catch you.
Noonan, would you consider buying a warehouse using your super as a deposit and then running your business out of it as personal use?
Has to pay commercial rent to the fund....i wouldn't be too sure you could do that. I don't really know all of ins and outs of that sort of thing. I work in standard super.
If you try to abuse the rules, I hope they catch you.
It is perfectly legal. A separate trust needs to be set up and the business pays rent to the trust/ super fund. It is really no different to investing in a warehouse and leasing the property to another business. The obvious benefit is that instead of paying rent to someone else, you can be paying rent on your own investment. I suppose it would be a bit different if you invested your super into a house and lived in it. I reckon that anyone renting a premises for work should look into it.
It is perfectly legal as you say but there are a lot of rules surrounding how it is to be done. If you do go down this path make sure you have an accountant (not a financial planner) who can set this up properly and has experience in the field. We had an awful issue with accountants who claimed they knew what they were doing and setup the entire thing wrong which meant months of paperwork issues and months of compliance issues.
I know there are many BBers who are much more financially savvy than me. (Which is probably most BBers..) And also there are many working in the Super industry.
Without asking for personal advice or anything else that may be construed as a conflict of interest, what are your opinions about the avalanche of SMSFs being reported these days? And said SMSFs buying up a zillion dollars of property across our wide brown land?
What is the likely governmental response? Will any such response lead to a crash in capital city property values?
Would you advise others to take up an SMSF? If the answer is "no" do you have one yourself? If so, why say no (recognizing that many advisors these days are touting to set up SMSFs)?
Finally, any non-conflicted advice for those thinking about going where so many have gone before?
SMSFs are great for the intelligent investor probably like your good self who will take the time to research and understand what they are going to invest in and know the pluses and minuses of them. It's also for the investor who want access to areas most super funds (industry, retail or wholesale) can't access or don't have access to. If you're thinking direct property, collections, art, cars and shares outside the ASX200 then this is a way to go.
As Noonan said the $200k mark is where you start to make some savings over a retail or industry fund (without paying for advice) but as usual depending on which fund you are in. Remember as a SMSF it will need it's own bank account and also an annual tax return (well all super funds need this but normally the average joe doesn't see any of it). There are also annual fees for trusts and then accountant fees to do the work. If you trade say 10 shares a month, there is potentially 120 pieces of information you have to keep track of for the tax return. In addition as most funds have life insurance attached this will also need to be setup yourself to attach to the super fund. Lastly there is also the issue of where the super fund goes if you die. There are non binding and binding death nomination options. A binding death nomination is something which CANNOT be challenged in court so it's handy for split families. Then of course is keeping track of any contributions you make to the fund.
One warning as well, if you were in a super fund for a long time and 'cash' up to move to a super fund you are also realising all your capital gains which will be taxed. So you may have a balance of $200k but by the time all the taxes are paid you might only have $180k.
Self managed super funds explain themselves. They are for those who are capable and willing to self manage them. If you find you will only run it properly for a year or two then you are wasting your time.
An extreme way some of our clients used their SMSFs was invest in fixed interest directly through a bank.
With regards to the Government and who will do what. In my opinion Labor would be tightening reigns on them, while Liberals will be not changing them or make changes for the well off. Both in my opinion would be looking to raise the annual fee as it's an easy cash cow that doesn't really affect pensioners.
I do not have a SMSF and my partner doesn't either (she's an accountant so we're probably in a best case scenario of people who could). Who I would recommend it to is sort of summed up above.
Lastly, most advisers / accountants normally have an arrangement for sharing of fees between themselves. So a lot of advisers are recommending SMSF's as they get a portion of the accountants fees as well or vice versa. If an adviser or accountant recommend you to only one person and say it has to be through them you're probably going to be ripped off.
That sounds more reasonable...Rolling over funds from one Super account to another shouldn't attract CGT.
Anyway, the intent of the thread was to provoke discussion rather than raise specific questions. Ironically, most of the discussion relevant to this issue is taking place in the Politics thread by people who don't know about SMSFs nor how they appear to be distorting the [inner city] property markets.
Thanks Soulnet - some great advice there. I was not aware about CGT on rollovers.
Though I am curious why you and Mrs Soulnet wouldn't do this when you seem better placed than 99.99% of the population to do so.
I think of it like car maintenance. Everyone can do a little bit here and there as a hobby, but when you need some serious work done you leave it to the experts.
So we have our trusts for investments but keep our super simple.
Thanks Soulnet - some great advice there. I was not aware about CGT on rollovers.
I think that's only SMSF to another fund. Capital gains tax is assumed in the unit price IIRC.
How could it be assumed if you could be in a fund for a month or in it for 10 years. Obviously the amount paid would vary based on discounts etc... Same would apply if you sold out of say a aggressive fund and invested into something conservative. This is based on retail and wholesale funds anyway. Industry funds do it an odd way and generally only price monthly or quarterly.
By our dealer group standards (this was law based 3 years ago) we had to include a CGT report for every rollover. In some cases we didn't sell out of a particular fund for this very reason.
Thanks Soulnet - some great advice there. I was not aware about CGT on rollovers.
I think that's only SMSF to another fund. Capital gains tax is assumed in the unit price IIRC.
How could it be assumed if you could be in a fund for a month or in it for 10 years. Obviously the amount paid would vary based on discounts etc... Same would apply if you sold out of say a aggressive fund and invested into something conservative. This is based on retail and wholesale funds anyway. Industry funds do it an odd way and generally only price monthly or quarterly.
By our dealer group standards (this was law based 3 years ago) we had to include a CGT report for every rollover. In some cases we didn't sell out of a particular fund for this very reason.
I was looking at rolling out of a corporate, industry or retail fund and starting up an SMSF.
Assets are held in a homogeneous glob. It looks to me as if you're taking the money out of some other investment vehicle where the assets are held in a discrete fashion.
While the topic is hot…could you knock down your house and build 2 townhouses. Live in ine and negatively gear the other as your SMSF, rather than selling it off to the highest bidder? If so, would you be looking to over or under pay for the SMSF property?