Home – New Forums Money matters Why Self-Managed Super is Better?

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  • #991371
    IrinaHollander
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    There are plenty of advantages of managing your own super in general. This would explain the exponential increase in the numbers the SMSFs have experienced since 1994. (According to the Australian Prudential Regulation Authority and ATO statistics to March 31, 2014, there are 528,700 SMSFs with $558 billion in assets).

    Below are the main 5 advantages:

    1) SMSFs are multi-generational and last forever, so passing of retirement wealth and estate assets from generation to generation is possible.

    2) Better super changes in 2007 have brought in the deductibility to the fund of death, permanent and temporary disability insurance premiums paid by the Fund in respect of its members. As per Swiss Re Economic Research & Consulting, 2007, Australia is one of the most underinsured nations in the developed world ranking 16th for life insurance.

    3) Choice of investments. This is a key driver to establish a SMSF.
    The borrowing restrictions for SMSFs have been partially lifted. The funds are now permitted to borrow for strictly investment purposes. Should your SMSF consider an investment in real property, there are a couple of options available to suit your personal circumstances.

    4) Simplicity of implementation of tax minimisation strategies involving superannuation. There is no bureaucratic, time consuming barrier of a large and slow-moving master or industry fund between you and your SMSF.

    5) Less tax payable from your superannuation savings. Have you ever looked at your super statement to notice that your employer contributions are taxed at 15%, then to see a deduction for account management fees from the remaining balance?
    In contrast to how master and industry funds are taxed, SMSFs are able to deduct any associated expenses out of contribution income before being taxed at 15%. Who is going to be better off long-term?

    Happy to discuss :)

    #1181250
    LucasArthur
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    Hi Irina

    May i be the first to welcome you to the forums :)

    Being a fairly friendly and transparent group, you may benefit from popping across to the intro yourself section so we can learn a little more about your journey, where you are at and how you are currently experiencing the FS world..

    Back to your topic, are you actually providing any information for the benefit of the community or just trying to create a hook and contact point for yourself? Over the little time i have been in the forum, i have seen most people tend to get more out of the forums when they contribute and sharing usable knowledge more so than just using ‘hooks’ as such.

    Look forward to learning more about you.

    Jason

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1181251
    IrinaHollander
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    Hi Jason,
    Thank you for welcoming me :)
    My post was a discussion topic, I had something to say, so I did. I have a special interest in self-managed superannuation and superannuation in general. Decided to post after reading 2015 Intergenerational Report Australia in 2055 at http://www.challengeofchange.gov.au.
    It is alarming how few of us are actually interested in saving for own retirement given the demographic changes we are facing.
    Hope to make a difference at least on a very small scale…
    Have a Happy Easter, Jason, not too many chocolate eggs, hey? :))

    #1181252
    bb1
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    Irina, welcome.

    An interesting topic, and good timing as i just recieved my Super statements and am about to embark on my regular thinking session on what to do with them,

    Just a query on your last point, in the case of Industry super funds the actual administartion fee is low, and as such if it is included or not included really wouldnt make a huge difference, or am I understanding that wrong.

    Also, My understanding is that there is a Break even point (or a point of no benefit i suppose), as which there is really no use in running your own SMSF. I guess my understanding is that with all of the compliance and reporting fee’s, accountants fee’s and whatever else, the benefit of running you own is lost and actually a negative if your funds are below a certain limit. Can you give some guidance on an approximate for this limit, I realise it is a movable number but there is abvoisly an approximate ceiling somewhere.

    One last one that has sprung to mind, you say there is better options for investing in real property, but arent there still very tight guidelines on the property which you can invest in.

    Thanks

    #1181253
    IrinaHollander
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    Hi Bert
    You are right, self-managed super is not going to work for all.
    I have seen superannuations funds started with as little as $50,000, and they went from strength from strength. $50,000 would be the minimum starting balance, I would not recommend setting up a self-managed super fund with less than that...unless:
    1. one is a business owner in need of business premises to operate their business from. In that case, the starting balance can be zero; or
    2. one has access to either physical cash or equity in their existing property outside of super and they are looking to invest in property within their super. In that case, no minimum super balance is necessary either.

    In terms of restrictions in property investments in super, they are not overly burdensome, though it is important to get it right :) You can buy a commercial property, residential property, land & home package, off the plan property as long as residential property is not being purchased form a related party or not being occupied at any time by a related party.

    There are many ways to skin a cat, as they say, and the limited recourse borrowing arrangement provisions (borrowing in super) cater for that.

    From tax point of view, if one is purely intending to invest in a residential property, they should seek out a neutrally or positively geared property, as there is almost no point in negatively gear inside of super.

    I guess the main attraction of investing in property in super is being able to sell it tax-free once you have retired (based on the legislation as it stands now). As the future tax benefit is that great, it is suddenly not that important if the administration costs of managing your own super (accounting and audit fees) are, say, $500 greater a year than the current master/industry fund’s fees where not much is happening in terms of growth.

    A lot has changed in the SMSF administration industry too with the introduction of partial automation of transactions in the accounting software, so it is worthwhile to get a few quotes to see actually how much you would be paying should you set up your SMSF.

    Please let me know if you have any further questions, I am happy to help.

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