# Setting up an SMSF fund



## Fab (14 October 2007)

Hi,

I am wondering what is envolved in setting up an SMSF fund for my wife and myself. I understand we can have both account into 1 SMSF fund.
We have each about $45 000 in our current MTAA account.

Also once this is setup where can we get the best death and permanent disabily insurance. MTAA currently offers about $120 000 worth of benefit for $1.20 per week which is quite cheap.

I like the idea to have control over my fund and believe I can generate a better return than the 20% currently generated by my fund


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## BradK (14 October 2007)

*Re: Seting up an SMSF fund*



Fab said:


> I like the idea to have control over my fund and believe I can generate a better return than the 20% currently generated by my fund




Not if you keep buying PDN my friend


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## Fab (14 October 2007)

*Re: Seting up an SMSF fund*



BradK said:


> Not if you keep buying PDN my friend




Indeed but then it depends when you bought PDN. I bought them when they were $2.45 so I will loose on them anytime soon.
Also I bought a fair bit of SDL @ 0.13 cents . It would have been nice having that in an SMSF


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## billv (5 March 2009)

Fab

Have you ended up starting up a SMSF?


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## Julia (5 March 2009)

Billy, I've just tried to reply to your PM but have been advised "Billy has chosen not to receive PM's."
Not sure why you'd ask a question and then not want the answer.


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## billv (5 March 2009)

Sorry Julia
There was a problem with my registration.
It's fixed so you can reply now.


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## ROE (6 March 2009)

Fab said:


> Hi,
> 
> I like the idea to have control over my fund and believe I can generate a better return than the 20% currently generated by my fund




That is an outstanding return if you can do it year after year, only a handful of people on the planet can consistently do that 

don't be fool by randomness thinking you can get better than 20% 
you may end up with -20% .


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## billv (6 March 2009)

ROE said:


> don't be fool by randomness thinking you can get better than 20%
> you may end up with -20% .




Good point, the only reason I started my SMSF is to be able to buy properties in a capital gains tax free environment. In fact it doesn't make sense buying anything other than our PPOR outside super.


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## nulla nulla (9 March 2009)

If you want to spend the rest of your life collating documentation to comply with regulations for the reporting side of self managed superannuation funds and incur the cost of independent accountants/audits go for it. Otherwise a good industry managed superfund can save you thousands of dollars, thousands of hours and plenty of headaches.


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## waza1960 (9 March 2009)

Can't agree Nulla Nulla I have had smsf since 2001 and i have never regretted it .I only spend about 2 days per year on paper work and my accountant charges around $900/year to audit our fund which has four family members


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## Duckman#72 (9 March 2009)

waza1960 said:


> Can't agree Nulla Nulla I have had smsf since 2001 and i have never regretted it .I only spend about 2 days per year on paper work and my accountant charges around $900/year to audit our fund which has four family members




Hey Waza

Quick question. Is that $900 just for the audit or does the accountant perform both both audit and accounting duties for that fee? In other words - who prepares and lodges your ITR?

Speaking of industry funds Nulla Nulla - Alan Kohler wrote a very good article the other day advising anyone who is in an industry fund to ......"get out now". That is a direct quote. His argument being that over the next couple of months industry funds are going to have large sections of their property and infrastructure investments revalued.  And revalued downwards in a BIG way. Industry funds don't comply with the accounting regulations of other commercial funds(in the way the average Joe knows it) and "smoothing" of super returns takes place. In the good years, they hold money in reserves and don't hand it all back and then hold on and "add it in" during the bad years. Well according to Kohler if you transfer into a Cash portfolio within your industry fund you could be saving 10-15%.

Duckman  


Duckman


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## Prospector (9 March 2009)

We moved into an SMSF over 10 years ago and have not regretted it for an instant.  Once you know the limitations on investments, and they are actually quite logical, then the ability to absolutely control where your best investments lie is a great feeling.  And any mistakes that are made are yours, not some highly paid investment person to whom you are just a number.  No-one pays more attention to your financial needs than yourself!


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## Julia (9 March 2009)

billv said:


> Good point, the only reason I started my SMSF is to be able to buy properties in a capital gains tax free environment. In fact it doesn't make sense buying anything other than our PPOR outside super.



So presumably you are in pension phase if you're not paying any CGT?



Prospector said:


> We moved into an SMSF over 10 years ago and have not regretted it for an instant.  Once you know the limitations on investments, and they are actually quite logical, then the ability to absolutely control where your best investments lie is a great feeling.  And any mistakes that are made are yours, not some highly paid investment person to whom you are just a number.  No-one pays more attention to your financial needs than yourself!



Couldn't agree more, Prospector.   I've found it really easy to manage, no difficulties at all other than a shonky accountant who is now well and truly history and will soon be facing a disciplinary hearing from CPA Australia.
The record keeping is no problem and any restrictions are far from onerous.
I would never go back to letting anyone else manage any part of my financial situation.

Duckman, I heard Alan Kohler's remarks too.   I guess in opposition someone disagreeing could say that to move to cash now is to crystallise losses.
Sounds as though there are going to be losses whichever way an industry fund investor goes.


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## billv (9 March 2009)

Julia said:


> So presumably you are in pension phase if you're not paying any CGT?



No I am not in pension phase but I don't intend to sell for at least another 10 years so by that time I'll be able to switch to a transition to retirement plan


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## DB008 (10 March 2009)

Just a question relating to brokerage on SMSF's.

If the Goverment wanted to make your returns better, than why not make it so that the brokerage they charge SMSF same as what most big super funds pay.
I very, very much doubt that _ _ _ _ _ _ _  ( <- insert big super fund name here, eg;MTAA) would be paying $30 brokerage on a 10k trade (if hypothetically they did a trade that small).
So, why aren't SMSF's given an exception to brokerage by the ASX to trade with less cost? Instead of varying amounts of brokerage charged by the many trading houses in Oz, why not standardise brokerage for SMSF's?


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## wonderrman (10 March 2009)

DB008 said:


> Just a question relating to brokerage on SMSF's.
> 
> If the Goverment wanted to make your returns better, than why not make it so that the brokerage they charge SMSF same as what most big super funds pay.
> I very, very much doubt that _ _ _ _ _ _ _  ( <- insert big super fund name here, eg;MTAA) would be paying $30 brokerage on a 10k trade (if hypothetically they did a trade that small).
> So, why aren't SMSF's given an exception to brokerage by the ASX to trade with less cost? Instead of varying amounts of brokerage charged by the many trading houses in Oz, why not standardise brokerage for SMSF's?




Because big superfunds purchase a lot more then 10k when they trade. More like 10m. Just like institutions, they buy more so they pay less. Thats the way it works. You can't expect brokerage's to charge you $5 or $10 for a trade worth 10k. If you want cheap prices use Interactive Brokers.


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## trading_rookie (10 March 2009)

> Good point, the only reason I started my SMSF is to be able to buy properties in a capital gains tax free environment. In fact it doesn't make sense buying anything other than our PPOR outside super.
> 
> No I am not in pension phase but I don't intend to sell for at least another 10 years so by that time I'll be able to switch to a transition to retirement plan




I see now why the Super Industry wants ppl to complete a test before allowing them to start up their own SMSF.

If your investment property owned by your SMSF makes a capital gain every year for the next 10 years your SMSF will be expected to pay the ATO 15% tax for every one of those years. I'm pretty sure the rent you receive is also taxed at 15% - that's the incentive of super, flat tax of 15% as opposed to what tax bracket you fall into.

This is no different to the industry or retail funds - we're all paying 15% tax on any gain our super makes.


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## billv (10 March 2009)

trading_rookie said:


> I see now why the Super Industry wants ppl to complete a test before allowing them to start up their own SMSF.
> 
> If your investment property owned by your SMSF makes a capital gain every year for the next 10 years your SMSF will be expected to pay the ATO 15% tax for every one of those years. I'm pretty sure the rent you receive is also taxed at 15%.




You only pay tax on capital gains if you sell early and only of you are under 60yo. 
The rent and monthly contributions are taxed @ 15% but these will be offset by the property depreciation amount 
and you could also use tax credits from shares to lower your tax further


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## Wysiwyg (10 March 2009)

trading_rookie said:


> If your investment property owned by your SMSF makes a capital gain every year for the next 10 years your SMSF will be expected to pay the ATO 15% tax for every one of those years.



You obviously misunderstand how a capital gain is taxed (on disposal of the asset) 



> I see now why the Super Industry wants ppl to complete a test before allowing them to start up their own SMSF.


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## Julia (10 March 2009)

trading_rookie said:


> I see now why the Super Industry wants ppl to complete a test before allowing them to start up their own SMSF.
> 
> If your investment property owned by your SMSF makes a capital gain every year for the next 10 years your SMSF will be expected to pay the ATO 15% tax for every one of those years



That doesn't sound right to me.  I haven't looked into this because I don't own property in my SF but why would CGT be treated like this within a SMSF when it isn't in the ordinary sense?

Can you provide a link showing the application of CGT in the way you describe?


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## trading_rookie (10 March 2009)

> You obviously misunderstand how a capital gain is taxed (on disposal of the asset)




I mustn't ;-) … I was under the impression that managed funds like industry superfunds for example with large commercial property, value their assets every year and any CGT from those assets is taxed at 15%. That’s how I’ve read it anyway.


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## trading_rookie (10 March 2009)

mods please delete this post - as previous post could now be edited


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## Prospector (11 March 2009)

trading_rookie said:


> I see now why the Super Industry wants ppl to complete a test before allowing them to start up their own SMSF.
> 
> If your investment property owned by your SMSF makes a capital gain every year for the next 10 years your SMSF will be expected to pay the ATO 15% tax for every one of those years.




NO, you dont pay capital gains tax until you sell; you do pay tax on the overall increase in value of the whole porfolio though.  If it is in the pension phase then no tax at all even when selling.  I know because we held some land for a few years in an SMSF and then sold.  The property value has to be re-assessed every three years in a super fund for this purpose.


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## DB008 (11 March 2009)

To wonderrman.
 The brokers are charged by the ASX certain prices for putting an order through, eg $10 per abc... lot and the rest is just profit. I've seen brokerage range from $15 - Bell Direct upto $100 - Mac Bank.
I'm saying that the GOV should step in and force the ASX to lower brokerage for SMSF's. That's all. Give the SMSF a fair go.


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## Boggo (11 March 2009)

DB008 said:


> I'm saying that the GOV should step in and force the ASX to lower brokerage for SMSF's. That's all. Give the SMSF a fair go.




I have a couple of friends who are in the financial planning industry and based on what they are are hinting at then just the opposite is more likely to happen.

The FP industry is not happy with the rise and apparent success of of SMSF's and are lobbying certain areas of the regulators (and are getting a sympathetic ear in some quarters) to make setting up and compliance more difficult.
The ability of SMSF's enter and exit ETF's (many more on the way) with ease and just brokerage fees and minimum MER's are touching a few sensitive nerve endings apparently.

Their ideal world would be all SMSF's have to be overseen by FP's with PS146 etc qualifications... scary.


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## Prospector (11 March 2009)

Boggo said:


> Their ideal world would be all SMSF's have to be overseen by FP's with PS146 etc qualifications... scary.




That would suck, big time!  Except my Accountant is a licensed Financial Planner anyway, and he knows not to advise me UNLESS I ask for it!


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## sails (11 March 2009)

Boggo said:


> I have a couple of friends who are in the financial planning industry and based on what they are are hinting at then just the opposite is more likely to happen.
> 
> The FP industry is not happy with the rise and apparent success of of SMSF's and are lobbying certain areas of the regulators (and are getting a sympathetic ear in some quarters) to make setting up and compliance more difficult.
> The ability of SMSF's enter and exit ETF's (many more on the way) with ease and just brokerage fees and minimum MER's are touching a few sensitive nerve endings apparently.
> ...




So they've lost a big hunk of the funds they had under management, now they want to get their greasy mits on more OPM to put under their dubious care.

Does anyone know if there are SMSF associations where the masses with their own super funds could pull together to petition or lobby against these potential changes and charges?

I have found this link:  http://www.moneymanagement.com.au/Article/New-association-launched-for-SMSF-trustees/222042.aspx -  Self-Managed Superannuation Members Association (SMSA) in Sydney.  Looks like they have only just launched it.  Can't find a website on them either with a quick google search.  Anyone know about them?


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## Boggo (11 March 2009)

I subscribe to the free ATO SMSF newsletter, it keeps you informed of basic changes *after* they have been implemented.
The issue below is interesting.

http://www.ato.gov.au/superfunds/co...35/008/001/002&mnu=46092&mfp=001/149&st=&cy=1

There is a review of the current tax system happening at the moment and they are inviting public submissions.
It would be a good time to have a SMSF representative organisation to be the voice and use these opportunities to make submissions (if required) on behalf of the largest superannuation sector.
http://taxreview.treasury.gov.au/content/Content.aspx?doc=html/submissions.htm


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## sails (11 March 2009)

Boggo said:


> I subscribe to the free ATO SMSF newsletter, it keeps you informed of basic changes *after* they have been implemented.
> The issue below is interesting.
> 
> http://www.ato.gov.au/superfunds/co...35/008/001/002&mnu=46092&mfp=001/149&st=&cy=1




Thanks for the link - looks a useful publication.  With so many SMSFs, surely we would have to have some clout...


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## Julia (11 March 2009)

Ditto Sails' comment from me, Boggo.  Really useful link. 

Prospector, re your comment that if 'FP Supervision' is required it will be no problem because your accountant also has the FP qualifications, mine does also, but if they were required to provide some sort of regular report, then we can't expect them not to charge us for that, I guess.

So I would very, very annoyed if this did become regulation.   I reckon many of us with SMSF's know more than some FP's about the regulations and obligations anyway.


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## Prospector (11 March 2009)

Julia said:


> but if they were required to provide some sort of regular report, then we can't expect them not to charge us for that, I guess.



   Hopefully he can develop a proforma report that you just need to fill in the blanks for the name etc.  Seriously, after the shocker of a year that 'the experts' have had, how can financial planners even think they have a right to get onto this!


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## tul1 (30 July 2009)

*Self Managed Super Funds*

Hi all
Can someone share tips, or let me know where should I start in investigating this Subject? Cons \ Probs?
My husbend and I leavein Aus for about 1 year, in our 30th, both working.

Many thanks


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