SMSF Strategies

[Adventure Always]

Hi Guys

A SMSF cannot incur debt in any way, shape or form

This is why SMSF's cannot invest in an installment warrant as this is a debt facility, unlike an endowment warrant which is a contractural obligation.

CFD's are a contractural obligation and a SMSF can use these instruments, providing they lodge cash with the provider and do not lodge assets as security - this is seen as allowing someone to take a charge over the assets of a Superannuation fund which is definitely against the law.

Have a great day

Pete

 

[YELNATS]

Hi Guys

A SMSF cannot incur debt in any way, shape or form

This is why SMSF's cannot invest in an installment warrant as this is a debt facility, .......

Pete

Hello Pete,

I run my own SMSF and have been investigating a facility called Quantum Warrants which are available both for property and equity investments. Here's part of of what they say on their website www.quantumwarrants.com.au:

Quote:
About Quantum Portfolio Warrants
A Quantum Portfolio Warrant is a structure that allows you to buy a portfolio of shares or managed funds using your equity and borrowed funds. A Quantum Portfolio Warrant is an instalment warrant. You make an upfront equity payment and then the final payment (loan) to take possession of the underlying investments.

The instalments allow you to gain exposure to the shares or managed funds by making a part payment upfront and delaying a final payment until a later date.

This allows you to buy the shares or managed funds for a fraction of the current price, while receiving the benefits of any capital growth, dividend returns and tax deductions

Key Features
• Ability to increase the pool of investable funds within your superannuation fund
• Ability to increase diversification within your superannuation fund
• Access to the benefits of dividends, franking and tax deferred distributions on the total investment amount without your superannuation fund having to contribute the total investment amount
• Potential to use excess franking and interest deductions to offset contributions and earnings taxes within your superannuation fund
• Extensive choice of Approved Securities including shares and managed funds
• Ability to trade Approved Securities
• Flexible payment options including interest
• Ability to create a "self funding" position such that expected dividends exceed interest expense, leaving the excess available to reduce your debt
• Competitive interest rates and low facility fees
• Simple application process without credit checks in most cases
• Consolidated reporting (with online access) on all transactions, investment holdings, obligations, dividends, distributions and interest
Unquote

Can you comment on this, as like you I understood that SMSF's couldn't borrow, but this company indicates that SMSF's can participate in instalment warrants.

Look forward to your comment. Many thanks, regards YN

 

[CompareSMSF]

Interesting article from the Bulletin re: SMSF's borrowing.

DIY funds await green light

 

[fourth]

A SMSF cannot incur debt in any way, shape or form

Can't you just set up a company structure that does the business, then buy shares equal to 100% of the value of the super fund. Then just do whatever the hell you want inside the company?

 

[reece55]

Can't you just set up a company structure that does the business, then buy shares equal to 100% of the value of the super fund. Then just do whatever the hell you want inside the company?

Short answer is no, because the income from the Company would be special income to the Super Fund and taxed at 46.5%.......

If it doesn't work directly in a super fund, then you have no chance of making the super fund investing in a structure that does the same thing....... Otherwise wouldn't we all invest in unit trust that lent money to people????? HAHAHAHA....

Cheers

 

[Junior]

Hi Guys

A SMSF cannot incur debt in any way, shape or form

This is why SMSF's cannot invest in an installment warrant as this is a debt facility, unlike an endowment warrant which is a contractural obligation.

CFD's are a contractural obligation and a SMSF can use these instruments, providing they lodge cash with the provider and do not lodge assets as security - this is seen as allowing someone to take a charge over the assets of a Superannuation fund which is definitely against the law.

Have a great day

Pete

This is incorrect.

For example you can purchase 'Self Funding Installments' which are a geared product. This is allowed because the way they are structured means that you cannot end up in a situation where you have negative equity.

 

[Boggo]

A SMSF can invest in instalment warrants.

http://ato.gov.au/taxprofessionals/content.asp?doc=/content/00102389.htm

http://assistant.treasurer.gov.au/pcd/content/pressreleases/2006/078.asp

 

[awg]

Hi,
I am just now setting up my SMSF, after 3 years with a planner led Wrap fund.

I researched the alternatives, and have found a Melbourne base organisation,
Esuper, that will set up SMSF free and charge only $599pa, for all audit and financials.

There is a one off $590 to set up the Corporate Trustee and $499 to setup the Pension.

A Commsec account is established and as many trades as one wishes can be carried out.

I have become dissatisfied with the fees and lack of aggressive advice from the planner. My balance is over $1m.

my Wrap was setup with managed funds, over the last couple of years I have been reallocating into direct shares, mainly Resources and Financials.

Because I recieve a Pension, the Managed funds do not distribute the Franking credits to me, as effectively as they would in direct shares.

I have had to learn everything myself, my advisor never rings me, I ring him and instruct to buy certain shares. He is not permitted to give me any advice on shares.

My ongoing strategy is to virtually eliminate managed funds, to hold 20 to 30 shares, to utilise these newer ETF's to gain International and ASX 200 market tracking exposure,and maintain my ongoing education regarding stockpicking.

I expect to pocket extra, no risk, about $15,000 pa, by greatly reducing MERs, buy/sell spreads, Accountant Audit fees, and Financial planners fees.

Does anyone have any comments regarding the new style ETF's..for example iSHARES, recently introduced, especially regarding liquidity, MER and any risks/downsides associated with their use.

regards tony

 

[Boggo]

Tony

I am not familiar with these etf's etc but I would strongly recommend that you have a look at StockDoctor.

It narrows the playing field down in your favour.

For investment stocks I believe it is essential.

Ask around, my

Mike

 

[Julia]

There is a one off $590 to set up the Corporate Trustee and $499 to setup the Pension.

regards tony

Hello Tony,

What does the Corporate Trustee do? Are you planning to set up the SMSF as a company?

I've had a SMSF for several years and have never heard of a Corporate Trustee.

There are several ASF members who have used E-super and hopefully some of them will let you know if they are happy. I know from one of them that they registered the Fund for GST which apparently delivered them (E-super) some advantage.

Sorry, no experience with ETF's. I use all Australian direct shares.

 

[awg]

Corporate Trustee

The Corporate Trustee structure:

1) allows a single member to be in control without the need for another trustee

2) In the event of adding other family members in the future, it is easier to do this for several reasons

3) My accountant strongly advised the Corporate trustee structure,
it is allegedly better for Estate planning, and future administration.

I was somewhat sceptical, cause it costs the extra $590 setup + $45 pa ASIC fee, but as he strongly advised I felt best to take his advice, even though I decided not to use his services for the SMSF, due to higher cost.

The ESUPERFUND uses software to automatically audit the share transactions, that is why it is so much cheaper. The accountants are supposed to manually check each share transaction, dividends etc.

The Esuper people told me one of their clients did over 2000 share transactions within his SMSF...same audit price $599.

 

[YELNATS]

I feel more in control now I'm managing my own super. The only drawbacks are the auditing fees (money for accountants) and every few years the trust deed has to be rewritten (money for lawyers).

Hi Fraxinus, I've been running my own SMSF for about 6 years now.

In addition, I also still have a retail super fund. Since 01-01-2007, I am +19% with my SMSF and only +6% with my retail fund. In the prior 2 years, it was much the same result. It says a lot about the impact of fees in retail funds I think.

I pay about $1000 pa for my accountant to prepare the financial statements and annual tax return for my SMSF. I have no problem with this, as I think the fee accurately reflects the amount of work the accountant needs to do to put all the results together.

However, I've haven't heard anything about the SMSF trust deed needing to be rewritten every few years involving lawyers. For what reason(s)? My SMSF Trust Deed was set up by my accountant with my collobaration. ie. lawyers were not required, and I see no reason to change/update it. Can you please elaborate on this aspect?

Best wishes with your SMSF, you seem to be on the right track with it.
Many thanks.

 

[yonnie]

YELNATS,

the trust deed will be outdated quickly if you want to go beyond trading shares.

you will have to keep an eye on your trading strategy for your SMSF as a lot has changed since 6 years ago.

if you want to trade cfd`s, warrants, options etc, you will have to change your SMSF`s trading strategy to include those derivatives.

so your trading got to reflect the SMSF trust deed, otherwise it will be called non-compliant and you will be in a lot of trouble.

 

[macca]

There are companies that specialise in updating all the rules, your accountant should know of them.

I got a letter from my accountant in April saying time to check and update SMSF company paperwork, cost me $99.00 payable to Thrifty Corporate services.

HTH

 

[Julia]

There are companies that specialise in updating all the rules, your accountant should know of them.

I got a letter from my accountant in April saying time to check and update SMSF company paperwork, cost me $99.00 payable to Thrifty Corporate services.

HTH

And what did you get for your $99.00, Macca?
What differences were made and did you feel they were all necessary/relevant?

I'm not suggesting this is the case here, but I imagine there would be the odd organisation out there quick to make a buck through offering a service which will capitalise on someone's anxiety not to offend the ATO.

 

[hangseng]

Hi,
I am just now setting up my SMSF, after 3 years with a planner led Wrap fund.

I researched the alternatives, and have found a Melbourne base organisation,
Esuper, that will set up SMSF free and charge only $599pa, for all audit and financials.

There is a one off $590 to set up the Corporate Trustee and $499 to setup the Pension.

A Commsec account is established and as many trades as one wishes can be carried out.

I have become dissatisfied with the fees and lack of aggressive advice from the planner. My balance is over $1m.

my Wrap was setup with managed funds, over the last couple of years I have been reallocating into direct shares, mainly Resources and Financials.

Because I recieve a Pension, the Managed funds do not distribute the Franking credits to me, as effectively as they would in direct shares.

I have had to learn everything myself, my advisor never rings me, I ring him and instruct to buy certain shares. He is not permitted to give me any advice on shares.

My ongoing strategy is to virtually eliminate managed funds, to hold 20 to 30 shares, to utilise these newer ETF's to gain International and ASX 200 market tracking exposure,and maintain my ongoing education regarding stockpicking.

I expect to pocket extra, no risk, about $15,000 pa, by greatly reducing MERs, buy/sell spreads, Accountant Audit fees, and Financial planners fees.

Does anyone have any comments regarding the new style ETF's..for example iSHARES, recently introduced, especially regarding liquidity, MER and any risks/downsides associated with their use.

regards tony

I take it this is what you are referring to?
http://www.esuperfund.com.au/index.aspx

I have been looking to SMSF for some time as after analysing what the fund managers take and the performance of the funds I have. I would have been far beter off trading in direct shares myself, i.e. I have by far outperformed my super funds % performance over the last 5 yrs and they are both only in Aust shares. When I saw what they poured into the units on the 23/7 last year when I was busy getting out of the market, I was quite staggered that I could see what was coming but professionals couldn't or if they did were tied to "policy' to re-invest. I would have expected at least they wouldn't have placed such a large amount into the market at that time. Waiting 3-4 weeks would have made a huge difference to what I have now in super. At least they are seemingly holding back at present with the cash account loading up again ready to place into the market.

Also found a litle something that has me angry at myself. The fund managers seems to retain funds that outperfom the all ords index. I am yet to confirm but if it is fact then it would explain why my collective super has only just performed near the index before fees in the last 5 yrs, after fees I am behind the index. I have ben so caught up in trading shares directly that I wrongly left the funds to there own devices.

Esuperfund seems excellent with low fees and I am in complete control. Just wondering if anyone has feedback after using them over time?

Either way SMSF here I come.

 

[xyzedarteerf]

I take it this is what you are referring to?
http://www.esuperfund.com.au/index.aspx

Either way SMSF here I come.

i say do it ASAP before the fed govt start regulating SMSF more and more as i cant imagine half the working population pulling out there super funds and doing it on there own, which for me is a far better option than just watching your super go up and down with no control.

 

[danhoff]

hello gentleman and ladies... this is my first post

for year after year I got confused why my retail super funds always UNDERDID the market by 5%; four years ago I told my super managers to put all my money into the 'aggressive' managed funds; well the stock market grew 20% a year and my fund grew 14%; in fact, I had three retail funds... AMP, State Super, and Spectrum. And I was amazed how a monkey throwing darts at the ASX200 could out perform fund managers.

in Nov, the funds that I could control, I had all the money moved into 'capital stable' funds, but I did also set up an esuper fund. I have no idea what one writer says about esuper doing something with GST to their advantage.

I can only tell you since Nov I have increased my portfolio about 10% (with the monies I transferred to my SMSF) whereas the monies I left with AMP (about $43,000 simply crashed down to $35,000); and I invested in such dodgy shares as ANZ, ERA, BHP, ZFX, UGL, CWN, PAG. So, I have no idea what the heck these BMW, MERCEDES driving fund 'managers' are doing - other than losing my money and collecting fees for doing worse than the aforementioned monkey throwing darts at the share list showing in the daily newspaper

re esuper, I am sad I must trade on comsec at $29 fees, not the $19 - I am not allowed to use a CommBank account (which gives lower fees) I am required to use a Macquarie account and a Commsec account the report directly to esuper - in fact, I am a 'third party' on my own account, but they say they do that so that they can do your returns each year for $600

that leads me to two questions you all may be able to answer me

1) since my wife spends hours and hours daily monitoring and managing our SMSF, can I pay her a FEE from the SMSF for her work; I am not doing anything dodgy, but I would think since some idiot losing my money gets fees, I should be able to pay my 'stay at home' fund manager a small stipend... is there any guidance there from you all

2) just tonight after a few wines, I thought (from a tax and fee advantage) it would be most useful to buy shares personally and TRANSFER them to my SMSF; is there any problem with that... it sort of goes like this

I KNOW ANZ is great value at just a tick over $20; so why dont I just buy them personally, and if they go up... great... I sell and pocket profit. If they go down, since I KNOW they are great value, I sell them to my SMSF (at the daily rate via share transfer)... in this way I get a nice tax deduction for the capital loss and my SMSF has a quality share at a great price. It seems WIN WIN to me.

Comments?

Thanks all, I enjoy your down to earth words.

 

[Dezza]

Welcome Danhoff and congrats on boosting your SMSF.

I'm no Accountant, so please double check with your tax adviser before doing anything. However, to my understanding, if you pay your wife a fee, she will then have to declare that as an income and pay tax at her marginal tax (unless operating under a business name).

As for transferring shares, you can make in-species transfers from your personal name to the SMSF, however, there are CGT implications upon the transfer of ownership as with most cases. So before completing any transfer, be sure to check with your Accountant.

As for the CommSec brokerage fees, Colonial First State have a SMSF Admin product called YourChoice, which will administer your SMSF. Allows you to hold property / shares / managed funds, and does not require a Macquarie Account for trading. Therefore, you should be able to use your CBA CDIA account and trade at a lower cost. More info can be found at www.colonialfirststate.com.au.

However, please do your own research. The above is just my input / personal opinion.
Cheers and have a good night.

 

[reece55]

1) since my wife spends hours and hours daily monitoring and managing our SMSF, can I pay her a FEE from the SMSF for her work; I am not doing anything dodgy, but I would think since some idiot losing my money gets fees, I should be able to pay my 'stay at home' fund manager a small stipend... is there any guidance there from you all

2) just tonight after a few wines, I thought (from a tax and fee advantage) it would be most useful to buy shares personally and TRANSFER them to my SMSF; is there any problem with that... it sort of goes like this

Is your wife a trustee of the fund? Because if she is, the answer is definitely no. Personally, regardless of that fact, I would probably avoid doing it, the other questions would be is she qualified to do the work, is the transaction at arms length as she's a related party - all big no no's in super land...

You can certainly transfer or even make the fund buy the shares with cash if you like, listed securities are one of the 4 exemptions from the related party rules. However, if you only transferred the shares for a tax advantage and generated the loss to reduce other gains, the strict answer is that you shouldn't do this. The ATO have been pretty heavy in the media stating that they are looking at wash sale type transactions and if the only reason for the sale/transfer is for tax purposes, then they are likely to have an issue with it. In saying all this however, I think it will be very difficult for the ATO to monitor.

As usual, the above does not represent financial advice, when it comes to super, ALWAYS double check with your accountant...

Cheers