How much do I need in Super to start my own SMSF?

How much do I need to set up my own SMSF

and what do I need to know?


 

The Royal Commission has ignited a lot of talk in the media surrounding Self Managed Super Funds raising more questions than answers

We are not financial planners nor sharing financial planning advice merely quoting sources and or using basic logic in what we are sharing with you

 

What we do know is that industry funds (generalised) tend to perform at 5% to 7% per annum over the long term + fees, where in your own SMSF you have a wide choice of investment vehicle and can therefore be more hands on with our own Super destiny

 

NB : It is important to find out what all the fees/costs are being charged to you now wherever your super is being invested. Allows you to compare to what you could be doing and the fees there

 

There are investment platforms out there where there are no minimums, but before you set up your own SMSF you need to realise that there are some upfront costs for setting up the SMSF and also a SMSF requires annual audits which also cost money

 

What this means to you and your super is that once you understand the upfront and the ongoing then work out the minimum you would require in super that not only covers your annual audit / accounting fees but also give you returns in excess of average super funds performance

 

Set up fees could range between $700 and $2,500 depending on complexity and purpose and annual costs for Admin & Audit from around $665 to $1700 for basic SMSF’s and higher for more complex Self-managed funds and some other minor fees

Meaning that the lower the balance the higher the cost as a ratio, thus requiring investments to cover costs and return an ROI you are comfortable with

 

You will have heard a figure of $200k required by ASIC  as a minimum to have your own SMSF, this figure used to be a recommendation and not a legal requirement

If you have an amount you are comfortable with knowing you could achieve the financial return on investment you want then having control and choice over your retirement wealth is imperative to enhancing your retirement goals. This is why there as so many SMSF’s registered with Billions of Dollars under Self Manged Super Funds management

 

You may encounter negativity from your financial advisor and the media (it’s their job) however an advisor is obligated to put your interests ahead of theirs or the conglomerate they represent, your own research and due diligence will allow you to come to an informed decision

 

Once again : the amount you have in super, the rate of return you are getting versus what your research indicates you could get, less upfront and ongoing fees should help you determine what is the correct strategy and investment vehicle for you and your family

 

Other aspects for consideration could include : how best to maximise your wealth in retirement planning, what flexibility do you have and want, the varying investment vehicles available to you giving you a wide array of choice and thus control when comparing where the funds are invested now and what choice, control, flexibility, return on investment and ongoing fees  

If you are unable to do the comparisons and calculations speak to your financial advisor and or your accountant or ask us for a referral to a reputable professional who

can assist you so that you can make your very own informed decision of how you want your monies in Super to be working for you

 

Whilst Planning

Did you know that a major advantage of investing in a property within a SMSF is that you are able to Leverage?

 

What this means to you and other SMSF members is that you can invest only 20% (or more) yet achieve Capital Growth on 100% of the property value + your tenant will help you build wealth by paying rent and depreciation can be deducted against Super contributions further lowering the tax on contributions

 

The numbers which are underpinning an investment in property could return you around 10% to 17% per annum – *depending on the type of dwelling, rent, interest rates, deposit, capital growth etc, we can help you estimate the cash flow

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Brisbane Tipped for Strong Capital Growth

Brisbane & Pockets of South East Qld Tipped to be the strongest Property Market in Australia

“Investing in an area with very high and growing demand improves your opportunity for strong rental yields and capital growth potential we all agree”

Identifying these areas and expanding your investment potential into new geographic locations improve the opportunity of creating and securing more wealth, with online inquiry for property in Brisbane and South East Queensland on the increase … meaning astute investors are investing in locations from where they live

Brisbane is tipped to be the strongest property market in Australia in the next five or six years.

Leading real estate industry figure John McGrath described the Brisbane market as undervalued and predicted it would soon start to catch up to southern powerhouses Sydney and Melbourne.

Mr McGrath, the founder of McGrath Real Estate, was speaking in Brisbane at a function on Wednesday and “very, very confident” in where the property market was right now, particularly in Southeast Queensland.

“We think Southeast Queensland, and Brisbane is a focal point, is going to be one of the strongest markets in Australia.”

 

Click here  for full article and watch Adam Di Marco share words of Wisdom here enabling you to come to your own informed decision on where to focus your own research on

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Sydney too expensive to Invest in? Where should I invest?

Sydney too expensive to Invest in?

Sydney Return on Investment continues to drop, property values exceptionally high & rental yields exceptionally low as a percentage in most sought after locations in Sydney

Investing in Sydney might not make investment sense to you with rental yields fallen way behind the Capital Growth as Sydney peaks in value?

Are you comfortable investing outside of where you live, if so and you merely view the property purely as an investment vehicle – your strategy would be worthy of including Brisbane, South East Queensland or Melbourne in your portfolio. Most of our online inquiries are coming out of Sydney and for QLD property …

Why?

Better value for your Investment Dollar + capital growth potential + Higher Rental Yields mean you get more for your investment in terms of property + yield and thus return on your Investment dollars working hard for you

 

Did you know :  Brisbane needs to accommodate another 1 Million Residents by the year 2031 requiring 30,000 new dwellings per year !

Ignore the Press : Brisbane on the Cusp of a Once-in-a-Generation growth opportunity on the back of massive Infrastructure Investment, new Job creation and a continued strengthening Population Growth where Vacancies are exceptionally low and Rental Yields very strong  read blog here

 

 

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Industry Super Funds continued Poor Performance and ongoing high fees

Buying property in Super

Why set up your own Self Managed Super Fund?

Industry funds dismal long term (lack of) Performance :

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Industry Funds results from 1996 to 2010 :

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  • corporate funds on average provided returns of 5.84% pa
  • industry funds 5.35% pa
  • the public sector funds 6.30% pa
  • and retail funds 3.66% pa

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And … more than 150 of the growth funds tracked by Morningstar have not earned more than 3.5 per cent a year — or 1 per cent above inflation — over the past decade. These funds contain about $16 billion of workers’ retirement savings.

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Thirty-three funds have delivered average investment returns of 5 per cent or more for the past 10 years, including some of the biggest funds.


“Ask yourself how does this help you create sufficient retirement income on your super contributions?”


It is widely known that Industry Super Funds attract ongoing annual fees which are further eating into your own retirement value. What most investors don’t consider is that you pay your Fund Managers every year even in years where your fund goes into negative performance. You are paying for this privilege – why??

  • In your industry fund, not only are you achieving dismal long term performance results on your own retirement funds but if you have $125,000 in your current super, ONLY this $125k is working for you!

Wouldn’t you prefer to take advantage of the power of Leverage; whereby you invest say only 20% of the value of the property and have the bank and a tenant fund 80% of the investment meaning you now have an Asset of over $500,000 working for you in your own SMSF and you only invested around $100k for the privilege


Compounding Returns on Investment

Compounding Returns comprise of Interest being earned on top of Interest for the life of the investment; the longer one invests this higher a compounded return will be … we agree

Based on the above returns of 5% pa, $100,00 invested in your Industry Super account would have grown to $1.54m in 15 years (excluding Industry Super annual fees for this exercise) but if the return was 10% per cent pa, the balance would only be $.51m over this same period

What this means to you is that being in control of your own Super Destiny you could be better off by over $900,000 this time in your own pocket!


“This is serious stuff you would agree!”


What if you set up a SMSF (Self Managed Super Fund) and secured a prudent investment property which generated a return on investment of 10% pa; can you imagine the returns on your investment at a regular 10% pa versus industry averages of a dismal 5% pa?!?  Could equate to over a Million $’s over 15 years more in your own pocket


How will a 10% compounded over 10 years or more positively effect your retirement lifestyle. What will this mean to you?


*This is not rocket science nor financial planning advice; merely using Logic and industry statistics

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Property in a Self Managed Super Fund and Tax Efficiency

Self Managed Super Funds and Investing in Property

Through properT network and our value added services and allied accounting practices & financial planners, you now have access to the complete solution of how to diversify Super Fund monies into Investment Property utilising a SMSF to ensure adequate retirement funds will be available to you. Once again we are not financial planners but work with licensed financial planners or work alongside the Statement of Advice your financial planner has given you.

We will demonstrate : CHOICE of property, CONTROL of making an informed decision, CERTAINTY in knowing the finances and cash flow upfront &  CONTINUITY of holding onto the investment property for as long as it continues to make investment sense to your SMSF and your financial planner

Your financial planner will demonstrate :

  • How you can reduce your Capital Gains Tax to 0%
  • The ability to Diversify your retirement nest egg giving you Choice of where you wish to invest
  • The opportunity to now have a say over your own retirement funds and where they are invested
  • Flexibility of implementing effective Tax Planning Strategies
  • How you can reduce the amount of tax you might pay on other investments down to 15%
  • The ability to pool family assets, to lower overall fees
  • How you can transfer your personal assets into your SMSF
  • The ability of a SMSF to borrow / leverage so that you can purchase an investment property
  • Demonstrate how other members of the fund will continue to receive tax efficient income streams into perpetuity
  • Peace of mind knowing that the structure put in place is managed from beginning to end and that it is legally structured to avoid potential charges a non-compliant SMSF would attract

According to the main stream media ‘most Australians are wanting the ‘chance’ to invest their retirement funds in capital protected investments that will provide an estimated predetermined income yield at the time of retirement.’

Why invest in your SMSF you are asking? (this is not advice)

1.   AMP in their market analysis found that 70% of people now aged 50 – 69 will earn less than $320 per week at retirement!

a.  Can you and your dependents at the time survive and enjoy retirement on $320 per week?

b. We live to work, we work to live … but at retirement can we afford to live when we can’t or don’t want to work?

2.   Using the 9.25% superannuation grant levy, may only provide a quarter of what you need in retirement.

a.  We just don’t realise how much money we will need to come out on a weekly basis. Not enjoy life, just to come out!

3.   BIS Schrapnel show that the required income for a retired couple, who are debt free, would need to be in the order of $43,000 today

a.  Inflation at 3% will turn today’s value of $43,000 into over $85,000 in just 20 years time

b. Will you have accumulated sufficient capital so that you can retire in the lifestyle you are accustomed to and wish to maintain?

4.   We also know that retirement capital after retirement will probably run out far sooner than you want!

a.  What if it does not run the length of your retirement?  – and we are living longer these days.

5.   Having shared all the ‘cup is half full’ doomsday readily available market information with you, we ask you to realise the fact that :

a.  The government is urging you to put more away towards retirement than we currently do

b. The need to start investing in Super far sooner

c.  And most importantly … people like you are saying they need an element of control and choice of how their own money is invested

i. properT and our professional partners we outsource to provide you with an overall solution to accelerate your Retirement Savings

ii. To become tax efficient now and at retirement

1.  Tax Efficiency at retirement will guarantee you more money in your pocket !!

iii. Forces you to save towards your retirement

iv. You can run your SMSF into perpetuity for your beneficiaries

v.  Minimise capital gains taxes, maximise the outcome

6.   Leveraging with borrowings up to around 70% (some banks will lend 80%) in the purchase of your Investment Property

a. Will allow you to achieve Capital Growth on the full purchase value of the property (not just on the deposit you invest). You may be aware that residential property has doubled in value every 7 – 10 years throughout the last 125 years of record keeping in Australia

  • Meaning if you invest as an example $150,000 into a property valued at $500,000. Any capital growth achieved is off the $500,000! 

Another financial bonus your accountant will share with you is that after holding for 10 years in your SMSF, for which there is not one cent of Capital Gains payable if you sell when you retire.

Summarised : The benefits of having a Self Managed Super Fund (or DIY Super Fund) include :

a.  Ability to reduce income tax on investment income and capital gains during accumulation phase and at retirement

b. Increasing your flexibility of investment choice, asset selection and giving you control of where you want to invest your monies

c.  You manage the risk profile of your investments in conjunction with your financial planners advice

d. Managing the income streams at retirement for you and other members of the SMSF

e. You can transfer personal assets (shares, gold, art, property etc) into your SMSF

f.   Pooling assets of up to 4 members (allowed) into the SMSF will save on costs of managing these funds under seperate Super Funds

g.  Logic tells us that ‘The more tax efficient you are able to retire in, the more money in your pocket for retirement and planned choice of Lifestyle’

 

After all “It is your money!”

Once again, we are not financial planners and any information shared with you on our website is freely available online in the public domain and can be ratified by your financial planner and or accountant who can give you financial planning advice

Comments or questions are welcome.

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Self Managed Super Fund’s and Investment Property

SMSF and Investment Property

…what you would want to be aware of!

 

Investment Property in your SMSF

The STATE REVENUE OFFICE has clearly warned trustees of SMSF’s that he will be focusing on SMSF and investment property out of concern that trustees are making ill informed investment decisions on behalf of their SMSF’s!

 

The purpose of this blog is to remind you and enlighten you on the benefits of securing and investment property for your SMSF where the numbers actually stack up. This will mean you will be better off by thousands of dollars at retirement; by making an informed decision based on the underlying fundamentals and numbers underpinning the potential property.

The recent Financial Review article warns investors/trustees about two major issues in SMSF space with regards to investing in property; a most welcome article highlighting the fact that ‘trustees don’t seek advice upfront often leading to poor investment decision making which will attract the attention of the SRO’.

We urge you to take the view that if you are going to make an uninformed decision (which is unfortunately what most tend to do, putting emotion ahead of the financials) then perhaps you have an obligation as Trustee to your SMSF (and the Tax Office)  and thus take advantage of services such as ours prior to looking for your preferred investment property.

 

Does the property you are looking at have the correct Fundamentals in place?

The question is : “Are you giving yourself choice of an alternative solution to potentially make a better more informed and astute investment decision?”

An Investment decision that will benefit you by Thousands of Dollars. This is why more and more accountants, financial planners and mortgage brokers are now introducing their clients to services such as ours.

You will avoid the above pitfalls whilst we save you time, stress and probably money using our professional services, in working with you to help find what we call a ‘best fit’ investment property that matches your goals, investment strategy and overall SMSF and personal objectives.

 Did you know that securing a new property over an existing older one will result in your investment being thousands and thousands of dollars better off over the investment period?

See figures in example below :

SMSF Property

Increase the end value of your retirement by making an Informed Decision upfront

Your Investment  will be better off based on :

 demonstrating the above figures;   providing you with a selection of ‘best fit’ properties + due diligence and market reports on why these properties;   implementing our personal objectives of encouraging our clients to make an informed decision(using our industry knowledge, expertise and due diligence);  and inviting you to undertake your own due diligence on our recommendations.

  … the reality is that our system is deliberately designed to ensure that you will make more astute investment decisions!

  • than if you went to your local estate agent or a financial planner who is trying to flog you a property they have access to; both will tell you exactly what you want to hear so that you put down a 10% deposit and buy that property

 

Ask those in the know how you could maximise your Investment Returns

Our primary role is to explain how the numbers work, provide you with a selection of best fit properties that match your investment objectives, in your preferred locations (across Australia) and work with you so that you as the Trustee of your SMSF  make an informed decision whether that be a no or a yes, to options on the table.

There are other ways to perhaps achieve better results for your SMSF.

We look forward to your questions and feedback

Helping you grow your Retirement Value whilst exceeding your expectations of us. We assure you of our prompt and personal attention now and into the future.

 

Wanting to set up your SMSF?    Free consultationclick here

 

SMSF Property FundamentalsWhy a SMSF, tax advantages and Why an Investment Property…  more

 

Comments or questions are welcome.

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