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Re: elf managed super fund threshold

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I'm new

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i would like to use my super to invest in property as a self managed super fund. My broker is threshold of 500K. Is this true?

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Hi @Kayzee5

 

There is information on the ASIC website re: SMSF which mentions the $500,000 in cost-effectiveness of these kind of super funds, in relation to APRA regulated super funds. However, the amount of money to invest may not be the only factor in coming to a decision to invest via a SMSF.

 

Please consider this ATO Community thread re: SMSF for more advice in this matter (this reply has been 'ATO-certified').

 

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Devotee

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SMSF

The ideal amount & ATO Guide for setting up new SMSF is $200K, However the annual Concessional Contribution cap is $25k per year
(If you go to accountant or Financial planners to set up, under compliance regime they are required to prepare StatementsOf Advise which will cost between 600 to 1000, depending on the size & popularity of the firm)

However if you want to set up DIY then you can, DIY & no SOA required and will cost between $1000 to $2000 depending on Structure

SMSF has mainly 2 types of structure
1. Individual Trustees ( each member of the fund also is a trustee of the fund)
2. Corporate trustees (Company is a trustee, ideally this company should be non-trading company) & each member is a director of the company
Structure 2 is ideally a better structure & ATO also recommends this structure

Management cost
Accounting & Tax Annually $1000 to 2000 depending on how complex investments
Audit $600 to 1000 depending on how complex investments
ATO levy $300

Investing in SMSF
You can invest in
Property (Usually you can borrow up to 70% of security value, so the fund will need to provide 30% Deposit + Stampduty + Legal & purchase cost + Bank fees & settlement costs + 5 to 10% cash balances as a residual balance post settlement)
Shares (The fund can also takeout a Margin Loan, However great caution is required, given trustees are responsible for investment decision & can erode the balances very quickly on any wrong decision)
Artefacts Collectibles (Can’t display them in your home or office) have to put them in secure storage facility or locker

SMSF also can borrow under LRBA External Lender (Limited recourse Borrowing Arrangement) which means in the event of default the lender can only repo the under lying asset which is mortgaged and can not touch any other asset held by SMSF (However in all cases the lenders will get the personal guarantee of directors & or members on the SMSF loan, so as an individual member you will still be liable & the bank can recourse your personal property or asset to recover their loan, so not off the hook)
LRBA Internal Lender (Related Party LRBA with arms length transaction)Advisable under safe harbour provisions only to avoid NALI treatment

Insurance in Super
As a trustee you are required to review insurance requirements of each member on annual basis, you can buy following insurances from super for the members
LIFE (Premium is tax deductible inside super & non tax deductible outside super)
TPD (Premium is tax deductibile inside super & non tax deductible outside super)
INCOME PROTECTION (Premium is tax deductibile inside super & tax deductible outside super, However upon claim there are two layers of approval inside super, first insurer would pass the claim & then trustees have to make sure the member has met condition of release under SIS act, if condition of release not met the payout will be considered as contribution & all Tax provisions apply)

SMSFs are a Financial Product if used wisely has great advantages particularly for SMEs Such as

Retirement planning
Wealth Creation
Tax Planning
Insurance & risk protection
Estate Planning
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Most helpful response

Community Support

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Hi @Kayzee5

 

There is information on the ASIC website re: SMSF which mentions the $500,000 in cost-effectiveness of these kind of super funds, in relation to APRA regulated super funds. However, the amount of money to invest may not be the only factor in coming to a decision to invest via a SMSF.

 

Please consider this ATO Community thread re: SMSF for more advice in this matter (this reply has been 'ATO-certified').

 

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Devotee

Replies 0

My personal view is that ASIC's $500k threshold is too high and $200k is closer to the mark. I say this because many retail or industry funds charge 1% (or more) in fees, so a $500k balance assumes that you will incur costs of $5k in managing your SMSF - this is excessive in my view and many SMSF's can be managed for give or take $2k per annum.

 

However, cost is just one factor and a SMSF isn't for everyone. It is highly regulated and small slip ups can result in large fines that will make you wish you never set one up.