First published 20/10/2013
It seems no matter how much data is available on the internet or elsewhere the question of investing in property with your SMSF continues to be an area that prompts the most amount of questions and seems to confuse the consumer the most.
SMSF 101
A Self Managed Super Fund is a fund that has a maximum of four members (most are set up between partners and have 2). It is a fund that must meet the requirements of the Superannuation Industry (Supervision) Act 1993 (SISA).
The SMSF landscape has changed so dramatically over the last 2 years. For example, the cost of the Google search words “SMSF Property”. Two years ago, it was bidding at 80c per click and today it trades at $20 odd dollars.
The below graph is the reason that the industry has responded to provide good simple solutions to the set up and management of an SMSF it shows the Google search frequency since 2004 of the search term “SMSF”
AMP have committed to the space in a big way and some more established operators such as esuperfund have been mastering their offering for quite a while. This competition has changed the cost and difficulty of setting up and managing a fund dramatically.
Some issues to consider when thinking of starting an SMSF:
- Pay particular attention to anyone “recommending” one to you. The reason the space is getting filled with providers is so that they can access your retirement saving and be in a better position to invest those dollars.
- Be extremely careful of property sellers suggesting a set up and a purchase of a property. Usually there is a price to pay for this approach in the form of overpriced services of the property itself.
- Remember that you or any related party cannot gain benefit from your super money until retirement. You cannot use it to buy your dream holiday home, pay for your kids’ uni or to fund your business.
- Do not embark on an SMSF journey unless you understand that you are doing it because you think taking control of your super will benefit you in retirement.
- You have to assess the fees you pay for administration which range from $900 per annum for an online provider who gives you strict rules on what you can and can’t do to $4000 odd for an experienced accountant who will be continuing to provide service and advice on all aspects of your fund.
- The traps to avoid are the property spruikers they will sell you overpriced property with big commissions in them and even a 10% over pay will take years to be whittled away with the future modest price growth expectations.
Rebekah Blake is Director and Manager at SMSF Property Capital.
