Delving into the World of Self-Managed Super Funds

Ever wish you had more control over your super fund? Well, buckle up because we're about to show you how! Our lively chat this time revolves around the allure of self-managed super funds. Enhanced control, cost-effectiveness, and flexibility - these are just a few of the advantages that may be in store for you. We also get into the nitty-gritty of a fixed fee structure and why it may prove more favorable than traditional percentage-based fees, especially if you're playing with a larger balance.

Beyond the basics, we delve into the exciting world of diverse investment opportunities that a self-managed super fund has to offer. Be it direct property, individual shares, or more unconventional options like cryptocurrency and collectibles, we're leaving no stone unturned. For the enterprising business owners among you, we've got some intriguing insights on purchasing property for business purposes. And let's not forget about estate planning and administration simplicity that comes with such funds. Ending on a high note, we can't wait to see you in person soon for more electrifying financial discussions in Perth!

For any inquiries or to connect with Oscar, Zeke, or their company, Asset Road, listeners can visit the following links:

• Finance Bible Podcast Instagram
• Asset Road Instagram
• Asset Road Website

The advice shared on The Finance Bible is general in nature and does not consider your individual circumstances. The Finance Bible exists purely for educational / entertainment purposes and should not be relied upon to make an investment or financial decision. If you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards your needs.

Transcript

Zeke Guenthroth: 0:08

Hey guys, welcome back to another episode of the Finance Bible podcast.

Oscar Don: 0:12

We are your hosts, as always, oscar and Zeke, and please note that nothing in this podcast should ever be considered as personal financial advice.

Zeke Guenthroth: 0:21

And if personal financial advice is what you are after, then please get in touch so that we can connect you with the correct professionals to make sure that the job is done correctly.

Oscar Don: 0:30

Enjoy the show All right today, we are talking about four key benefits of establishing a self-managed superfund, and you may ask what is a self-managed superfund, Zeke? If you had to answer that question, what would the answer be?

Zeke Guenthroth: 0:52

It would probably be pretty self-managing, to be honest. It would be literally a self-managed superfund. So instead of it being one that the answer yeah, here's a good answer Instead of it being one that you know, or a super or a C-Bus anyone like that are managing, you manage it directly, and or you can basically own the fund, have the operation of it figured out but pay someone else to actually manage it for you. There's probably an actual definition, but what's your definition you?

Oscar Don: 1:22

can manage yourself, though a lot of people tend to avoid managing it yourself because there is a lot of downtime in terms of documentation and compliance you need to upkeep. So, generally speaking, getting someone else to manage it is the way to go. But you did mention a definition of what is the best definition for it. Got one here, just a short and sharp. The self-managed superfund Brackets, smsf, is a superannuation fund that has the members or a company with the members as directors, slash as the trustee.

Zeke Guenthroth: 1:59

Brilliant definition. We love it. It realistically is just a fund that you are a director and trustee of. You can outsource it, like we said, but the main difference is it's private. It's no longer managed by an external source where you can just go on and dictate a couple of little things. It's private, it's yours. You can control how it's managed, whether you want to or you want to outsource it. It's probably the simplest way to put it.

Oscar Don: 2:24

Yeah, perfect. And you can have the fund as well with family members, partners, friends as well, so it doesn't actually have to be just your own, so you can combine your balances together and use it as a force to reckon with. So first off the bat, cost effectiveness. So, generally speaking, smsfs with larger balances may have low fees, depending on the circumstances. Historically it's considered that SMSFs are a better option when you have a balance of up to 200,000, because the reason being is SMSFs are a fixed fee.

Oscar Don: 3:03

So regardless of your balance let's say, if you have 200,000 or you have a million dollars the fee to run that self-managed super fund stays the same. If we look at comparing that to an industry super fund, like your host plus, aware, super, etc. They charge a rolling percentage based fee. So, pending on your balance, the higher your balance, the higher fees you're paying. So when you compare $200,000 from an industry super fund to a self-managed fund, it's actually cheaper to run your self-managed super fund because the fixed fee structure has. That's the main benefit in terms of if you do have quite a bit of balance or if you're combining not just one or two balances together, like a few of your friends or families, it may be appropriate to look into how much money you may be saving.

Zeke Guenthroth: 3:56

Yeah, you're bang on.

Zeke Guenthroth: 3:57

So, for example, let's say you're married couple, you're 50 years old each, your super balance is $250,000 each, meaning a combined balance $500,000. If your percentage based fee with your industry fund is something like 1.7%, which isn't too out of the ordinary, that'd equate to roughly $8,500 a year that you'd be paying in fees there. Whereas if you had that $500,000 in a self-managed fund on a fixed fee, then chances are the fixed fee is going to be lower than that 1.7% of the total fund. So if your fee for the self-managed fund is less than $8,500 in that example, then it's more beneficial in terms of like a cost ratio. That's what with the bigger balance you've got, the better it gets. So if you've got a million in there same example it's going to be up near the 17 grand mark, whereas if you've got 50,000 in there, then your self-managed fund being fixed might be more than the percentage base. So that's a rolling thing. The less you've got, the less attractive. The more you've got, the more attractive.

Zeke Guenthroth: 5:03

Point number two would be I mean, I'm just going to say control of the actual fund. So a little bit of what you said earlier how you can have multiple members in there as well. In Australia you can actually have six members in the fund at one time. So, for example, my family I've got four siblings, two older brothers, one younger brother and one younger sister. Yes, lucky her for older boys to make sure her life is a living misery. No, we take care of her. Let's say there's a five of us and then we throw in a little random person just to spice it up. You're coming in, mate, you're joining the cult. Anyway, you've now got six people. If we say our average balance is 300 grand, that's 1.8 million Between all of us. Having the 1.8 million in an industry fund, getting charged that percentage basis we talked about, you'd be paying over 25 grand in fees in total, whereas if we go this way it might only cost us, combined as a cohort, something like $5,000 per year. So massive savings. But you actually get a lot more control with it too.

Zeke Guenthroth: 6:11

Let's say I'm not happy with investing in. I'm just going to use Australian Super as an example. Again, not financial advice, not ripping on their product or anything. But let's say they've got a few different options, they've got growth, they've got balanced conservative. Instead of picking one of those three options or another couple of options that they do offer. Then I can actually decide with the other five members. Okay, we want to do XYZ as their investment strategy. We'll put a bit here, a bit there, a bit there. Figure it out, leave some in cash, put some in fixed interest Shares here, property there, direct shares, equities, term deposits, whatever you want. It's a lot more flexible. You've got bulk control. I can wake up one day and go out and pull an X amount out of that and put it into this, whereas if you try to do that with your current fund, it's going to be a lot more difficult. So that's control for me.

Oscar Don: 7:02

Because that leads on to the next point where, as you were just mentioning, your current fund, like Australian Super, for example, won't allow you to do it by investing direct property. So you can actually utilise your superannuation to purchase an investment property. Can I only be an investment property? You can't buy a property to live in because that is illegal under the law.

Oscar Don: 7:25

The good thing about purchasing an investment property in your super fund is when you hit a certain age, around 60, your retirement age, the income that generates up to a certain threshold is all tax-free.

Oscar Don: 7:43

So let's say, 30 years from now, let's say in 10 years time, you've purchased a property in your super fund. Later on, when you retire, it's ultimately all paid off and the income that you generate from that property you don't pay a cent of tax on it. So with a lot of clients who've met in the past, that's been a big reason for them to invest in the property side of things through their super. And it just makes sense because you can put the other portion into direct shares, like you were saying, zeke, and it doesn't all have to be in property, because the reason being you don't want to do that is what if there's a big crash and you lose literally 90% of your portfolio and you're coming up to retirement means you got to work for the rest of your life because everything you've had has gone out the window. So diversifying your super, which is self-managed sort of fund actually allows you to do, is a big difference as opposed to just having your shares in the industry super fund.

Zeke Guenthroth: 8:41

I mean, firstly, the point you made about having the cap on the taxed income, one of my favorite things. A lot of people don't actually get to reach that cap, so if you're able to leverage into something like property, for example, it helps you get there.

Oscar Don: 8:54

It's $3.4 million. $1.7 per individual.

Zeke Guenthroth: 9:00

Correct. Yeah, I was going to say you're right at the 3.4, because we normally deal with the couples and whatnot. But yeah, 1.7 per member. So if you had six, you can obviously multiply that quite a bit. But what's important to note there is that it is based on each actual member, so you can't just go around 1.7 times by six. It's actually your portion of it. So if I had five million and Cody, which is one of the brothers, had 500k, then we can't just go around. Well, he's got 1.7, I've got 1.7, and the other four will split between other people.

Zeke Guenthroth: 9:32

It doesn't work like that. Each person has their own allocation. But on the point we're talking about, which is investment flexibility, you've got a whole bunch of different options, like not only direct property, but you can do individual shares, so specific companies that you want to invest in managed funds, fixed interest, you know, like term deposit, corporate bonds, government bonds, stuff like that Cryptocurrency, which is a big one for people at the moment. A little bit if you don't know what you're doing. So I'm not going to say get into it or steer clear of it not giving any financial advice here, but a couple of cool ones or interesting ones, collectibles and personal use assets, so for example, artwork, antiques, vintage cars, stuff like that.

Oscar Don: 10:17

I've been speaking to someone about the artwork four months ago.

Zeke Guenthroth: 10:20

Artwork is a pretty cool thing. You get a bit of a side track here, but there is companies out there and artwork makers out there and stuff where you can basically purchase a piece of art which might be a trend, and what did I say?

Oscar Don: 10:38

Artwork makers.

Zeke Guenthroth: 10:39

What did I say?

Oscar Don: 10:43

I've lost the plot on even others.

Zeke Guenthroth: 10:47

Artwork makers will continue it on With that. Around there they might charge 30 grand for, like, some Aboriginal artwork and that might rent to somewhere for, you know, 800 bucks a day or something like that. It might not be rented out all the time. It's kind of like having property, but very different. Do your own research, but it is an option. Antiques, vintage cars, stuff like that that are going to go up in value over time, and a really common one for business owners is that you can actually purchase a property for business purposes. So, for example, if you own, throw something out there, don what's a business that you might own.

Oscar Don: 11:27

Let's just say a car washing company.

Zeke Guenthroth: 11:30

You own a car washing company, a situator at 123 Zeke and Oscar Street in the Bahamas or wherever it is, then you could actually buy that actual facility in your super fund and then the business itself pays a rent to the super fund for occupying the space. So that's something that a lot of people do, basically any business you can do that with. Again, do your own research, not providing the advice, but it's very common. So that was point three. Moving on to number four, what do we want to go on to next?

Oscar Don: 12:05

Well, one for when you're a bit older in life, possible estate planning flexibility. We can do number four with a few different things if you have anything else in your mind, but this is one of the other benefits. So self managed fund can actually manage and control tax free benefits prior to death to better manage the liabilities of tax. So if it is something you're looking for, if you are the latest stage of life, you can utilize your SMSF to help planning those tough conversations and tough times. So that's also a big benefit in this game of things.

Zeke Guenthroth: 12:44

Yeah, I think that the estate planning part of it is pretty important. For example, you've got multiple members in the fund. One of you is older than the other. Let's just say, in this instance, you know you're a family, you've got a husband and wife, and the wife has a younger brother, or the husband has an older brother or something, and they all come together to be in one and you might have an age range of 20 years. In that example, if the husband's a bit older, the wife's a bit younger and then her brother is also younger than what might happen in that case is you could go all right. Well, chances are the hubby is going to kick it a bit earlier when it gets to that point in time where you're hitting. You know you're 60 or something like that, not saying it's when you're going to kick the bucket, but if he's 60 and the younger brother, who's also in the fund, is 35, then they're going to have different investment strategies, or they should again, not financially advice. So you might be able to go okay, well, planning for what's to come. Maybe we change his investment strategy into something that's more by his I mean the hubby into something that's more cash or fixed interest a bit less volatile, whereas the younger boy, the younger brother of the wife could then be in more high growth assets and stuff like that, allowing for additional estate planning long term.

Zeke Guenthroth: 14:04

Onto the final, onto my final point. I don't know if Don wants to throw any more out there, but the administration of it is a big thing to talk about. So a lot of people will look at a self managed fund and go, oh, based on the admin, like the keyword being self managed they won't want to go ahead and do it because I think it's going to be in a bulk amount of admin. Realistically you can probably only like, genuinely, you could probably spend two hours a month on admin for it and get away with it, get the job done effectively. It's pretty easy to keep records of what's going on if you've got a good platform. But also if you don't want to, it's very easy to outsource to, for example, an accountant who might charge two grand a year to do it between however many members. That is, it's not very expensive.

Oscar Don: 14:49

That's a good finishing point mate.

Oscar Don: 14:51

No, that's good. I guess the bit off topic now. But another good point, which is not actually a point about SMSS, is in four weeks time we are heading to the coast of Western Australia, heading over to Perth, which means we are back together. So we will be doing some very good in-person podcasts so you won't have to listen to the over-streamyard reception. So that will be good fun. If any of you are in Perth, let us know. I would remind some listeners to show us around town, show us where to go bars, restaurants, wherever it may be. Let's reach out and see what we can do.

Zeke Guenthroth: 15:37

Yeah, the boys will be back with a bit of banter. It's hard to have the banter over a microphone because by the time I say something and then Don comes back and then I come back. It's been about 10 seconds, it is very difficult, isn't it? It is as soon as you start talking or I see your bubble, it's like, okay, I need to stop so that his audio doesn't get destroyed. And then vice versa.

Oscar Don: 15:58

Yeah, it's funny. So Perth will be good because we'll definitely get a lot of content going and therefore checking out clients' properties. So, yeah, reach out if you happen to be on that side of the country.

Zeke Guenthroth: 16:15

That's all for today's episode. We'll catch you all next time.

Oscar Don: 16:18

Perfect Ciao.

Zeke Guenthroth: 16:24

Guys, as always, if you'd like to podcast, please give us a review. Jump on that five-star wagon, share it around with your mates and just give it the big odd tip.