It has been 4 years since I written the original piece. A few things have changed with eSuperfund. One of the most important changes is that they no longer limited you to the 2 brokers that they have nominated. So you are free to use any brokers you choose. There is at least one other lower cost broker I used, SelfWealth (you can read my review of SelfWealth here), which charged a flat rate $9.50 on all trade. So if you typically trade in larger transactional amounts, you can save yourself some money.
We have our own SMSF for a couple of years now and wanted to share our experience for anyone that is looking to set one up.
Would SMSF suit you?
It depends. If you are not good at looking after your money and investments. I will strongly advise against it. How safe are your assets entirely dependent on what assets you chosen to invest in. You have no one else to blame but yourself.
If you want to borrow money to invest in real estate properties through your superannuation, SMSF is the only way. Where I live in Sydney, we never have a price correction (ie greater than 10% correction in any year) as far back as I can remember and things are so so so expensive now.
I wouldnt touch properties at the moment. So why would you want to set up a SMSF to invest in properties? Investment properties may have provided good return in the past but it is about to change in my opinion.
I went into SMSF so that I can take control of my share investments. I have been investing for a long time and I enjoy picking my own stock. Therefore I have no one to blame but myself!!!! SMSF is a no brainer as capital gain / dividends are taxed at a much lower rate during the accumulation phase (when you are not yet old enough to take a tax free pension - that is younger than 60 years old). And of course, provided that the laws dont change ( wishful thinking!), all income in the pension phase are tax free. Thanks to Peter Costello and John Howard for inventing such a generous system. I have no doubt things will be a little different.
We chosen esuperfund as it is by far the lowest cost provider out there in the market place. They set up all the documents for your SMSF for free and when we signed up, we didnt need to pay any annual fees for 2 years. How great is this!
Individual Trustees or Corporate Trustee?
The majority of SMSF are set up with individual trustees but I would definitely advise against this.
Obviously you will need to set up a company. We chose ecompanies and they charged about $500 for setting up the company and you can complete the application online.
A couple of reasons why I want to set up our SMSF as corporate trustee -
1. Continuity when membership changed - As the assets of SMSF are held under corporate trustee, there will be no changes if membership of the SMSF changed. For example, a new member join or an existing member left. This saves you all the hardwork with changing ownership on all your investments.
2. Protect the assets from malicious or other legal actions. As the assets are held in corporate trustee name, in case you are being sued, the court cannot get accessed to those assets if there are any judgements against you for whatever reasons.
I might also add that there is a small annual review fee that ASIC charged for speical purpose company (ie. the corporate Trustee company) and you can get a good discount by prepaying 10 years in advance.
Banking and investment providers
eSuperfund has their preferred banking and investment providers. You can check it out on their website.
We have no issues using Commonwealth Bank, Commonwealth securities and ING Direct.
Having said that, they do allow other online banking accounts as you would find that rates can be much better with some of the other providers.
The caveat is that where you chosen a provider that is not their preferred, you will need to be prepared to do more work in reporting those transactions back to esuperfund.
I have always found them to be responsive in getting back to me.
I normally sent them a message through their website and they would come back to me very promptly everytime.
eSuperfund provides a pretty good reporting system for accurately reflecting the financial position of your SMSF and also the income statement for the period.
It will take you a bit of time to comply with all their information requests. As it is not like an accountant you can throw the receipts you have in the shoebox, they required you to do most of the transactions coding work. I found their system pretty good and easy to navigate. So no problems with that.
Hopefully this article help you to decide if SMSF is suitable for you and some of the benefits you can expect from setting one up yourself. If you have a reasonable Super balance, say greater than $200k, you can probably save some money in terms of the administration fee the typical superannuation fund is charging. But it is important, this cannot be the dominant reason, the reason must be you enjoy looking after your investment and are confident that you will do a better job than the superannuation industry. So it is not suitable for everyone.
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