Best strategy to invest super money

Hi,
This year we put aside $60K into super to save bit of tax in our small biz. Could someone please advise best strategy to invest this money,
still got 20yrs before getting retired....

Thanks in advance.
Kevin

Geared funds in a rising market. Bear market your losses are magnified too though.

Hi Kevin

Is this money going into a SMSF or a commercial super fund?

If it is a SMSF what have you been doing with your super fund up to now?

Cheers

Is this money going into a SMSF or a commercial super fund?
Money is already in SMSF, me & my wife are the trustee of this fund.

If it is a SMSF what have you been doing with your super fund up to now?
We just established this fund in June07 before that we never put any money towards super since we established our business.
But I have $45K lying in STA (Australian super) contributed by my employer while I was working. Eventually we would like to roll over these funds to SMSF, if any benefit.

Thanks
Kevin

Hi Kev,

I'd be beating up your accountant.

The ATO suggests that $200k is the amount which makes SMSF cost effective. Though, like bundy said geared funds may help your fund get to that point quicker.

Locking away $60k for some deductions does sound like an accountants answer, I'm sure alot of people in these forums could suggest other ways, such as Income Protection, Margin Lending/Borrowing to invest and Agribusiness to claim deductions which don't lock your money up for the next 20 years.

Now the rules have change in the 07/08 year you'll get 100% up to $50,000. Rather than the annoying first $5,000 100% and then 75% after.

Accountants love SMSFs because they get to pick up the annual auditing fees then they usually leave money sitting in bank accounts earning 1% pa.

Why did the accountant suggest a SMSF over AustralianSuper?

Did your accountant give you advice on doing this? Did he take into account your whole situation (eg, debts and insurance needs)? Did he give you a Statement of Advice for this SMSF (I won't be surprised when you say no).

Depending on how much your accountant is charging you to do your auditing (calculate to an annual percentage of your $60k). If it's more than a couple of percent, it's getting expensive (ie, $1,200 is 2% cost). AustralianSuper is around 0.6% pa (Balanced option) plus about $50 per annum or so.

If your accountant isn't going to give you advice on where to invest the SMSF money you should go to a SMSF specialist who can give you awesome advice, eg, how not to pay any CGT in SMSF, which is always good

Hope this helps,

Dan

PS This is not a recommendation for any person to invest in SMSF, Income Protection, Borrow to Invest or Agribusiness. Speak to your FPA registered Financial Planner, Accountant or Tax Adviser before making an investment decision.

why did you open a SMSF? Sounds like a waste of money..

You can invest in most things via platforms like colonial first state with minimal costs.. if you have over 100k, then you can invest into their wholesale products.

Since you are sure what to do with the money, I don't know why you wouldn't just invest into normal super funds and let them manage it.

I would suggest seeing a proper financial planner who can properly consider your situation.

The only reason to invest into a SMSF is if you want to manage your money directly. ie invest into direct shares, direct property, and unconventional investments like paintings, vintage cars, coins, etc.. Since it seems you don't have experience in investing, leaving it to the pro's would be better. at least till you learn a little more

Hi crc_error,

I'd like to show just a different perspective.

While I think SMSF is not for everyone (because of it is not cost effective until you have certain amount of $$$ there and all the related paper work to maintain it), I believe it is a good way to gain that experience in investing you mentioned in you post. If you leave it to the professionals, how are you going to gain the experience? Because of the money in Super will be there for the next 35 years (at least in my case), I think is better to make mistakes with that money than with the one I have saved/earned i.e. Invest my money in Managed Funds (and other assets) while I learn how to invest using my Super $$$.


I read somewhere (sorry I don't remember the source) that borrowing for SMSF was going to be approved. If that's approved, it will open the door to a more diverse range of investing options and will make SMSF even more attractive for some people.

Currently, I use a normal super fund. But when the time comes and my $$$ there are enough to make it cost effective, SMSF is an option I will consider.

Cheers,

Dinky

There seems to be a universal hatred of SMSF's on this site.

A SMSF is designed to be exactly that - self managed.

The deed cost me $200 through the Taxpayers Australia.

It costs me $200 + GST a year to get my fund audited, plus $45 (now $150) for the ATO levy.

This is because I do my own paperwork & lodge my own tax returns and manage my own investments. The audit fee is low because I don't do any dodgy related party transactions or dubious tax driven investments, and I keep all relevant documents well sorted (not a hard thing to do).

The cost does not change with the amount of funds under management and there are no hidden commissions or charges.

What's more is that the compund growth on the tax sheltered investments is phenomenal.

By judicial use of franking credits, a super fund should pay ZERO TAX on its investments instead of 15%, possibly it could be getting tax refunds.

Now that flexibility of drawing on benefits has been added, it should be an essential part of most people's portfolio. Also, due to limits on the size of contributions it should be considered by younger people.

What brings people undone is when they pay someone to manage their fund, which then invests in boutique managed products and your little nest egg gets eroded by layers of fees.

If you don't want to self-manage then get into a wholesale or industry fund with an accent on LOW FEES (STA is a good one).

Conversely, if you are a business owner you need to see if better returns can be earned by reinvesting in your business and using CGT exemptions when you sell your business. This may involve more risk and a combination of strategies may be prudent.

I am sure your Accountant has taken into consideration your situation and overall objectives.

Cheers,

Rob

Hi, So your saying that its a great way to lean to invest? You don't need to do this via a SMSF.. you can learn outside super, and once you feel your comfortable, then apply your experiance into super.

However, what is it people are investing in which requires a SMSF? There are many quality products out there now which you can invest in using convential super funds.

As I said, I would assume your buying stock directly, not just investing in normal managed funds, which many have super versions of them avaliable anyway.

I personally use a SMSF as part of my overall hands-on strategy.

Although it is a great way to learn how to operate a trust since there is plenty of self-help articles on the ATO website, as well as self-help groups such as Taxpayers Association & Shareholders Association which hold regular meetings.

I treat the SMSF as an asset class, the low risk fall-back plan to get rich slowly in case my other investments fail in the long term.

The reason to use super is because low risk investments pay low returns and are sensitive to fees. Hence a low tax (or zero tax) low fee environment is an advantage, and because of the long term objective it is not a problem having assets tied up.

It is also a trust and so relatively safe from creditors etc.

Since I am a property owner in my own name, and have an IP in a trust that might be realised prior to retirement, I don't hold direct property in the SMSF (duplication), along with borrowing restrictions being a problem to fund such a large cost item.

Similarly, I don't duplicate other investments in my name and the trust - except maybe if I wish to gear the investment in my own name but I also think it is a good long term prospect for my super. Also, the attitude to gearing within a SMSF is changing over time.

You can also transfer listed securities or business real property into an SMSF to retain beneficial ownership whilst the income & CG generated is taxed concessionally. So you can initially acquire the asset from that class negative geared in your own name, and if you wish to retain ownership when positive geared then stick it in your super (there are CGT & contribution concessions for active business assets).

If you hold your assets long enough to reach the pension phase then the fund pays no income tax. This is in addition to distributions being tax free when you reach 60.

Mainly though, it is just part of a wider long term strategy.

Cheers,

Rob