SMSF - $200,000 minimum?

[Ext User(Tom)]

I'm thinking about setting up a SMSF.

I keep reading that $200,000 is the minimum portfolio size to make it
worthwhile, because of the costs involved.

Is this true?

Assuming I'm on the top marginal tax rate, with the super fund only
having to pay 15% tax, I would think the costs would have to quite
large to make the SMSF ineffective.

I'd be interested to hear from people who have had experience with
their SMSF.

Can these costs be minimised greatly by undertaking some of the tasks
myself?

[Ext User(Someone Else)]

"Tom" <t_rooking1@hotmail.com> wrote in message
news:1141289900.333145.265950@z34g2000cwc.googlegr oups.com...
> I'm thinking about setting up a SMSF.
>
> I keep reading that $200,000 is the minimum portfolio size to make it
> worthwhile, because of the costs involved.
>
> Is this true?
>
> Assuming I'm on the top marginal tax rate, with the super fund only
> having to pay 15% tax, I would think the costs would have to quite
> large to make the SMSF ineffective.
>
> I'd be interested to hear from people who have had experience with
> their SMSF.
>
> Can these costs be minimised greatly by undertaking some of the tasks
> myself?
>

If you need to ask these kinds of questions, then you should not go anywhere
near a SMSF.

Do some more reading. Do some calcs.

Why do you want to set up a SMSF?

[Ext User(Tonen)]

It's little realised, but when all is said and done, the only absolute
advantage of a SMSF is that you may avoid realising some Capital Gains
Tax when you move from accumulation to distribution phase on
retirement, ie you don't have to roll over the fund assets. Everything
else about the "advantages" of a SMSF is basically fluff. Forget the
control thing - you can get enough exposure to various stuff by other
cheaper and less strenuous means.

I have a SMSF only because I'm an absolute asset class junkie including
direct overseas investment, but I run nevertheless at an MER of around
only 0.7%. Otherwise I'd be sorely tempted to use something really
cheap ie an industry fund like Sunsuper (~30 investment options). The
key thing an investor can reliably do to improve his/her return is to
control costs, and for your average sane person, I'd recommend steering
well clear of SMSF's, unless willing to do it for the ultimate CGT
advantage.

Tonen

[Ext User(KL)]

The cost for my SMSF is around $1K per year for adminstration (I use
www.supereasy.com.au). So for even $50K it is only around 2% which is
comparable with retail funds. If you go with direct share investments rather
than managed funds, you would also save on the MER fee (which even industry
funds have to pay I believe).

I guess it depends on whether you are already a seasoned investor - a SMSF
will give you greater control over your investments. Otherwise, for most
people, an industry fund is probably just as good.

"Tom" <t_rooking1@hotmail.com> wrote in message
news:1141289900.333145.265950@z34g2000cwc.googlegr oups.com...
> I'm thinking about setting up a SMSF.
>
> I keep reading that $200,000 is the minimum portfolio size to make it
> worthwhile, because of the costs involved.
>
> Is this true?
>
> Assuming I'm on the top marginal tax rate, with the super fund only
> having to pay 15% tax, I would think the costs would have to quite
> large to make the SMSF ineffective.
>
> I'd be interested to hear from people who have had experience with
> their SMSF.
>
> Can these costs be minimised greatly by undertaking some of the tasks
> myself?
>

[Ext User(KL)]

Another advantage is the ability to carry losses forward within the fund. I
found out the hard way, that these losses cannot be carried forward
(taxwise) when rolling over from one super fund to another (invested in some
global managed funds during the bear market of 2001, then rolled out into my
SMSF, and lost the ability to carry the 30% loss forward). At least, with
your own SMSF, it's unlikely you'll be rolling out of it.

"Tonen" <tonen@swiftdsl.com.au> wrote in message
news:1141298319.107972.191100@i39g2000cwa.googlegr oups.com...
> It's little realised, but when all is said and done, the only absolute
> advantage of a SMSF is that you may avoid realising some Capital Gains
> Tax when you move from accumulation to distribution phase on
> retirement, ie you don't have to roll over the fund assets. Everything
> else about the "advantages" of a SMSF is basically fluff. Forget the
> control thing - you can get enough exposure to various stuff by other
> cheaper and less strenuous means.
>
> I have a SMSF only because I'm an absolute asset class junkie including
> direct overseas investment, but I run nevertheless at an MER of around
> only 0.7%. Otherwise I'd be sorely tempted to use something really
> cheap ie an industry fund like Sunsuper (~30 investment options). The
> key thing an investor can reliably do to improve his/her return is to
> control costs, and for your average sane person, I'd recommend steering
> well clear of SMSF's, unless willing to do it for the ultimate CGT
> advantage.
>
> Tonen
>

[Ext User(Travis Morien)]

Tom wrote:
> I'm thinking about setting up a SMSF.
>
> I keep reading that $200,000 is the minimum portfolio size to make it
> worthwhile, because of the costs involved.
>
> Is this true?

No, in my opinion $200,000 is way too little.

For instance, you could use Macquarie Super and Pension Manager, a full
featured superannuation master trust which gives a vast selection of
funds and shares and subject to just a couple of limits like a cap on
the % of the portfolio which can be allocated to single companies, you
can manage it any way you like.

You don't have the responsibilities of a trustee, you don't have to
organise the tax return or audit, you won't get a call from the ATO
querying whether or not you know what you are doing, all you have to do
is choose your investments.

How much does this cost? 0.77% of the first $50K per investment and
0.1% on the balance. Lets assume that your $200,000 is spread out over
more than four funds and none of these exceed $50,000. Your total fees
would be $1,540.

Realistically, you can't run a compliant super fund for less than
$2,000 a year. Some SMSF specialists say $3,000 but for the sake of
argument lets just say $2,000. The point at which a SMSF would become
economical compared to Macquarie Super and Pension Manager would be
about $260,000. That's just where they become equally expensive. In
reality you'd want to go to an SMSF only when you can manage it for a
good deal less than Macquarie would charge in order to compensate you
for the time and bother that goes with being an SMSF trustee. For this
reason, I rarely recommend SMSFs unless the fund has over $400K in it,
and even then its a dubious proposition most of the time.

I owuld add that Macquarie sometimes discount this price for advisors
with large amounts of money invested with them, and I'm close to
qualifying for such a discount. When that happens the breakeven point
will be almost double the above.

Where SMSFs can be better than master trusts is if you want to buy
assets other than shares and managed funds. For instance:

* If you are a business owner, and you want to acquire a property for
your business. SMSFs are allowed to own "business real property".
* If you are a direct property investor, you want to buy houses and
apartments directly instead of buying a property trust or property
managed fund. NB: you can't use borrowed money to buy the property and
you can't acquire it from a related party. You CAN acquire business
real property from a related party, but not other properties.
* If you are a frequent trader. Master Trusts are not really equipped
to deal with frequent trades. Administration delays add a couple of
days to the turnaround time, which is fine for long term investors but
not a good thing for traders.
* People who want to acquire exotic assets, foreign direct shares,
wine, art etc.

For anyone else however, SMSFs are usually not a good option and in my
opinion they are very oversold by SMSF specialists who can make a lot
more money out of SMSFs (more work to do) than the low cost off the
shelf options.

> Assuming I'm on the top marginal tax rate, with the super fund only
> having to pay 15% tax, I would think the costs would have to quite
> large to make the SMSF ineffective.

You can get the same tax benefits from investing in an industry fund
costing $1.30 a week. Your choice is not SMSF vs personal investments,
it is SMSF vs other forms of super fund.

You could put your super into anything from an ultra cheap industry
fund through to a retail fund with a few more options, to a simple
master trust with anything from a dozen to a hundred funds, to a
sophisticated master trust like Mac

> I'd be interested to hear from people who have had experience with
> their SMSF.

I haven't got one personally, but I deal with them all the time and we
can set them up and do all the administration in-house. The reason why
I haven't got one is because I manage my own money in exactly the same
way I do for clients. I personally have better things to do than
reinvent a wheel which can be bought off the shelf very cheaply.
>
> Can these costs be minimised greatly by undertaking some of the tasks
> myself?

Some, but most people do not have the capacity to do so. Many THINK
they do, but they're wrong. Being a SMSF trustee is a serious business
and the ATO has in the last few months announced that they have changed
their policy toward breaches. The ATO took over responsibility for
SMSFs a few years ago and since then have taken a rather friendly and
forgiving stance, trying to educate people about breaches rather than
hammering everyone with big fees.

The ATO's new policy is far more hardline and they have indicated that
they intend to apply the law more strictly in future.

Being an SMSF trustee is an enormous responsibility. You not only have
to know the rules of super inside out, you must also keep current on
the rules which change all the time. You must update your trust deed
whevever the rules change significantly in order to remain compliant
and be able to use the full range of strategies available.

There is actually a lot that must be done with an SMSF. A lot you must
do, and a lot that you must not do.

While you can shop around looking for online service providers who will
rubber stamp your documentation in exchange for a modest "audit fee",
you should be aware that the penalties of willfull non-compliance can
be severe and the penalties of non-compliance through ignorance of the
rules can be almost as bad.

Travis
www.travismorien.com

[Ext User(Travis Morien)]

Tonen wrote:
> It's little realised, but when all is said and done, the only absolute
> advantage of a SMSF is that you may avoid realising some Capital Gains
> Tax when you move from accumulation to distribution phase on
> retirement, ie you don't have to roll over the fund assets. Everything
> else about the "advantages" of a SMSF is basically fluff. Forget the
> control thing - you can get enough exposure to various stuff by other
> cheaper and less strenuous means.

I agree with you here but I should point out that most of the better
master trusts, including Macquarie, Credit Suisse, BT et al, allow a
CGT free transfer from super accumulation to pension mode.

So your list of reasons to set up an SMSF just got even smaller.

Travis
www.travismorien.com

[Ext User(John Wright)]

"Tom" wrote
> I'm thinking about setting up a SMSF.
>
> I keep reading that $200,000 is the minimum portfolio size to make it
> worthwhile, because of the costs involved.
>
> Is this true?

It is in the ball park, yes.

If you are a seasoned investor, then already you are used to the discipline
of managing your investments and keeping/filing proper records etc - the
ongoing work is not much different for an SMSF. Provided that you know
enough about SMSF to not require ongoing professional advice during the year
to run your SMSF, you should be able to limit the annual administration
expenses (not including brokerage) to about $1000. This cost is solely for
producing the end of year statutory accounting reports, audit and tax return
done by professionals. There is also a small $45 levy payable to ATO yearly.
So at about $100,000 portfolio you will just break even with the alternative
of going to a super managed fund, who charge about 1% minimum (some industry
super funds can be cheaper than that; most retail funds can charge 2% or
more). ATO in their DIY super write-ups use $200,000 as the minimum figure,
and is in the ball park. If you don't need a corporate trustee, you should
be able to start a super fund for $200 - this is for the trust deed,
assuming you know all the formalities to start a super fund (ATO website has
full details) and you do all the paperwork, lodging with ATO etc.

> Can these costs be minimised greatly by undertaking some of the tasks
> myself?

Yes, but not easy, and perhaps not recommended to over 95% of SMSF. The only
thing you aren't allowed to do yourself is the annual audit, it must be done
by an approved auditor. So if you have very good accounting skills and you
have software that can produce SMSF statutory reports (very clumsy doing it
with just Excel) and understand SMSF tax very well, you can do those
yourself and then you need pay only for the annual audit. You may be able to
find auditors for under $500 assuming your SMSF is straightforward.

Regards - JW

P.S. Travis has in his reply assumed a $2000 admin cost as a minimum. Yes,
there are many professionals who charge a lot more than that; I also know
that it is not too hard to find accountants who will charge about $1000.

[Ext User(John Wright)]

"Travis Morien" wrote [edited]
>
> Realistically, you can't run a compliant super fund for less than
> $2,000 a year.

These professional fees seem to vary very widely. Many accountants would
charge around this figure and more - but there are also some who would
charge under $1000; you need to shop around a little, though. These low-cost
accountants will not be the big firms with offices located in central CBD -
they will be near where you live, in the suburbs, working from their home
office - still provide the same service quality. Hence I would consider
$200,000 portfolio an acceptable minimum for SMSF.

>> Can these costs be minimised greatly by undertaking some of the tasks
>> myself?
>
> Some, but most people do not have the capacity to do so. Many THINK
> they do, but they're wrong. Being a SMSF trustee is a serious business
> ...
> Being an SMSF trustee is an enormous responsibility. You not only have
> to know the rules of super inside out, you must also keep current on
> the rules which change all the time. You must update your trust deed
> whevever the rules change significantly in order to remain compliant
> and be able to use the full range of strategies available.
>
> There is actually a lot that must be done with an SMSF. A lot you must
> do, and a lot that you must not do.
>
> While you can shop around looking for online service providers who will
> rubber stamp your documentation in exchange for a modest "audit fee",
> you should be aware that the penalties of willfull non-compliance can
> be severe and the penalties of non-compliance through ignorance of the
> rules can be almost as bad.

I agree that being an SMSF trustee is to be taken seriously; but I must
refute suggestions that it is just too hard. Yes, trustees need to keep
themselves abreast of the rules and changes - and many would be well
equipped to do that. ATO has extensive information in their website, and
there are lots of books on the subject. Articles appear all the time
covering recent changes in most reputed magazines, newspapers. Yes, one
needs to invest time.

Those who "rubber stamp" are those who don't follow the right ethics - and
they are unfortunately to be found everywhere, not just among on-line
service providers. A bigger fee by itself is unlikely to guarantee better
quality service.

Regards - JW

[Ext User(David Segall)]

"Tom" <t_rooking1@hotmail.com> wrote:

>I'm thinking about setting up a SMSF.
>
>I keep reading that $200,000 is the minimum portfolio size to make it
>worthwhile, because of the costs involved.
>
>Is this true?
It is true that they say it but it is not a fact. Visit
<http://www.nicholasneedham.com.au/costs.asp> to get a different
picture of the costs.

If you just want to invest in some managed funds it is probably still
not worth doing. Look for an industry fund that will allow you to
join. However, if you want direct share or property investments it is
probably cheaper for sums considerably less than $200,000. If you
think you have the expertise to invest on the bleeding edge such as
art, antiques or race horses it is the only way to go.

An SMSF has all the advantages and disadvantages of any other DIY
activity. It can be satisfying and cheaper to install your own kitchen
cabinets but you do risk hitting your thumb with a hammer.

[Ext User(Travis Morien)]

David Segall wrote:
> "Tom" <t_rooking1@hotmail.com> wrote:
>
> >I'm thinking about setting up a SMSF.
> >
> >I keep reading that $200,000 is the minimum portfolio size to make it
> >worthwhile, because of the costs involved.
> >
> >Is this true?
> It is true that they say it but it is not a fact. Visit
> <http://www.nicholasneedham.com.au/costs.asp> to get a different
> picture of the costs.

I've never heard of the chap so can't comment on what kind of job he
does, but a bright red flashing light went off the moment I read that
he does all the accounting AND AUDITING himself.

The same red light goes off at the ATO, for the very simple reason that
its highly unlikely that a person will qualify an audit when they are
auditing their own work.

An auditor's job is to look for compliance breaches. Check that the
fund isn't doing something not permitted by SIS or the trust deed
itself.

When an accountant audits his own work, what do you think the
probability is that he'll:
a) find a breach;
b) qualify the audit; and
c) report the breach to the ATO, potentially inviting the attention of
the ATO to be directed toward his other funds?

Call me a cynic, but I can't see any SMSF auditor doing that, can you?

> If you just want to invest in some managed funds it is probably still
> not worth doing. Look for an industry fund that will allow you to
> join. However, if you want direct share or property investments it is
> probably cheaper for sums considerably less than $200,000. If you
> think you have the expertise to invest on the bleeding edge such as
> art, antiques or race horses it is the only way to go.
>
> An SMSF has all the advantages and disadvantages of any other DIY
> activity. It can be satisfying and cheaper to install your own kitchen
> cabinets but you do risk hitting your thumb with a hammer.

You also risk having a crappily installed cabinet, or badly painted
walls, or even a structurally unsound extension with dodgy wiring that
isn't safe to inhabit.

Travis
www.travismorien.com

[Ext User(Peter Sutton)]

On 2 Mar 2006 05:32:34 -0800, "Travis Morien" <travismorien@yahoo.com>
wrote:

>You can get the same tax benefits from investing in an industry fund
>costing $1.30 a week. Your choice is not SMSF vs personal investments,
>it is SMSF vs other forms of super fund.

Is this apparent low fee not a bit misleading? While industry funds
may themselves charge such a fee, the funds are invested in wholesale
investment funds which have a fee (admittedly lower than retail
funds).

It's been a while since I had money with an industry fund but I don't
recall them publishing the real MER.

[Ext User(Travis Morien)]

Peter Sutton wrote:
> On 2 Mar 2006 05:32:34 -0800, "Travis Morien" <travismorien@yahoo.com>
> wrote:
>
> >You can get the same tax benefits from investing in an industry fund
> >costing $1.30 a week. Your choice is not SMSF vs personal investments,
> >it is SMSF vs other forms of super fund.
>
> Is this apparent low fee not a bit misleading? While industry funds
> may themselves charge such a fee, the funds are invested in wholesale
> investment funds which have a fee (admittedly lower than retail
> funds).

i don't see anyone talking about the MER or brokerage or other costs
involved with the investments in the SMSF, so I don't think its
misleading to put the admin fees side by side and compare the
administration costs of an SMSF (the cost of a plasma TV, each year)
with the administration costs of an industry fund (ten happy meals).

However, you do bring up a valid point. SunSuper, a fund already
mentioned in this thread, has a good selection of active and index
funds. If you go with the latter you'll pay between 0.1% and 0.3% of
assets, depending on which asset classes you go with.

In other words, an almost negligible expense.

> It's been a while since I had money with an industry fund but I don't
> recall them publishing the real MER.

Some funds are much better than others at disclosing their costs. Some
have dodgy practices like creaming off the franking credits as an
additional fee on top of the other ones, which enables them to claim
competitive performance pre tax and low fees. ASIC has had a few less
than flattering comments about MER disclosure in industry funds and has
made them pull their industry fund vs commercial super fund ads.

Travis
www.travismorien.com

[Ext User(John Wright)]

"Travis Morien" wrote [... edited]
> I've never heard of the chap so can't comment on what kind of job he
> does, but a bright red flashing light went off the moment I read that
> he does all the accounting AND AUDITING himself.
>
> The same red light goes off at the ATO, for the very simple reason that
> its highly unlikely that a person will qualify an audit when they are
> auditing their own work.
> ...
> When an accountant audits his own work, what do you think the
> probability is that he'll:
> a) find a breach;
> b) qualify the audit; and
> c) report the breach to the ATO, potentially inviting the attention of
> the ATO to be directed toward his other funds?
>
> Call me a cynic, but I can't see any SMSF auditor doing that, can you?

I have had a brief look at the PDS of this accounting company at their
website. The service they provide for the fixed cost of $685 is, as far as I
can understand from their website, only to set up a new SMSF and do its end
of year compliance work (accounting reports, audit and tax return). They
will do nothing else. They will have no part in any decision about how the
money is used or invested - that will be left for the trustees to do.

My understanding is that ATO does not have strong objection to the
accountant and auditor being the same person or firm in such situations.
http://www.ato.gov.au/super/content.asp?doc=/content/39631.htm has a speech
from ATO Deputy Commissioner where he touches upon this issue. To quote from
that speech -
"If the auditor is not independent - for example if they are involved in
running or advising the fund - then that fund is at greater risk of
breaching the rules, as there is a risk that less scrutiny might be applied
to decisions or activities he or she may have recommended. In other words
where, for instance, an accountant recommended that a fund follow a
particular course of action which was contrary to the rules, that infraction
is quite likely to go unreported if the same accountant subsequently
conducts the audit of the fund. It's the standards stipulated by auditors'
own professional associations which are the standards to which they are
required to adhere. So I must say I am a little puzzled when we receive
complaints that the standards for SMSF auditors are too onerous or otherwise
inappropriate. Let me say that we have real concerns about the notion of
independence where an auditor: 1) Is also involved in the day to day running
of an SMSF; 2) Is in a position to influence the fund's decision making
processes including the provision of financial or investment advice, Or 3)
has responsibility for maintaining the accounts and preparing the fund's
financial reports".

Of the many accountants I have spoken to, there are indeed some who won't
take the risk of doing both reporting and audit work for a client for fear
of ATO's wrath - and others who see no problem in doing both where they
clearly have had no part in the ongoing management and decision of the fund.
ATO seems to have left this area a little unclear. I interpret their last
point (point 3) above as meaning that if the accountant is preparing the
reports but not maintaining the accounts, ATO has no concerns. Preparing the
reports is not maintaining the accounts, I believe.

Those SMSF trustees who see their accountant just once a year to only get
their end of year compliance work done should be fine.

Regards - JW

[Ext User(John Wright)]

The $685 annual fee does look rather low. I noted in the PDS on the
http://www.nicholasneedham.com.au/costs.asp website that besides the $685
fixed fees, this accountant may get something extra - in the form of
trailing commission etc - though at no cost to the fund. To quote from the
PDS,

"Appointment of Nicholas Needham - An authority nominating Nicholas Needham
to act for your SMSF will be provided to you when you establish your SMSF.
This will allow our office to access your SMSF financial information for
taxation and planning purposes directly from any relevant institution. The
authority also authorises Nicholas Needham to receive commission payments on
investments held by you at no cost to you as they are paid by the relevant
institution".

Does acceptance of a trailing commission imply a role in the ongoing
(day-to-day) management of the fund? That COULD raise ATO's eyebrows.

Regards - JW

[Ext User(Ken)]

My standard advice to anyone who asks me about whether they should go
smsf is: "Don't".

I welcome the fact that, with so many smsfs, there are signs of growing
competition for the routine tasks necessary to sustain them.

But I am fairly certain that a smsf which does not do its own investing
decisions is a contradiction. These investment decisions may include
using cash or a master trust or whatever for part of the funds. But,
unless you want to venture out into the jungle of investment choice
(beyond cash) then smsf is not for you.

Obviously if you can do the routine stuff yourself then this saves you
from $1k to t$3k per annum right off. But most smsf candidates are not
that brave.

Smsfs have only existed for a few years. It will be another 5 - 6 years
before it will be possible to judge whether smsfs were a good addition
to the super options.

But I am reasonably confident that it will turn out that they are a
good option. This is mainly because of the distortions, incompetence
and downright corruption I have identified in the financial advice
industry.

The only person in Australia I would consider seeking investment advice
from is the bloke who established this group (who is a strict fee for
service man and who has demonstrated to me a singulaly deep
understading of the constraints within which we operate in Australia).

When you get right down to it, the main reason for going smsf is so
that you can accept responsibility for any bad investments yourself (as
well as credit for good ones). It is hard to live with paying thousands
to fund managers who destroy your nest-egg.

[Ext User(Travis Morien)]

John Wright wrote:
> The $685 annual fee does look rather low. I noted in the PDS on the
> http://www.nicholasneedham.com.au/costs.asp website that besides the $685
> fixed fees, this accountant may get something extra - in the form of
> trailing commission etc - though at no cost to the fund. To quote from the
> PDS,
>
> "Appointment of Nicholas Needham - An authority nominating Nicholas Needham
> to act for your SMSF will be provided to you when you establish your SMSF.
> This will allow our office to access your SMSF financial information for
> taxation and planning purposes directly from any relevant institution. The
> authority also authorises Nicholas Needham to receive commission payments on
> investments held by you at no cost to you as they are paid by the relevant
> institution".

Ah, another one of those "free" advisors. Commissions are standard
they say, you pay them even if you go direct to the fund manager they
say, and therefore they are "free". Nobody here has any objections to
advisors receiving "free" commissions would they?

I saw nothing at the site about him being either an AFSL holder or
authorised by one. That's a compliance breach. He should provide a
FInancial Services Guide and have the license and authority details
displayed prominently at his site.

If he is not a licensee or authorised, he shouldn't be receiving
trails. He's not allowed to.

> Does acceptance of a trailing commission imply a role in the ongoing
> (day-to-day) management of the fund? That COULD raise ATO's eyebrows.

If he gives advice to clients about what they can and can't do, then
he's involved in the management of the fund.

If he's not having any role in the management of the fund then his
clients would have to know the rules of super very well. To avoid
being involved in the management of the fund, he'd have to NOT be
giving them advice on whether they're allowed to buy something (related
party transactions, sole purpose test etc).

At a conference I recently attended there were several top SMSF lawyers
speaking. One had a whole bunch of examples of real life silly things
that SMSF trustees did.

For example, one lady invested in jewellery. Nothing wrong with that,
as long as you keep it in a safe and never wear it. Otherwise you
breach the sole purpose test. She actually wore the jewellery to a
SMSf-related meeting she had with the ATO to show them what a great
investment she'd made. The ATO instantly picked up on the breach, and
in the subsequent ATO audit found other problems. The lawyer didn't
say what happened to her or her fund.

There were many examples like it. People were just clueless about what
they can and can't do with their super.

If you don't understand the sole purpose test, related party
transactions etc then you shouldn't use an administrator like this,
because to maintain the necessary distance from the running of the fund
he'd have to stay away from giving that kind of advice and merely do
what he says he'd do - the accounts and auditing.- then the first the
clients would know of any breach would only be at the time of the audit
when they get the qualified audit back and notice, after the fact, that
their fund is in breach.

I wonder how many of his audits get qualified?

(I've seen that same speech you quoted from in your previous post. I
tend to interpret it in a more literal way - the ATO has serious
concerns about people auditing their own work. ATO people I've talked
to are very clear on the principle that while this isn't illegal its
not a practice they approve of and they're far more likely to audit
such funds than funds where there was an independent auditor.

Travis
www.travismorien.com

[Ext User(Travis Morien)]

Ken wrote:

> The only person in Australia I would consider seeking investment advice
> from is the bloke who established this group (who is a strict fee for
> service man and who has demonstrated to me a singulaly deep
> understading of the constraints within which we operate in Australia).

Who is that?

(Its certainly not me. This newsgroup was around several years before
I even took an active interest in investing. I wrote its first FAQ,
but that's about it.)

Travis
www.travismorien.com

[Ext User(John Wright)]

"Tom" wrote
> I'm thinking about setting up a SMSF.
>
> I keep reading that $200,000 is the minimum portfolio size to make it
> worthwhile, because of the costs involved.
>
> Is this true?

SMSF costs are detailed in full in a recent research/survey report
"Investment Trends/IFSA Self Managed Super Funds (SMSF) Report" available at
http://www.ifsa.com.au/public/content/ViewCategory.aspx?id=84 - click the
pdf file under the heading "2006 IFSA Commissioned Research".

Some interesting findings from it related to SMSF costs -
- "we estimate the average annual amount spent per SMSF on running their
fund at $3,500 as of December 2004". [Note however that besides fees for
advice from accountants, planners, solicitors, this included an assumed 2%
MER on any money invested in managed funds, and excluded brokerage].
-"Those currently using an accountant or tax agent to assist with their SMSF
spend an average of $3,200 per year, including the accountants' services,
managed fund MERs and all other costs... Those currently using a financial
planner (including those that also use an accountant) spend an average of
$5,900 per year, including the planners' advice, managed fund MERs, and all
other costs"
- "only a minority (28%) of SMSFs use a financial planner and are paying for
investment advice".

A few other findings -
- "There a significant minority of small SMSFs, with 28% having total
balances under $100,000. Compared to large (>$250k funds), small SMSFs were
63% more likely to say they set up their fund based on advice from a friend
who had one (18% versus 11%), almost three times as likely to highlight a
job change as a driver (22% versus 8%), 50% more likely to cite
consolidation of multiple super funds as a driver (29% versus 19%) and only
half as likely to be set up in response to recommendation by an accountant
(21% versus 41%)".
- "58% of SMSF have managed fund investments, with an average holding of
$120k. Managed funds account for around 15% of SMSF assets".
-"Some 78% of SMSFs say they are willing to invest in managed funds in
future"
- "By far the most popular reason given for setting up a self managed super
fund is investors' desire to exercise more control over their super (55%).
Control is even more prominent in recently established (60%) and larger
balance SMSFs (72%)"
-"most members consider setting up and running an SMSF to be fairly straight
forward"

Lot of other interesting information there.

Regards - JW

[Ext User(David Segall)]

"Travis Morien" <travismorien@yahoo.com> wrote:

>
>David Segall wrote:
>> "Tom" <t_rooking1@hotmail.com> wrote:
>>
>> >I'm thinking about setting up a SMSF.
>> >
>> >I keep reading that $200,000 is the minimum portfolio size to make it
>> >worthwhile, because of the costs involved.
>> >
>> >Is this true?
>> It is true that they say it but it is not a fact. Visit
>> <http://www.nicholasneedham.com.au/costs.asp> to get a different
>> picture of the costs.
>
>An auditor's job is to look for compliance breaches. Check that the
>fund isn't doing something not permitted by SIS or the trust deed
>itself.
>
>When an accountant audits his own work, what do you think the
>probability is that he'll:
>a) find a breach;
>b) qualify the audit; and
>c) report the breach to the ATO, potentially inviting the attention of
>the ATO to be directed toward his other funds?
>
>Call me a cynic, but I can't see any SMSF auditor doing that, can you?
Well that's a good. I don't want an auditor telling the ATO that my
fund is non-complying. I just want to be able to convince an ATO
auditor that I have taken all reasonable steps to ensure that the fund
was complying. And, "Please sir, I'm sorry I hung the Rembrandt on my
wall, and I'll put it in a safe immediately but don't tax me at the
full rate".
>> An SMSF has all the advantages and disadvantages of any other DIY
>> activity. It can be satisfying and cheaper to install your own kitchen
>> cabinets but you do risk hitting your thumb with a hammer.
>
>You also risk having a crappily installed cabinet, or badly painted
>walls, or even a structurally unsound extension with dodgy wiring that
>isn't safe to inhabit.
You do. Unfortunately, you also risk all that with professional help.
It seems the riskiest option is to have an SMSF _and_ a financial
planner.