Superannuation Discussion + market volatility

[cove]

Yes I ran with seven and now I am up to twelve but may move back to less than ten. I do try to get to their AGMs.
Mrscove came with me Wednesday evening to listen to Ophir High Conviction Fund discussion in Perth and she found it way more interesting than the choreographed Qantas AGM in Melbourne. I think she is getting more interested in investing.

 

[lovetravellingoz]

Esuperfund has worked for us. They keep the accounting and audit records and we invest the money. Very accurate, great pricing and no issues. Have never had to go to see the admin folks in Melbourne and we are happy with their accurate work. They have access to the broker and our bank account
That said if you need lots of assistance investing or if you are weak with paperwork then an SMSF would not be a good idea. We use Commsec and ANZ Bank combination and have stayed with them from the start which was what Esuperfund originally recommended.
This is not investment advice......

Thanks for this and all your other esuperfund comments. Most appreciated as I am considering switching to a SMSF and so I am assessing the various pros and cons, and options, of doing so as outlined in my earlier posts.

I understand that the SM in SMSF stands for Self Managed, so yes appreciate that means a level of active management , and in particular that you are responsible for everything (and cannot delegate that).

How much SM varies from 100% on down as different accounting firms offer a wide range of packages and services for SMSF that allow one to outsource some of the M and or to make that SM easier. This can also include advice, or it can just be bare bones. Some are online, some more "manual". Some make use of online software like Class Super, Simple Fund 360 etc. And yes the fees vary widely due to this as well.



After your comments I have read up a lot more and so my present understanding of esuperfund is that:

• Most who use it see quite happy with it, and report that it is easy to use
• It is very low cost (though there are others who have copied their model) with what you need to do in running a SMSF
• You make your own investment choices and strategies (but hey this is SM! )
• It is easy to use, and it makes it easy to comply
• It has limited investment options
  • It seems vary suited to those that are happy to make large use of the ASX
  • I would be curious what options people use within esuperfund when they wish to invest in more defensive options - Just getting the intererrst rates on cash accounts has little appeal
• Costs are kept low principally by:
  • 1/ restricting choice
  • 2/ the amount of support provided
  • 3/ doing things mainly online and with partners that have automated the information flow
  • and 4/ gaining commissions from a range of partners
  • (though cost/fee/interest rate passed on seem to still be what that organisation would charge any way. So main drawback is if one can source other partners that would be cheaper/offer higher interest etc. that one either cannot use them or where you can that you then have to source and supply necessary data (and if you do that then that increases the time and effort involved).

ie

Can your SMSF invest in other Bank Term Deposits?
Yes. It is not compulsory to use our Preferred Term Deposit Providers and you are permitted to invest in Term Deposits for your SMSF directly with any other Bank desired. However if you establish Term Deposits for your SMSF with Non Preferred Providers, data will not be accessible by ESUPERFUND and you will need to source and provide this data to ESUPERFUND annually. In addition ESUPERFUND provides a Client Login Portal to clients with real time data of all your SMSF Investments. Where you elect to use Non Preferred Banks to invest in Term Deposits, that we do not receive daily data on, we will not be able to report details of these accounts in real time.​

• Despite what is on their website various posts here and elsewhere report being able to use other brokers than Comsec. I read one when someone used Self Wealth. Has anyone here done that (their low fees are attractive).

Apart from esuperfund, are other forumites happy with other suppliers, including ones where they may pay more for more service?

iCare Super SMSF | Self Managed Superannuation Fund | iCare SMSF is anther that I have stumbled accross that is of interest as it allows a wider choice of investments.


PS: $ wise I certainly am in the range as to when SMSF annual costs are attractive as with my wife and I we already have $2.3 million in super now. That will soon be boosted by $450K being transferred in and another $200K in just over two years (Due to the $300k pp in 3 years rule).. That with the $25K annual contributions each over the next 3 years will see us at the $3.2 million cap, or thereabouts , when we turn 60 if we decide to pull the pin ten.

 

[tgh]

We subscribe to an smsf admin system that runs on Class Super.
It's very flashy and the real time reporting is nifty (how much did I make/lose today? )
It's certainly not fool proof and we have seen some good clangers.
None of these systems replace old fashioned hands on management, but combined with a decent stockbroker , we seem to get by.

 

[lovetravellingoz]

We subscribe to an smsf admin system that runs on Class Super.

Are you happy to say with whom and if you are been happy with them? And pros and cons?

With iCare Super:

We can subscribe cloud-based SMSF software for your SMSF. The bank transactions will be uploaded to the software on daily basis. The most popular software on the market is Class Super and Simple Fund 360. However, you need to reimburse these software costs to us. For Class Super, it costs about $275 per year and Simple 360 $165.​

(ie that is on top of their all inclusive $77/month fee)

It's very flashy and the real time reporting is nifty (how much did I make/lose today? )
It's certainly not fool proof and we have seen some good clangers.
None of these systems replace old fashioned hands on management, but combined with a decent stockbroker , we seem to get by.

Thanks for that.

 

[tgh]

Are you happy to say with whom and if you are been happy with them? And pros and cons?

The facilitator is qld based, so little point in naming them.
They were early adopters and we have been in the "system" for a quite few years now.
I suspect that we could now find some savings and better service if we shopped around.

Something not, perhaps, considered by all you youngsters… is that there comes a time when you really don't want to be bothered.
To this end I have looked at holistic managers of all our financial affairs , but found the options singularly unpalatable.
The generic platitudes , fees to buy flash cars, and the inept conceptualisation of wealth management left me speechless.

A lifetime of independent and relatively successful financial management is not easily replaced.. caveat emptor.
Sometime, somehow, we should/must let go.. how is currently beyond me….fortunately my brain still works.. sometimes...

 

[lovetravellingoz]

Something not, perhaps, considered by all you youngsters…

It has been a long since I was called that. But thank you. Everything is relative of course.

is that there comes a time when you really don't want to be bothered.
...

Yes that is one of my considerations. But it is not just yet. Maybe a decade or two though...

 

[cove]

For us it has been a fun journey despite all the changes to superannuation. We started with a free trust deed and free for a year. It is now $899 plus the Government fee if you are in accumulation phase. Yes Esuperfund suited us and I have never had an issue with the accounting, audit and Tax Office. It is a very good deal and some of my associates are paying more than $10,000 in fees, charges and trailing commissions.

 

[Freq Flier 2013]

For us it has been a fun journey despite all the changes to superannuation. We started with a free trust deed and free for a year. It is now $899 plus the Government fee if you are in accumulation phase. Yes Esuperfund suited us and I have never had an issue with the accounting, audit and Tax Office. It is a very good deal and some of my associates are paying more than $10,000 in fees, charges and trailing commissions.

We've also been using Esuper for years however last year they removed their phone number and phone support. Only left with email correspondence. I don't typically call them but have done so one a few occasions. I now find their email correspondence is getting worse.
Ie they asked for copies of extra paperwork and I have emailed it to them twice and they are still asking me for it.
Now with no phone number I can't call them and they don't want to call me back. So I'm left with just resubmitting the file again and again.

 

[cove]

I think I called Mark their admin manager once in all the years we have used them. I don’t know how many funds they are doing the tax returns for so I would be guessing that it is quite a lot.
I took over the management of the fund when our joint fund was around $750,000 and I moved to working 3 days a week at the office. It quickly grew to the $3.2 million level and we now draw down more than the excess as pension payments. That process was not too difficult.

 

[rogerkambah]

Read an article a few days ago (can't find it now though) which made sense to my simple thought process. It likened franking credits paid to the ATO to PAYG tax payments, which I have always viewed them, since they are included in one's income and also as tax credits.

Is my thinking below correct?
If the company tax rate were to be reduced then I would expect a fully franked share tax credit to reduce and the dividend paid to the investor would increase, if the 'total dividend' (div + FC) maintained the same value?

Just escalating that thought somewhat, what is there to stop a company that currently pays a fully franked (30%) dividend from not paying franking credits and just increasing the value of the dividend paid to the investor.

 

[cove]

Bill Shorten thinks that $59 billion in double taxation would be his to use and spend, spend,spend. Do show him that grey power can work this out. The money that is currently coming your way in franked dividends has already been taxed.

 

[Quickstatus]

Fully franked dividend = dividend where tax has been 100% applied.

FFF $750
The franking is 100%
Franking credit = $750 x 30/70 x1.0= $321.42
Let’s say pensioner has other income of $100
Total income now is $100+$750+$321.42
That income below tax thresholds
So refund of $321.42 is due

Let’s say company pays the fully franked $750 plus additional special dividend of $100 but is unfranked because it comes out of untaxed cash reserves.
Total dividend $850
Franking credit = $750 x30/70 x1.0+ $100x30/70x0.0 = $321.42

A company just can’t reduce franking credits (easily) just to increase overall dividend. To reduce franking would mean that the dividend would necessarily come from untaxed cash reserves and/or overseas sources.

 

[Quickstatus]

For those where Spouse A is nearing the transfer balance cap of $1.6M and Spouse B has a lot more headroom.

Did you know Spouse A can contribution split prior year (say 2017) into next year (say 2018) contribution into Spouse B account?. I think up to 85% of the contribution.

The $25000 limit still applies to spouse A but I think Spouse B gets their $25000 plus the 85% of Spouse A prior year contribution

Someone please check this. I could be wrong with the last paragraph

 

[potm]

Also have an SMSF using esuperfund. Was looking at buying some overseas stocks due to Labor's franking policy plans.
Unfortunately though, Esuperfund are quite restrictive in terms of brokers you can use. Seems like interactive brokers is no longer an option.
Anyone have experience with moving super fund providers?

 

[QF WP]

For those where Spouse A is nearing the transfer balance cap of $1.6M and Spouse B has a lot more headroom.

Did you know Spouse A can contribution split prior year (say 2017) into next year (say 2018) contribution into Spouse B account?. I think up to 85% of the contribution.

The $25000 limit still applies to spouse A but I think Spouse B gets their $25000 plus the 85% of Spouse A prior year contribution

Someone please check this. I could be wrong with the last paragraph

I believe your understanding is correct. Further details here: Contributions splitting for members.

Contribution splitting beneficial for those nearing the caps, or those with inequality in balances (a high income earner spouse and low or no income earning spouse).

The biggest pitfall is that only deductible contributions are eligible for splitting, but if personal non-deductible contributions or existing account balances are involved, then other strategies may be able to be employed (withdrawal with re-contribution to spouse account if eligibility to access applies to the donor spouse, as well as eligibility to contribute applies to donee spouse).

 

[burmans]

For those where Spouse A is nearing the transfer balance cap of $1.6M and Spouse B has a lot more headroom.

Did you know Spouse A can contribution split prior year (say 2017) into next year (say 2018) contribution into Spouse B account?. I think up to 85% of the contribution.

The $25000 limit still applies to spouse A but I think Spouse B gets their $25000 plus the 85% of Spouse A prior year contribution

Someone please check this. I could be wrong with the last paragraph

This is correct, I have done this the last couple of years. Thankfully, when I started I was a couple hundred K plus short of the cap but one good year is already pushing me over. I also started routing all the non-deductable contributions to my wife at the same time and my suggestion would be to plan well ahead rather than waiting until you are close to the limit.

 

[Quickstatus]

I believe your understanding is correct. Further details here: Contributions splitting for members.

This is correct, I have done this the last couple of years.

Thanks all. I have also independently confirmed this. A neat little device to stay under the transfer balance cap.

The other aspect to the transfer balance cap is to never transfer 100% of the transfer balance cap to pension account because the transfer balance cap rises every 3 years at $100k increments according to CPI.

So if you transfer $1.5M of a $1.6M TBC (transfer balance cap)and the TBC later rises to $1.7M due to CPI, you now have $0.2M headroom and can transfer $0.2M later? Keep under the TBC and you could keep transferring the CPI increase in the TBC to pension account every 3 years.

Whereas if you transferred $1.6M of a $1.6M TBC, it is deemed that you have fully transferred to pension account and any increase in TBC does not apply to you.

Could Experts here confirm?

 

[QF WP]

Your outlined example is also my understanding . Any additional amount above $1.6M would then have the tax penalty applied - but that is yet to happen. I am waiting for some live cases to appear in order to see how it will work in real life.

 

[Quickstatus]

Your outlined example is also my understanding . Any additional amount above $1.6M would then have the tax penalty applied - but that is yet to happen. I am waiting for some live cases to appear in order to see how it will work in real life.

I understand it thus:

Pension account is non taxed because it can only contain amounts up to the TBC whatever the amount is (currently $1.6M but can be higher down the track due to CPI increase. Except for those who have already transferred 100% of the TBC at the time of transfer)

Any amounts left over remains in accumulation phase and is taxed in the usual way for all accumulation super accounts. Any amounts subsequently transferred to pension phase are not taxed from the time it arrives in pension account

But the important point is that (unless there is further pollie super fiddle)

At 2% CPI The TBC is approximately predicted to be:
2022 $1.7
2024 $1.8
2027 $1.9
2031 $2.0
2033 $2.1
2036 $2.2
2038 $2.3
2040 $2.4
2042 $2.5

The period between each $100k increase is slightly incongruous because the TBC can only increase in $100k quantums

If someone transferred $1.6M today - the full amount on retirement, I think that retiree will miss out on further transfers into the non taxed pension account over time.

 

[There'sOnlyOneJimmy]

If someone transferred $1.6M today - the full amount on retirement, I think that retiree will miss out on further transfers into the non taxed pension account over time.

So then the question becomes: how far under the $1.6mill mark do you need to be? Is $0.01 enough, or $1, or $100, or $1000, or what? The thought of $0.01 appeals to the AFFer in me...