Independent vs 'Packaged' Corporate Trustee: Investment&running costs

[Skyblues]

Hi,
Few specific questions re corporate trustee structure. I am aware of hiho's thread and we have been preparing to go for a corporate trustee setup independently - with us applying to ASIC, doing our own documentation etc - thanks to the clarifications of kind forum members previously...Have been reviewing online super companies lately and would like to ask a few questions re possible investments and running costs...


1-) My understanding is that the corporate trustee structure cannot, by itself, borrow money to invest in an investment property and requires a Bare Trust. First of all is this correct, anything that one should be careful about while establishing? Cant an individual trustee structure, in any way, achieve the investment property strategy?

2-) Secondly, if you establish with a corporate trustee structure, do you have to have a bare trust structure established at the time you establish the SMSF - if you are looking into investing in an investment property in the next 5 years? Or is it okay to just establish a corporate trustee structure now, and establish a bare trust when the time to borrow comes for an investment property? Is it fairly easy to establish a bare trust in the future, if you didnt establish it at the beginning? So in short, is it okay or is it wise to defer the Bare Trust establishment until it is actually needed?

3-) Is it realistically possible to be able to borrow money for an investment property once the Super reaches 20% LVR? Or would it be disallowed to use all or most of your SMSF into a property investment? How do the individual situations of corporate trustees (mom/dad) taken into account when borrowing for the Superannuation company? If young mom/dad dont have any equity built up yet, can they still borrow money into the SMSF to invest in real estate? In short, can a mom/dad without any house/mortgage/equity etc borrow money into their SMSF for an investment property?

4-) I see the point re going independent as it is quite easy to get legal documents online + apply for an ACN, TFN etc, super savings account etc...

I prefer to run things independently but not knowing potential costs (financial, time-wise and control-wise) of managing all yourself is putting me off...What are some reasonable costs of SMSF audit & SMSF tax & any other compliance work required - if done independently? Online it shows about $450 for an audit-only at some websites, and not sure what an accountant would charge for the tax return...Say $300 for the independent SMSF tax return, you are already up there with $750 annual running costs, excluding ASIC fees...

5-) Are there any other independent SMSF running costs that should be taken into account?

I would like to compare these potential independent costs, for example, with the $79 per month ($950 per year) deal of the Superaanuation Warehouse which includes all investment options, SMSF audits and tax returns, and all compliance work. With a once-off $950 fee for a Corporate Trustee setup...

Wondering if a professional setup and $950 running costs per year would save us lots of headaches in the long run and is close to the costs you would incur if all established and run independently.

Any direct or life experience in terms of running SMSFs independently vs via packaged systems will be appreciated. We are almost there- FINALLY, soon after our wedding we will go for it! )

 

[hiho]

Hi,
Few specific questions re corporate trustee structure. I am aware of hiho's thread and we have been preparing to go for a corporate trustee setup independently - with us applying to ASIC, doing our own documentation etc - thanks to the clarifications of kind forum members previously...Have been reviewing online super companies lately and would like to ask a few questions re possible investments and running costs...

1-) My understanding is that the corporate trustee structure cannot, by itself, borrow money to invest in an investment property and requires a Bare Trust. First of all is this correct, yes anything that one should be careful about while establishing? Yes, the bank may insist on their solicitors setting up the trust, figures of $5-10k are not unusual Cant an individual trustee structure, in any way, achieve the investment property strategy? dunno
2-) Secondly, if you establish with a corporate trustee structure, do you have to have a bare trust structure established at the time you establish the SMSF - if you are looking into investing in an investment property in the next 5 years? No Or is it okay to just establish a corporate trustee structure now, yes and establish a bare trust when the time to borrow comes for an investment property? Yes Is it fairly easy to establish a bare trust in the future, if you didnt establish it at the beginning? Yes So in short, is it okay or is it wise to defer the Bare Trust establishment until it is actually needed? Yes
3-) Is it realistically possible to be able to borrow money for an investment property once the Super reaches 20% LVR? Not quite, you need setup costs covered, the bank may only take 80% of your contributions and 80% of the rent earned into consideration Or would it be disallowed to use all or most of your SMSF into a property investment? No How do the individual situations of corporate trustees (mom/dad) taken into account when borrowing for the Superannuation company? If young mom/dad dont have any equity built up yet, can they still borrow money into the SMSF to invest in real estate? You need to convince the lendor that the asset is sound and the loan is sustainable In short, can a mom/dad without any house/mortgage/equity etc borrow money into their SMSF for an investment property? Yes
4-) I see the point re going independent as it is quite easy to get legal documents online + apply for an ACN, TFN etc, super savings account etc...
I prefer to run things independently but not knowing potential costs (financial, time-wise and control-wise) of managing all yourself is putting me off...What are some reasonable costs of SMSF audit & SMSF tax & any other compliance work required - if done independently? Online it shows about $450 for an audit-only at some websites, and not sure what an accountant would charge for the tax return...Say $300 for the independent SMSF tax return, you are already up there with $750 annual running costs, excluding ASIC fees...
5-) Are there any other independent SMSF running costs that should be taken into account?
I would like to compare these potential independent costs, for example, with the $79 per month ($950 per year) deal of the Superaanuation Warehouse which includes all investment options, SMSF audits and tax returns, and all compliance work. With a once-off $950 fee for a Corporate Trustee setup...
Wondering if a professional setup and $950 running costs per year would save us lots of headaches in the long run and is close to the costs you would incur if all established and run independently.
Any direct or life experience in terms of running SMSFs independently vs via packaged systems will be appreciated. We are almost there- FINALLY, soon after our wedding we will go for it!

I have answered some in bold above.

As far as costs go it depends on how much data there is to process, adding a property to your portfolio will increase the accounting on your SMSF.

Some of us have purchased BGL Simple Fund to manage all transactions, upfront cost $600 but over time will save thousands in bookkeeping fees.

Remember Self Managed Super keep it out of the hands of these online leeches

 

[nonrecourse]

I would say it is not realistic to have only 20% when investing in a property for your SMSF full stop. 30% with the bare trust would be more appropriate. A better way is to purchase a commercial building if you have a business with you as the main tenant and sublet part of the building out so you have two incomes.

If you can carry the mortgage with the rent you pay use the subtenants rent to stack bullion until you have 5% of the buildings total worth as a hedge. Then after that direct all the subtenants rent at paying down the mortgage.

Better to pay your SMSF mortgage weekly.

I think you will find that the bank will insist you have a corporate trustee to borrow in an SMSF. I think it has something to do with restrictions on borrowing and personal guarantee's by beneficiaries in the super fund?

Kind Regards
non recourse

 

[registered nutcase]

I have answered some in bold above.

As far as costs go it depends on how much data there is to process, adding a property to your portfolio will increase the accounting on your SMSF.

Some of us have purchased BGL Simple Fund to manage all transactions, upfront cost $600 but over time will save thousands in bookkeeping fees.

Remember Self Managed Super keep it out of the hands of these online leeches

Is the BGL instead of e-super fund?

 

[nonrecourse]

I have answered some in bold above.

As far as costs go it depends on how much data there is to process, adding a property to your portfolio will increase the accounting on your SMSF.

Some of us have purchased BGL Simple Fund to manage all transactions, upfront cost $600 but over time will save thousands in bookkeeping fees.

Remember Self Managed Super keep it out of the hands of these online leeches

Is the BGL instead of e-super fund?

BGL is accounting software that your SMSF can do its own accountind AND prepare an audit report that your auditor can use instead of re-inventing the wheel.

Kind Regards
non recourse

 

[Skyblues]

hiho and nonrecourse, thank you very much for your responses, it has cleared up quite a few issues.

I have done more asking around and it seems an external audit is costing no less than $400, I also downloaded the NAT71287 form to see how complicated it would be to do your own SMSF tax return (if allowed?) it seems there is a great deal of room for confusion and it is wiser to use an accountant for it - that adds another $400 at least.

I have always enjoyed doing things independently, doing our own individual tax returns for day jobs, have learnt to do running a business on the side from scratch on top of day jobs, the partnership tax return etc...but coming to a life stage before we poop out a baby, where I am extremely time poor and just wanna focus (when I can ) more on income generation/investment efforts by cutting admin whereever I can IF THERE IS NOT A HUGE COST OPPORTUNITY ETC...

So I must admit I am tempted to use something like e-superfund or Superannuation Warehouse...I understand hiho's point - 'it is SELF managed super, dont let those leeches manage it' sort of arguments, I do need someone who has more life experience or is using a packaged service to expand on that please:, a few follow up questions in the case of a corporate trustee structure,

1-) is it too difficult to break away from packaged deals, if you are unhappy within say 2-3 years
a-) to another packaged deal
b-) to running things independently...

2-) I know esuperfund makes you use ANZ account but I think that's just their preference, you can still use what you want, no? Other than such account usage type of limitations that are I suppose easy to work around, what limitations do you actually have in packaged deals that might matter? Are there any hidden costs or limitation that you only find out once you get past the establishment phase and start investing?

3-) It seems if you are running things independently it has a potential to be more costly than packaged deals...What control do you actually loose in a packaged service, in other words, what pros are there for running independently, that justify potential extra costs + extra admin?

Just reiterating my overall principle to go independent and am not resisting to it, but considering this is a critical choice, I would like to dig this issue more. Any food for thought, life experience to exemplify practical/vital differences between running independently or using a packaged super will be really helpful...I will greatly appreciate if someone can expand more on this issue please...