April 22, 2025 • 21 mins
Do you need a self managed super fund? Who benefits from it? How does it work? How much does it cost? Just how complicated is it? Join Canna Campbell - a financial planner for 20 years - and Fear & Greed's Michael Thompson as they explore everything you've ever needed to know about SMSFs.
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The information in this podcast is general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.
Canna Campbell is a Corporate Authorised Representative and Corporate Credit Representative of Wealthstream Financial Group Pty Ltd ABN 35 152 803 113 Australian Financial Services Licensee AFSL 412079.
See omnystudio.com/listener for privacy information.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Michael Thompson (00:01):
Welcome to How Do They Afford That, the podcast that
peaks into the financial lives of everyday Australian. So I'm
Michael Thompson. I'm an author and the co host of
the podcast Fear and Greed business news. As always, I'm
with Canna Campbell, financial planner and founder of SugarMammaTV, the
financial literacy platform that you'll find just about everywhere podcasts, books, Instagram, threads,
(00:21):
TikTok and more. Hello, Canna, what are we talking about today?
Canna Campbell (00:26):
I love that you asked me that we are talking
about bit of context. First, I was talking recently with
a friend about superannuation, which don't laugh. Don't laugh, because
that is actually the kind of conversation that I have
with people now, because that is the effect that you
and doing this podcast has had on me. They asked
(00:49):
me if I had a self managed super fund because
they didn't know whether they needed one as well. I
don't have a self managed super fund, but it did
make me wonder who does have a self managed super fund?
Kind of why would you have a self managed super fund?
Who benefits from having a self managed super fund? How
(01:11):
much it costs, what a self managed super fund actually
is probably should have started with that one. So this
is what we're going to get into today. Do I
need a self managed super fund? Before we get into
it though? And I know that you are itching to
set me straight on all of this. Just please remember
that everything we talk about is always general in nature.
It is never personal investment, strategic or product advice. It
(01:33):
is purely for financial education purposes only.
That's correct. We don't think about your financial situation, so
always reach out and speak to a financial planner on
us then for personal advice in reference to your own situation.
Michael Thompson (01:44):
Yeah. Absolutely, Let's start with the basics, shall we, Right
at the very very start. What exactly is a self
managed super fund?
Canna Campbell (01:52):
All right? Think of it this way. So a normal, everyday,
you know, retail super innuation fund is like going to
a restaurant for dinner. You walk in, you get greeted,
you get served, you can pick from the menu, it
gets delivered to you, gets taken away, and you don't
need to worry about cleaning up whatsoever. It's very easy
and you can just sit back and relax and enjoy
(02:13):
your time in the restaurant.
Michael Thompson (02:14):
You haven't been to a restaurant with me, have you?
I'm the most indecisive person. And so if there's a
group of people, I always make sure that I go
last to order because I need the extra time to decide.
And even then, by the time the waiter comes around
to me, I will not have decided. And it is
only the pressure put on me by the waiter to
(02:35):
make a decision so that they can in fact do
their job, that is what will help me decide.
Canna Campbell (02:41):
It's not annoying at all.
Michael Thompson (02:43):
That's exactly what Sean says, Please go on.
Canna Campbell (02:47):
So a self managed super fund is like hosting, say
a dinner party instead of going to a restaurant, So
all the responsibility falls back on you. You need to
think about who you can invite, picking a date, time,
organizing a menu, going to the supermarket and buying all
the ingredients, obviously doing all the cooking, setting up the table,
(03:09):
making sure everyone's happy, has a glass of wine in
their hand or a refreshment, and that everyone's enjoying their meal,
and then obviously cleaning up after everyone has left. So
essentially that's the difference between the two.
Michael Thompson (03:22):
So essentially one everything most things are done for you,
and the other one you're doing it.
Canna Campbell (03:26):
All your stuff exactly but with most self management funds
you can only have maximum of six members, so your
dinner party is quite limited, unless, of course, you have
like a corporate trustee, which makes it a little bit different.
But this is quite popular and more and more people
have self managed super funds these days.
Michael Thompson (03:43):
How popular are they? I'm assuming that they are growing
in popularity over time, particularly as there is a greater
focus on superannuation and what we're all doing with our superannuation.
There is more money going into super so I would
just assume that as an extent that there are more
people investigating smsfs as an option. That is a very
(04:05):
hard acronym to say. I'm just going to continue calling
them self managed super funds.
Canna Campbell (04:10):
Yes, you're right, about twenty five percent of all superinnuation
assets are actually a self managed super fund. Really, there's
over six hundred thousand self mensagent funds in Australia and
one point one million members and there's a I believe,
just under nine hundred billion assets in a self masup
fund structure.
Michael Thompson (04:29):
That is a lot. It's a lot lot more than
I was expecting. But if we look at the logic
behind it, and it probably leads me to my next
question of who is actually using a self managed super
fund that perhaps they are more perhaps savvy investors, possibly
earning more money, having a larger structure behind it, more
(04:50):
assets to put into this self managed super fund, so
they might actually be kind of sophisticated. Yeah, and as
a higher represent of higher income earners and things.
Canna Campbell (05:03):
However, I will share a stat with you in a
few minutes that actually contradicts that.
Michael Thompson (05:09):
Okay, come on, this is turning out, this.
Canna Campbell (05:12):
Will say, I'll save it because we need to talk about.
Michael Thompson (05:14):
Who is actually it is on track to become the
most confusing episode we have done. We started with the
most convoluted restaurant analogy I have ever heard. It was
good until you suddenly said no, your dinner party is
only allowed to have six people unless you have a
corporate structure for your dinner party. Or okay, all right,
this is this is getting intense. So okay, so who
does tend to have one? Were sophisticated investors? Yes?
Canna Campbell (05:35):
So business owners, high income earners often mum and dad
and investors as well, like to have a self manage
super fun But you are right, it's typically people who have,
you know, a large amount of experience when it comes
to investing, and you know they have a you know,
sophisticated investment strategy, because one of the key reasons why
people would use a self manag super fund is because
(05:56):
you have more control over the underlying investment. You know.
I was talking to someone the other day who is
actually invested in racehorse breeding in their self made a
super fund. And I know people who've looked at including
art as part of their overall investment strategy.
Michael Thompson (06:10):
So imagine it's hard to invest in racehorse breeding going
through your your main super fund if you were.
Canna Campbell (06:16):
Going on under a retail fund. Absolutely, so it does
give people that sort of control and flexibility.
Michael Thompson (06:23):
All right, is there then? And going back to the
question asked of me by my friend and kind of
do I have one? Why would I have one? And
at what point should I start considering one? Is there
a threshold at which it's something that you might actually
start considering? For instance, I know that part of what
(06:45):
part of the reason you would do it would be
to have greater control over the assets and things within
your superannuation. But is there a minimum amount that you
need to have in order to make it at least Worthwhile.
Canna Campbell (06:57):
There's no official threshold as such, but because it's expensive
to set up and to maintain, the general rule of
thumb is between about two hundred and fifty thousand to
five hundred thousand in order for to be cost effective.
Michael Thompson (07:11):
Okay, And that says the minimum the starting point, and
then from there you're growing exactly. Okay, big one for you. Now,
how do they work? I know this is a meaty,
meaty question and there is no one set kind of
structure for them, but just broadly, how do they work?
Canna Campbell (07:32):
Well, you have to apply online and then you have
to register them with the ATO, and then you have
to open up a bank account, and if you're going
to be having an online trading account, you need like
a broker account as well. So there is a lot
of paperwork involved, and there's a lot of documentation about
the investment strategy behind it, and also understanding all the
rules and regulations that go into making sure that it
(07:54):
is compliant and you understand like for example, the reports,
the tax obligations, the audio and so forth. It's a
lot of time involved.
Michael Thompson (08:03):
To be honest, there really is. It does sound as
though it is the kind of thing that if you
are considering it, it is a conversation straight away with
a financial advisor, financial planner.
Canna Campbell (08:15):
And an accountant, and so they really do need to
sit down and go through all the expenses and the
responsibilities because they all those responsibilities and risks actually come
back onto your own shoulders. So it's not for everyone.
Michael Thompson (08:29):
Okay, So if I was just to put together a
bit of a checklist, you want to make sure that
you have got enough assets to make it worthwhile to
begin just as your initial kind of starting point. You
want to actually make sure that you have a need
for it that can't be met by an existing industry
(08:51):
fund or a retail super fund, in that you want
more control over where it is going, or that you've
got very particular ideas for what you want to do
with the money and the assets within your superannuation, something
that can't be met by one of these other funds
where they manage the whole process for you exactly.
Canna Campbell (09:09):
And you also need time. You know, there is a
lot of time that is involved in running a self
manage super fund as well as the risk and the responsibility.
Michael Thompson (09:17):
I want to get to some of the risks and
the responsibilities as part of it, but just finishing off
the checklist. Then you need to make sure that you're
having this conversation with your accountant, with your financial advisor
to see whether it is actually going to be beneficial
for you or whether you're just going to be making
a massive amount of work for yourself that could potentially
put you in a hole exactly.
Canna Campbell (09:37):
And one of the most important conversations I'd recommend someone
speak to a financial planner and an accountant about whether
or not a self manship fund is right for them
is what are the tax benefits. So I talk a
lot about this thing called in specie transfer benefits and
essentially is where you can avoid triggering capital gains tax
when you go to retire because with most industry and
(10:01):
retail superannuation accounts, when you shift your assets from accumulation
phase to a pension phase, use trigger a capital gains tax. Now,
obviously that capital gains tax depends on how long you've
held that asset, but it ranges between ten to fifteen percent. However,
with some special retail supernuation accounts, and there aren't many,
but with self managed super funds, you can actually, depending
on the structure, avoid having to pay this tax because
(10:24):
they have this thing called an n specie transfer benefit
within a self manage super fund, So asking your accountant
and financial planner to sit down and explain and see
whether that is actually relevant and applicable to you. If
you have this self married super fund may actually give
you some great long term tax savings if it's not
available in your current retail or industry supernation fund.
Michael Thompson (10:45):
Okay, we're going to take a quick break. When we
come back, I want to talk a little bit more
about some of the benefits. Some of the big risks though,
because you do need to go into this process with
your eyes very much wide open, some of the costs
associated with the regulation. We talked about, the paperwork and
the red tape. It's starting to sound I'm not saying
you've turned me off an SMSF, but you are certainly
(11:07):
making it very very clear to me that there is
a lot more involved.
Canna Campbell (11:10):
I'll explain why in second very good.
Michael Thompson (11:20):
Cana. We are talking today about superannuation. We are talking
more specifically about self managed super funds and do you
need one, who are they suited to, how do they work?
Everything that you could possibly need to know about smsfs.
We did touch on the main benefits. It is all
about having greater control over your money, over your assets,
and being able to be quite directive in terms of
(11:44):
where it's going. Is that the number one benefit along
with the tax kind of reasons as to why you
might do it.
Canna Campbell (11:52):
I'd say that the two sort of key reasons. Obviously,
you know, the bigger the self managed super fund is
the potential savings as well, and obviously you have maybe
some state planning benefits along the way. But also you
can you know, if you've got say up to six members,
you can potentially buy an asset that you wouldn't be
able to afford to buy in your superannuation alone. So
you know, you might see a commercial property and between
(12:15):
you and your other members you can afford to buy
that commercial property, whereas you wouldn't have been able to have
that wasn't an opportunity that you can consider it was
just you on your own and these other members.
Michael Thompson (12:24):
Are they typically kind of family? For instance? Is that
what you would most often see or are you talking
about kind of It wouldn't be colleagues and things. It
is more the people that you are actually planning for
retirement with, right.
Canna Campbell (12:36):
Yes, is the most common with families, and occasionally you
know business partners.
Michael Thompson (12:41):
Okay from a dad investors, Yeah, sure. That is interesting though,
that you would do it in order to buy a
larger asset, which because I have heard about people that
are buying property, buildings, et cetera, and then setting it
all up with their financial planner and their accountant to
actually make the most of having access to a larger
asset and potentially an asset that's that's got a fairly
(13:04):
good return attached to it. So in some circumstances different
types of property.
Canna Campbell (13:08):
Yes, exactly. And I've seen situations where people have gone
in together and they're you know, knocked things down or
rebuilt things or renovated things and onsold them and they've
never been able to have that opportunity when they're on
their own.
Michael Thompson (13:22):
The risks, and this is probably the big one, and
we've there are so many. Okay, all right, well let's
try and condense them down into say two minutes. If
you had to rank them, What would be the biggest
risk here? Is it getting in over your head.
Canna Campbell (13:38):
There are huge responsibilities, so you've got to comply with
some pretty complicated superannuation laws and the penalties are quite scary.
So penalties up to forty five percent of the fund's
market asset value.
Michael Thompson (13:52):
Oh wow, So it's not just a monetary figure that
they nominate. It is actually based on the amount within
the fund itself.
Canna Campbell (13:59):
It can be so it can be fines that you know,
and then of course there's legal costs as well, and
even up jail time up to five years if you
haven't intentionally that is of course broken the laws. So
this is why it's so important. You've got to go
in eyes wide open to know that you are completely
comfortable taking on all these risks and they stack up
(14:20):
on your advantage. The other risk is obviously it's time consuming.
I don't know a single person right now who has
the time to take on these types of responsibilities. And
I know I probably I am a bit anti self
managed super funds, which I'll explain in a second, but
you know, there's a lot of ongoing management required, investment decisions,
huge amounts of paperwork. You know, you've got to make
(14:42):
sure you've actually got the time to stay on top
of these responsibilities and also all the deadlines that go
along with the paperwork. It also can be really expensive
for small superannuation balances, which is why I said you
want to make sure that you've got a decent amount
of money between you, because there's all the annual fees,
the compliance costs, the professional co of an accountant, and
I find your partner if you're using them, So sometimes
(15:03):
it's not necessarily efficient. And then you've got the investment
risk and only you'll put yourself to blame if things
go wrong. And if you've got family members involved or
so you're doing with friends, if they aren't happy that
the returns and the results, it can cause issues, especially
(15:23):
if you then need to wind things down and you
need to debate buy someone out. And it's not a
liquid asset. This is where the wheels can come off
quite quickly.
Michael Thompson (15:33):
Wow, there's a lot of risks.
Canna Campbell (15:35):
I sound negative and blank's main.
Michael Thompson (15:37):
Why So why are you antiet? I mean there could
be any one of those those things, but is there
a main reason?
Canna Campbell (15:45):
Well, speaking from experience, so I have had so many
people come to me and say, Canna, we've got this
self managed super fund. There's so much involved. We didn't
really understand what we were signing up to in the
first place. Our accountant recommended it. It's expensive and when
I sit down and look at what's going on most
of the time. That money has been sitting in cash
(16:05):
for the last five, six, seven years, So you know,
and I think it was not recommended in the right
type of way for these particular people. The money wasn't
managed properly, and it's potentially have compliance issues because it
hasn't followed necessarily an investment strategy, because the documentation wasn't
done correctly. So you know, that could have sat in
(16:28):
a retail or an industry fund in cash and they
would have had no stresses, no paperwork. Yes, they would
have had to pay some fees, but probably would have
been cheaper than the self managed super fund. So I
feel like a lot of people that they have been
sold a self managed super fund for the wrong reasons.
And you look at, okay, the retail fund and even
industry funds really up their game in the level of
(16:51):
services and product offering an ability to diversify your money.
So it just is disappointing to see so many people
get burned. And so I've so many times I've had
to wind people's self made super funds down with the
assistance of an accountant and get them into something that
actually suits their needs and gets them back on track
and make sure that their money is actually complied and
(17:13):
it's actually aligned to their goals. So I'm not a
huge fan and personally someone that she asked me the
other day with her, I would set a self man
super fund that you. Tom asked me, should we be
looking at this? And I was like, as soon as
I spoke Tom about it, and I was like, oh
my god, forget it. Stop right there. Don't even bother
talking to me about it again, because there is a
lot of work involved, and there are great quality superinherotion
platforms that do I think a superior job keeping your
(17:38):
time and energy back.
Michael Thompson (17:39):
Okay, it sounds to me as though starting point is
not even so much the amount of money you have
in your super It is whether you are a savvy
investor that you have the time and the knowledge and
the willingness to devote what is going to be a
fairly significant chunk of time and effort and energy into
(18:02):
making sure that this is that this is working for
you exactly, that it is not just something that you go. Okay,
I know that there are multiple options out there for
my superannuation. I'm going to go with SMSF because I
know that you can do more with your money. For instance,
I can.
Canna Campbell (18:16):
Access something that's not available on an industry or retail
superinnuation account.
Michael Thompson (18:19):
Okay, it just sounds like it is absolutely something where
you need to be talking to a financial advisor and
an accountant to see whether it is genuinely right for you.
It does worry me that you say that a lot
of people have been kind of sold into self managed
super funds, because presumably it is somebody within the industry
broadly who has suggested it to them, but it's not
quite right for them.
Canna Campbell (18:39):
And that leads me to my stat approximately sixteen percent
of self manage super funds are sitting wholly in cash.
So this is a problem that's still lingering, and you
know it leads the question, hang on, are you really
upholding all your members' best interests at heart? If you
all this money is sitting just in cash doing not much,
especially when you look at inflation, and that's when you like,
(19:01):
you're opening yourself up to like your investment strategy being questioned,
what's the game plan behind this?
Michael Thompson (19:08):
And so just in terms of the fees, the fees
can be quite high, I would assume, because it's not
just the administration fees and the fees associated with registering
and maintaining it, but also the fees that you additional
fees that you would need to pay in order to
get the professional support from an accountant or from a
financial advisor to put it all together and to maintain
it right.
Canna Campbell (19:28):
You've got to pay for those reports to be completed,
and you've got to obviously pay for all the auditing
involved and returns to be lodged. So look, it can vary,
but as a as a rough ballpark, between two to
five six thousand dollars a year.
Michael Thompson (19:44):
Okay, that's a decent whack.
Canna Campbell (19:46):
When do you think we've got five hundred thousand dollars
in super and you caught five, you know, years just
going just to maintain it. And okay, you sometimes might
find something better value for money elsewhere.
Michael Thompson (19:56):
You know. I don't like being negative on this show,
and I don't like the this idea that we are
kind of coming in here just to say, hey, don't
try something. But it is just one of those situations
where you need to have the conversation with a professional
to see whether this is suited to you. It is
not the kind of thing where you can just rush
into it because you've heard something about it. You might
have seen something online. You might have seen an influencer
(20:17):
or something online going on about how they've got assets
within their self managed super funds that they can't access
somewhere else. You need to have the conversation for yourself
and make sure that there's one hundred percent suited to you.
Canna Campbell (20:28):
Absolutely.
Michael Thompson (20:30):
Ah, that was a very serious episode. It was minimal fun.
My favorite part was the restaurant's analogy. I thought, Oh,
here we go, we're going to be We're going to
be in for something here, and then it complicated and convoluted.
And then at the end of the restaurant like you
left with this massive, massive bill of kind of five
thousand dollars. That was a one.
Canna Campbell (20:52):
Are the restaurants the cheap version?
Michael Thompson (20:54):
Oh that's right, that's the dinner party isn't much?
Canna Campbell (20:55):
You're around the wrong way.
Michael Thompson (20:57):
Who could have seen that coming? That was the most
compl catered analogy in the first place. Of course I
was going to stuff it up.
Canna Campbell (21:02):
I thought it was brilliant.
Michael Thompson (21:03):
It was. It was quite good at times. Canna. If
somebody wants more information from you, where do they find you?
Canna Campbell (21:10):
The best place is to send me an email or
a DM sorry on Instagram at Sugar Mama TV.
Michael Thompson (21:15):
And you can hear me every day with Sean Aylmer
on Fear and Greed daily business news for people who
make their own decisions. Thank you for listening to how
Do They Afford That? Remember to hit follow on the podcast.
And the best thing you can do is tell somebody
else or Betty at send them this podcast if if you,
like me, have had a conversation with a friend about
starting a self managed self managed super fun which I
(21:36):
know is probably a fairly niche category of people that
have had this conversation in the last few weeks, But
if you have had that conversation, then send them the
link to this episode so that they can get a
bit of a starting point for the research. Spread the
word about how do they ford that? Thank you for
your company. Join us again next week.
Welcome to How Do They Afford That, the podcast that
peaks into the financial lives of everyday Australian. So I'm
Michael Thompson. I'm an author and the co host of
the podcast Fear and Greed business news. As always, I'm
with Canna Campbell, financial planner and founder of SugarMammaTV, the
financial literacy platform that you'll find just about everywhere podcasts, books, Instagram, threads,
(00:21):
TikTok and more. Hello, Canna, what are we talking about today?
Canna Campbell (00:26):
I love that you asked me that we are talking
about bit of context. First, I was talking recently with
a friend about superannuation, which don't laugh. Don't laugh, because
that is actually the kind of conversation that I have
with people now, because that is the effect that you
and doing this podcast has had on me. They asked
(00:49):
me if I had a self managed super fund because
they didn't know whether they needed one as well. I
don't have a self managed super fund, but it did
make me wonder who does have a self managed super fund?
Kind of why would you have a self managed super fund?
Who benefits from having a self managed super fund? How
(01:11):
much it costs, what a self managed super fund actually
is probably should have started with that one. So this
is what we're going to get into today. Do I
need a self managed super fund? Before we get into
it though? And I know that you are itching to
set me straight on all of this. Just please remember
that everything we talk about is always general in nature.
It is never personal investment, strategic or product advice. It
(01:33):
is purely for financial education purposes only.
That's correct. We don't think about your financial situation, so
always reach out and speak to a financial planner on
us then for personal advice in reference to your own situation.
Michael Thompson (01:44):
Yeah. Absolutely, Let's start with the basics, shall we, Right
at the very very start. What exactly is a self
managed super fund?
Canna Campbell (01:52):
All right? Think of it this way. So a normal, everyday,
you know, retail super innuation fund is like going to
a restaurant for dinner. You walk in, you get greeted,
you get served, you can pick from the menu, it
gets delivered to you, gets taken away, and you don't
need to worry about cleaning up whatsoever. It's very easy
and you can just sit back and relax and enjoy
(02:13):
your time in the restaurant.
Michael Thompson (02:14):
You haven't been to a restaurant with me, have you?
I'm the most indecisive person. And so if there's a
group of people, I always make sure that I go
last to order because I need the extra time to decide.
And even then, by the time the waiter comes around
to me, I will not have decided. And it is
only the pressure put on me by the waiter to
(02:35):
make a decision so that they can in fact do
their job, that is what will help me decide.
Canna Campbell (02:41):
It's not annoying at all.
Michael Thompson (02:43):
That's exactly what Sean says, Please go on.
Canna Campbell (02:47):
So a self managed super fund is like hosting, say
a dinner party instead of going to a restaurant, So
all the responsibility falls back on you. You need to
think about who you can invite, picking a date, time,
organizing a menu, going to the supermarket and buying all
the ingredients, obviously doing all the cooking, setting up the table,
(03:09):
making sure everyone's happy, has a glass of wine in
their hand or a refreshment, and that everyone's enjoying their meal,
and then obviously cleaning up after everyone has left. So
essentially that's the difference between the two.
Michael Thompson (03:22):
So essentially one everything most things are done for you,
and the other one you're doing it.
Canna Campbell (03:26):
All your stuff exactly but with most self management funds
you can only have maximum of six members, so your
dinner party is quite limited, unless, of course, you have
like a corporate trustee, which makes it a little bit different.
But this is quite popular and more and more people
have self managed super funds these days.
Michael Thompson (03:43):
How popular are they? I'm assuming that they are growing
in popularity over time, particularly as there is a greater
focus on superannuation and what we're all doing with our superannuation.
There is more money going into super so I would
just assume that as an extent that there are more
people investigating smsfs as an option. That is a very
(04:05):
hard acronym to say. I'm just going to continue calling
them self managed super funds.
Canna Campbell (04:10):
Yes, you're right, about twenty five percent of all superinnuation
assets are actually a self managed super fund. Really, there's
over six hundred thousand self mensagent funds in Australia and
one point one million members and there's a I believe,
just under nine hundred billion assets in a self masup
fund structure.
Michael Thompson (04:29):
That is a lot. It's a lot lot more than
I was expecting. But if we look at the logic
behind it, and it probably leads me to my next
question of who is actually using a self managed super
fund that perhaps they are more perhaps savvy investors, possibly
earning more money, having a larger structure behind it, more
(04:50):
assets to put into this self managed super fund, so
they might actually be kind of sophisticated. Yeah, and as
a higher represent of higher income earners and things.
Canna Campbell (05:03):
However, I will share a stat with you in a
few minutes that actually contradicts that.
Michael Thompson (05:09):
Okay, come on, this is turning out, this.
Canna Campbell (05:12):
Will say, I'll save it because we need to talk about.
Michael Thompson (05:14):
Who is actually it is on track to become the
most confusing episode we have done. We started with the
most convoluted restaurant analogy I have ever heard. It was
good until you suddenly said no, your dinner party is
only allowed to have six people unless you have a
corporate structure for your dinner party. Or okay, all right,
this is this is getting intense. So okay, so who
does tend to have one? Were sophisticated investors? Yes?
Canna Campbell (05:35):
So business owners, high income earners often mum and dad
and investors as well, like to have a self manage
super fun But you are right, it's typically people who have,
you know, a large amount of experience when it comes
to investing, and you know they have a you know,
sophisticated investment strategy, because one of the key reasons why
people would use a self manag super fund is because
(05:56):
you have more control over the underlying investment. You know.
I was talking to someone the other day who is
actually invested in racehorse breeding in their self made a
super fund. And I know people who've looked at including
art as part of their overall investment strategy.
Michael Thompson (06:10):
So imagine it's hard to invest in racehorse breeding going
through your your main super fund if you were.
Canna Campbell (06:16):
Going on under a retail fund. Absolutely, so it does
give people that sort of control and flexibility.
Michael Thompson (06:23):
All right, is there then? And going back to the
question asked of me by my friend and kind of
do I have one? Why would I have one? And
at what point should I start considering one? Is there
a threshold at which it's something that you might actually
start considering? For instance, I know that part of what
(06:45):
part of the reason you would do it would be
to have greater control over the assets and things within
your superannuation. But is there a minimum amount that you
need to have in order to make it at least Worthwhile.
Canna Campbell (06:57):
There's no official threshold as such, but because it's expensive
to set up and to maintain, the general rule of
thumb is between about two hundred and fifty thousand to
five hundred thousand in order for to be cost effective.
Michael Thompson (07:11):
Okay, And that says the minimum the starting point, and
then from there you're growing exactly. Okay, big one for you. Now,
how do they work? I know this is a meaty,
meaty question and there is no one set kind of
structure for them, but just broadly, how do they work?
Canna Campbell (07:32):
Well, you have to apply online and then you have
to register them with the ATO, and then you have
to open up a bank account, and if you're going
to be having an online trading account, you need like
a broker account as well. So there is a lot
of paperwork involved, and there's a lot of documentation about
the investment strategy behind it, and also understanding all the
rules and regulations that go into making sure that it
(07:54):
is compliant and you understand like for example, the reports,
the tax obligations, the audio and so forth. It's a
lot of time involved.
Michael Thompson (08:03):
To be honest, there really is. It does sound as
though it is the kind of thing that if you
are considering it, it is a conversation straight away with
a financial advisor, financial planner.
Canna Campbell (08:15):
And an accountant, and so they really do need to
sit down and go through all the expenses and the
responsibilities because they all those responsibilities and risks actually come
back onto your own shoulders. So it's not for everyone.
Michael Thompson (08:29):
Okay, So if I was just to put together a
bit of a checklist, you want to make sure that
you have got enough assets to make it worthwhile to
begin just as your initial kind of starting point. You
want to actually make sure that you have a need
for it that can't be met by an existing industry
(08:51):
fund or a retail super fund, in that you want
more control over where it is going, or that you've
got very particular ideas for what you want to do
with the money and the assets within your superannuation, something
that can't be met by one of these other funds
where they manage the whole process for you exactly.
Canna Campbell (09:09):
And you also need time. You know, there is a
lot of time that is involved in running a self
manage super fund as well as the risk and the responsibility.
Michael Thompson (09:17):
I want to get to some of the risks and
the responsibilities as part of it, but just finishing off
the checklist. Then you need to make sure that you're
having this conversation with your accountant, with your financial advisor
to see whether it is actually going to be beneficial
for you or whether you're just going to be making
a massive amount of work for yourself that could potentially
put you in a hole exactly.
Canna Campbell (09:37):
And one of the most important conversations I'd recommend someone
speak to a financial planner and an accountant about whether
or not a self manship fund is right for them
is what are the tax benefits. So I talk a
lot about this thing called in specie transfer benefits and
essentially is where you can avoid triggering capital gains tax
when you go to retire because with most industry and
(10:01):
retail superannuation accounts, when you shift your assets from accumulation
phase to a pension phase, use trigger a capital gains tax. Now,
obviously that capital gains tax depends on how long you've
held that asset, but it ranges between ten to fifteen percent. However,
with some special retail supernuation accounts, and there aren't many,
but with self managed super funds, you can actually, depending
on the structure, avoid having to pay this tax because
(10:24):
they have this thing called an n specie transfer benefit
within a self manage super fund, So asking your accountant
and financial planner to sit down and explain and see
whether that is actually relevant and applicable to you. If
you have this self married super fund may actually give
you some great long term tax savings if it's not
available in your current retail or industry supernation fund.
Michael Thompson (10:45):
Okay, we're going to take a quick break. When we
come back, I want to talk a little bit more
about some of the benefits. Some of the big risks though,
because you do need to go into this process with
your eyes very much wide open, some of the costs
associated with the regulation. We talked about, the paperwork and
the red tape. It's starting to sound I'm not saying
you've turned me off an SMSF, but you are certainly
(11:07):
making it very very clear to me that there is
a lot more involved.
Canna Campbell (11:10):
I'll explain why in second very good.
Michael Thompson (11:20):
Cana. We are talking today about superannuation. We are talking
more specifically about self managed super funds and do you
need one, who are they suited to, how do they work?
Everything that you could possibly need to know about smsfs.
We did touch on the main benefits. It is all
about having greater control over your money, over your assets,
and being able to be quite directive in terms of
(11:44):
where it's going. Is that the number one benefit along
with the tax kind of reasons as to why you
might do it.
Canna Campbell (11:52):
I'd say that the two sort of key reasons. Obviously,
you know, the bigger the self managed super fund is
the potential savings as well, and obviously you have maybe
some state planning benefits along the way. But also you
can you know, if you've got say up to six members,
you can potentially buy an asset that you wouldn't be
able to afford to buy in your superannuation alone. So
you know, you might see a commercial property and between
(12:15):
you and your other members you can afford to buy
that commercial property, whereas you wouldn't have been able to have
that wasn't an opportunity that you can consider it was
just you on your own and these other members.
Michael Thompson (12:24):
Are they typically kind of family? For instance? Is that
what you would most often see or are you talking
about kind of It wouldn't be colleagues and things. It
is more the people that you are actually planning for
retirement with, right.
Canna Campbell (12:36):
Yes, is the most common with families, and occasionally you
know business partners.
Michael Thompson (12:41):
Okay from a dad investors, Yeah, sure. That is interesting though,
that you would do it in order to buy a
larger asset, which because I have heard about people that
are buying property, buildings, et cetera, and then setting it
all up with their financial planner and their accountant to
actually make the most of having access to a larger
asset and potentially an asset that's that's got a fairly
(13:04):
good return attached to it. So in some circumstances different
types of property.
Canna Campbell (13:08):
Yes, exactly. And I've seen situations where people have gone
in together and they're you know, knocked things down or
rebuilt things or renovated things and onsold them and they've
never been able to have that opportunity when they're on
their own.
Michael Thompson (13:22):
The risks, and this is probably the big one, and
we've there are so many. Okay, all right, well let's
try and condense them down into say two minutes. If
you had to rank them, What would be the biggest
risk here? Is it getting in over your head.
Canna Campbell (13:38):
There are huge responsibilities, so you've got to comply with
some pretty complicated superannuation laws and the penalties are quite scary.
So penalties up to forty five percent of the fund's
market asset value.
Michael Thompson (13:52):
Oh wow, So it's not just a monetary figure that
they nominate. It is actually based on the amount within
the fund itself.
Canna Campbell (13:59):
It can be so it can be fines that you know,
and then of course there's legal costs as well, and
even up jail time up to five years if you
haven't intentionally that is of course broken the laws. So
this is why it's so important. You've got to go
in eyes wide open to know that you are completely
comfortable taking on all these risks and they stack up
(14:20):
on your advantage. The other risk is obviously it's time consuming.
I don't know a single person right now who has
the time to take on these types of responsibilities. And
I know I probably I am a bit anti self
managed super funds, which I'll explain in a second, but
you know, there's a lot of ongoing management required, investment decisions,
huge amounts of paperwork. You know, you've got to make
(14:42):
sure you've actually got the time to stay on top
of these responsibilities and also all the deadlines that go
along with the paperwork. It also can be really expensive
for small superannuation balances, which is why I said you
want to make sure that you've got a decent amount
of money between you, because there's all the annual fees,
the compliance costs, the professional co of an accountant, and
I find your partner if you're using them, So sometimes
(15:03):
it's not necessarily efficient. And then you've got the investment
risk and only you'll put yourself to blame if things
go wrong. And if you've got family members involved or
so you're doing with friends, if they aren't happy that
the returns and the results, it can cause issues, especially
(15:23):
if you then need to wind things down and you
need to debate buy someone out. And it's not a
liquid asset. This is where the wheels can come off
quite quickly.
Michael Thompson (15:33):
Wow, there's a lot of risks.
Canna Campbell (15:35):
I sound negative and blank's main.
Michael Thompson (15:37):
Why So why are you antiet? I mean there could
be any one of those those things, but is there
a main reason?
Canna Campbell (15:45):
Well, speaking from experience, so I have had so many
people come to me and say, Canna, we've got this
self managed super fund. There's so much involved. We didn't
really understand what we were signing up to in the
first place. Our accountant recommended it. It's expensive and when
I sit down and look at what's going on most
of the time. That money has been sitting in cash
(16:05):
for the last five, six, seven years, So you know,
and I think it was not recommended in the right
type of way for these particular people. The money wasn't
managed properly, and it's potentially have compliance issues because it
hasn't followed necessarily an investment strategy, because the documentation wasn't
done correctly. So you know, that could have sat in
(16:28):
a retail or an industry fund in cash and they
would have had no stresses, no paperwork. Yes, they would
have had to pay some fees, but probably would have
been cheaper than the self managed super fund. So I
feel like a lot of people that they have been
sold a self managed super fund for the wrong reasons.
And you look at, okay, the retail fund and even
industry funds really up their game in the level of
(16:51):
services and product offering an ability to diversify your money.
So it just is disappointing to see so many people
get burned. And so I've so many times I've had
to wind people's self made super funds down with the
assistance of an accountant and get them into something that
actually suits their needs and gets them back on track
and make sure that their money is actually complied and
(17:13):
it's actually aligned to their goals. So I'm not a
huge fan and personally someone that she asked me the
other day with her, I would set a self man
super fund that you. Tom asked me, should we be
looking at this? And I was like, as soon as
I spoke Tom about it, and I was like, oh
my god, forget it. Stop right there. Don't even bother
talking to me about it again, because there is a
lot of work involved, and there are great quality superinherotion
platforms that do I think a superior job keeping your
(17:38):
time and energy back.
Michael Thompson (17:39):
Okay, it sounds to me as though starting point is
not even so much the amount of money you have
in your super It is whether you are a savvy
investor that you have the time and the knowledge and
the willingness to devote what is going to be a
fairly significant chunk of time and effort and energy into
(18:02):
making sure that this is that this is working for
you exactly, that it is not just something that you go. Okay,
I know that there are multiple options out there for
my superannuation. I'm going to go with SMSF because I
know that you can do more with your money. For instance,
I can.
Canna Campbell (18:16):
Access something that's not available on an industry or retail
superinnuation account.
Michael Thompson (18:19):
Okay, it just sounds like it is absolutely something where
you need to be talking to a financial advisor and
an accountant to see whether it is genuinely right for you.
It does worry me that you say that a lot
of people have been kind of sold into self managed
super funds, because presumably it is somebody within the industry
broadly who has suggested it to them, but it's not
quite right for them.
Canna Campbell (18:39):
And that leads me to my stat approximately sixteen percent
of self manage super funds are sitting wholly in cash.
So this is a problem that's still lingering, and you
know it leads the question, hang on, are you really
upholding all your members' best interests at heart? If you
all this money is sitting just in cash doing not much,
especially when you look at inflation, and that's when you like,
(19:01):
you're opening yourself up to like your investment strategy being questioned,
what's the game plan behind this?
Michael Thompson (19:08):
And so just in terms of the fees, the fees
can be quite high, I would assume, because it's not
just the administration fees and the fees associated with registering
and maintaining it, but also the fees that you additional
fees that you would need to pay in order to
get the professional support from an accountant or from a
financial advisor to put it all together and to maintain
it right.
Canna Campbell (19:28):
You've got to pay for those reports to be completed,
and you've got to obviously pay for all the auditing
involved and returns to be lodged. So look, it can vary,
but as a as a rough ballpark, between two to
five six thousand dollars a year.
Michael Thompson (19:44):
Okay, that's a decent whack.
Canna Campbell (19:46):
When do you think we've got five hundred thousand dollars
in super and you caught five, you know, years just
going just to maintain it. And okay, you sometimes might
find something better value for money elsewhere.
Michael Thompson (19:56):
You know. I don't like being negative on this show,
and I don't like the this idea that we are
kind of coming in here just to say, hey, don't
try something. But it is just one of those situations
where you need to have the conversation with a professional
to see whether this is suited to you. It is
not the kind of thing where you can just rush
into it because you've heard something about it. You might
have seen something online. You might have seen an influencer
(20:17):
or something online going on about how they've got assets
within their self managed super funds that they can't access
somewhere else. You need to have the conversation for yourself
and make sure that there's one hundred percent suited to you.
Canna Campbell (20:28):
Absolutely.
Michael Thompson (20:30):
Ah, that was a very serious episode. It was minimal fun.
My favorite part was the restaurant's analogy. I thought, Oh,
here we go, we're going to be We're going to
be in for something here, and then it complicated and convoluted.
And then at the end of the restaurant like you
left with this massive, massive bill of kind of five
thousand dollars. That was a one.
Canna Campbell (20:52):
Are the restaurants the cheap version?
Michael Thompson (20:54):
Oh that's right, that's the dinner party isn't much?
Canna Campbell (20:55):
You're around the wrong way.
Michael Thompson (20:57):
Who could have seen that coming? That was the most
compl catered analogy in the first place. Of course I
was going to stuff it up.
Canna Campbell (21:02):
I thought it was brilliant.
Michael Thompson (21:03):
It was. It was quite good at times. Canna. If
somebody wants more information from you, where do they find you?
Canna Campbell (21:10):
The best place is to send me an email or
a DM sorry on Instagram at Sugar Mama TV.
Michael Thompson (21:15):
And you can hear me every day with Sean Aylmer
on Fear and Greed daily business news for people who
make their own decisions. Thank you for listening to how
Do They Afford That? Remember to hit follow on the podcast.
And the best thing you can do is tell somebody
else or Betty at send them this podcast if if you,
like me, have had a conversation with a friend about
starting a self managed self managed super fun which I
(21:36):
know is probably a fairly niche category of people that
have had this conversation in the last few weeks, But
if you have had that conversation, then send them the
link to this episode so that they can get a
bit of a starting point for the research. Spread the
word about how do they ford that? Thank you for
your company. Join us again next week.
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