September 5, 2025 • 59 mins
In this episode of SMSF Insider, host Troy welcomes Paul Whitehead, Head of Client Relations at Blue Chip SMSF Services, to discuss the setup process of establishing a self-managed super fund (SMSF). Troy shares impressive statistics about their quick turnaround times for applications, highlighting a record of just seven days from application to rollover. The conversation covers essential aspects of SMSFs, including the advantages of investing in property within an SMSF, tax implications such as low capital gains tax, and the significance of these investments at retirement. Paul also touches on some challenges and horror stories from the setup process, providing insights into what prospective SMSF trustees should be aware of. Tune in for valuable information and tips to help you navigate the complexities of SMSFs and take charge of your financial freedom.
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Please note: The information provided in this recording is for coaching and educational purposes only. It should not be considered personal financial advice. Everyone’s situation is different, so before acting on any of the content discussed, please seek independent financial advice tailored to your specific circumstances.
Timestamps:
00:00:00 - 00:00:00: Introduction
00:01:04 - Disclaimer and Episode Overview
00:01:15 - Guest Introduction: Paul Whitehead
00:01:41 - The SMSF Setup Process
00:02:26 - Understanding Blue Chip SMSF Services
00:03:30 - Investing in Property through SMSF
00:04:43 - Bear Trust Explained
00:05:50 - Application Forms and Required Documentation
00:06:44 - Setting Up the Cash Management Account
00:07:43 - Rollover Process and Challenges
00:08:54 - Client Support and Communication
00:10:37 - No Advice Model in SMSF Setup
00:11:05 - Client Investment Preferences
00:12:52 - Types of Properties Purchased by Clients
00:14:58 - Contract Types for Property Purchases
00:16:07 - Referral Partner Experiences
00:17:40 - Speed and Efficiency of Blue Chip Services
00:18:40 - Entity Name Establishment for Contracts
00:19:09 - Insurance Considerations in SMSF
00:20:50 - Tax Advantages of Property in SMSF
00:21:12 - Horror Stories and Client Missteps
00:23:45 - Dealing with Client Misuse of Funds
00:25:09 - Education on SMSF Compliance
00:26:06 - Crypto Investment Challenges
00:27:39 - Referral Arrangements for Crypto
00:29:28 - Commercial Property and Leaseback Options
00:30:38 - Market Rate Requirements for Leasing
00:31:38 - Living in SMSF Properties: A No-Go
00:32:23 - Selling Personal Property to SMSF
00:33:40 - Long-Term Property Performance Insights
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Our record from application through to rollover is seven days, which
I'm pretty sure is unheard of. That's not usual, but that is
You need an entity name ASAP. How quickly can you get that entity name
Yeah, we can usually have the entity names within sort of two or three
days. When you invest in property inside Super, Negative gearing doesn't
(00:20):
really apply because the tax rate is already very low. It's only
15%. If they were to sell the property after owning it for more than
12 months, they'll only pay 10% capital gains tax, which is ridiculously low.
Welcome to SMSF Insider, where we help busy
professionals to gain financial independence using an SMSF. Hi,
(00:41):
I'm Troy, founder of Blue Chip SMSF Services. Now over the last
20 years, I've helped thousands of Aussies manage the complexities of
self-managed super funds. And in this podcast, I'll answer your questions, break
down the myths, so you can take charge of your financial freedom. Let's get
into it. Hey guys, just a quick disclaimer and just a reminder that
this is not personal advice. So make sure you speak with a licensed advisor
(01:01):
before making any investment decision. So welcome to this edition
of SMSF Insider. Today we're going to be talking to Paul
Whitehead. He's Head of Client Relations at Blue Chip SMSF
Services. So he's going to be talking to us a little bit about the
setup process of establishing an SMSF. And he's
going to touch on a couple of little horror stories as well. But
(01:23):
Paul, welcome to the show. Thanks, Matt. Hopefully not too many horror stories.
Exactly. Hoping you could run me through a bit
about the process of establishing an SMSF. Once
you get an application that comes through, can
you just sort of maybe talk me through what happens after that
Do you want me to go back to the very beginning, getting the
(01:45):
actual lead from the outset? So when I talk
to the client and then explain the process. So my explanation of
the process to a client will explain the setup process. So
normally what would happen is one of our referral partners, so
we'll get a lead through a referral partner, or we might get
(02:06):
a direct lead from online, from Google. or
some of the marking that we've been doing. So we'll get a raw lead
coming in terms of a client. So what
I like to do is set a Zoom meeting and
run through the process in detail. So Zoom
(02:26):
meeting usually takes about half an hour. And what I
do first is give the client a bit of a background
into who we are, so they understand who they're talking with. So
the first thing that I do is explain that there are actually a
couple of companies within our organization. The foundational company is
Blue Chip Financial, which was started 23 years ago
(02:47):
by itself. It started as a fairly typical financial planning
company doing typical financial planning activities. Self-managed super funds
were a thing back then, but it has become a really popular
and prevalent thing to do. And more recently, about
five years ago, you started Bluechip SMSF Services, so
Bluechip SMSF being the sister company to Bluechip Financial.
(03:09):
And obviously all we do at Bluechip SMSF is set up and
administer self-managed super funds. And
then most of my clients come through as clients
that are interested in property as an as an asset class So,
you know That's sort of fairly typical most
people that are setting SMSFs up so they can access Assets
(03:32):
that they can't get an industry or retail super fund direct access
to residential property or commercial property and
as we discussed earlier crypto is a pretty big thing at the moment,
but I don't do it do a lot of a lot in the crypto space. But
yeah, property is a really big part of what I
talk to my clients about. Obviously, there are some differences. If
(03:55):
you're investing in property, most people are going to be looking to borrow money.
So if you're borrowing money within a self-managed super
fund, then you need to set up a second trust
called a bear trust. That's B-A-R-E, bear trust, not bear
as in grizzly bear. Sometimes called a holding trust or
a custodial trust. The bear
(04:17):
trust specifically holds the
property with a loan attached. If the client was buying a property without a
loan, which not too many people do these days, you wouldn't need
a bear trust. So the property specifically holds the property with a loan
attached. In terms of the setup
process, setting up a self-managed
(04:38):
super fund that can purchase property is a fairly complex thing to
do. That's what we do all the heavy lifting and the technical stuff
in the background for our clients. We've made it extremely
easy to get the ball rolling. There are two application forms
in relation to setting up the SMSF
with the Bayer Trust. So one's for the SMSF, one is for the Bayer Trust.
(05:01):
The application forms are actually identical except for the names.
So one for the SMSF, one for the Bayer Trust. All we need as supporting
documentation to get the ball rolling is some ID, driver's
licence front and back, and a Medicare card, and a super statement. Once
we have those items, we can get the ball rolling in the background. So
the first thing that we do is we'll apply for
(05:25):
the company entity. So the structure of
the SMSF and the Bayer Trust is a self-managed super fund
and a Bayer Trust with corporate trustees. Corporate trustees is
just a type of company. So we
apply for the ABN and the ACN and the tax file number
for those companies. Once
(05:46):
we have those, then we can generate the trust
documents. So the trust documents are the standard legal
documents that formalize the setup of the SMSF. We
express post those out to the client. Unfortunately, we're
still in the dark ages. Trust documents have to be wet signed. So
we tag them up with sign here stickers, or the guys in the office tag them up with sign here
(06:09):
stickers, makes it really straightforward for the client. send those
out. Once the clients sign their trust documents and
return them to our office, then we
can move on to setting up the cash management
account. So every SMSF must have
a bank account attached to it. It's a special kind of bank
(06:29):
account called a cash management account. The
cash management account is essentially the hub of their SMSF. Every dollar
that goes into their SMSF and every dollar that goes out
goes through that bank account. So it's a really important part
of the SMSF. Once the bank account is all
set up and compliant, then we can call
(06:51):
rollovers from their current super funds. The rollover process is
part of the process that is out of our control, in a sense. The
super funds, industry and retail super funds, like
to play games at that time. So they pretend that they've
lost stocks and that sort of thing. So that
is part of the process that's out of our control. in
(07:14):
some sense. But once we eventually get the rollover funds
into the cash management account, then it's really handed back
over to the guys that might be helping the
client with the lending part of the process and
the property part of the process. And
then the client will secure the property, usually with funding
(07:36):
from a lender as well. And then Bob's your
Fairly, so it sounds like it's a fairly straightforward, although
how you've explained it is, sounds
quite lengthy. The actual setup process sounds quite simple. You've
got two application forms, one for the
(07:57):
SMSF and one for the Bayer Trust. So that sounds pretty straightforward. Pretty
straightforward. So that's pretty much all you need apart from those
two pieces of those two documents, which you said they're identical.
So two one-page documents, one for the Bear Trust,
one for the SMSF. You just need a super statement and some ID. Is
(08:19):
Yeah. So I usually explain to the clients that, you know, it sounds
pretty simple from their point of view because it is all we need them to
do is provide those documents, which takes about 15, 20 minutes
if they really want to get the process moving. And
then we do the heavy lifting in the background, which is some fairly
technical stuff that we need to do in the
(08:40):
background, setting up the entities in the right way, generating
those trust documents, which are pretty lengthy. But
Yeah. So if the client is, you know, let's say
they've got some questions, do you give them
a call or how do you
(09:00):
sort of hold their hand through that process if they're sort of not
sure what they're signing or they want a bit more information or they're not
Yeah. So on my Zoom call, I
will always make sure that the clients program my name
and number into their phone whilst I'm on the call. And they know
that I'll be their personal contact through the setup process
(09:23):
and beyond. So if they've got questions about anything at all, they come straight
through to me. I let them know that we've got a pretty big support team,
a pretty big admin team that work behind the scenes. But
I'm the only person that they need to speak to. personal
contact details. We do have a dedicated
office line, but they don't
(09:45):
even need to call that. They can just come through to me personally. They'll also have my email
address, but most of them will text me or call
me. And I'll usually hold
their hand through the
signing of the trust documents. Some clients just sign them straight
away and just get them back, and some clients want to go through them in
(10:06):
a lot of detail. Every now and then, if a client really wants to
go through the trust documents in detail, which is fine, I'd
actually rather them do that than I'll do a
Zoom meeting for the trust documents. as well, because
the trust documents can look a little bit confronting when
the clients first do get them. They're quite thick, and
(10:27):
there's a lot of terminology which most
clients won't really understand. So I'm
Yep. And so also I noticed part of
that process is there's no advice that's given through this process. So
it's essentially what you're saying is essentially clients
(10:52):
may already know what they want to do. They might already know what they want to invest in.
They're simply using this service to
establish the fund in an efficient way without
Spot on. The majority of clients, 99 clients
out of 100 that I speak to, they've already decided what they
want to do. They don't need advice for
(11:15):
that. They've already decided that they... Most of my clients want to invest
in property. That's what they want to do. So it's probably more
important in a sense that they get
an understanding before they come to us,
they get an understanding if their fund can borrow money, that
that part of it is, you know, they get the green light and that's all been
(11:36):
ticked off. So if the client hasn't engaged a broker, I
might refer them on to a broker or tell them to
find their own broker. Obviously, they need to make sure
that if they are doing that, the broker understands SMSF lending, There
is some nuance, there's some difference with
SMSF lending as to, you know, in comparison to lending
(11:58):
in your personal name. So that's pretty important. There's no
point setting up an SMSF to purchase property if the SMSF
can't borrow money. So I always make sure that that
box has been ticked before the client sets up an SMSF. But
again, most of the clients that I speak to, they
may have been referred by a broker or referred by a property group
(12:20):
or a buyer's agent, and those guys have already sort
of ticked that box. And by the time they get to me, they
know that their fund can borrow money because that's already been assessed. They
obviously know that they want that they want to buy property. Sometimes they
may have even sort of got a bit of an idea of what type of property, or
in some cases, the property has already been selected,
(12:44):
or earmarked at least. And it's
just a matter of talking them through the setup process and getting
Yep. And just with the property,
so drilling down a little bit on the types of properties that most of
your clients are purchasing, are they residential,
industrial, commercial? And
(13:06):
can you tell me a little bit about that? And if it is a
residential, for example, is it a one-part contract
or a two-part contract? I know when you're purchasing something in your own name, You
can, or a different entity that's other than a self-managed super
fund, you can have what's called a two-part contract where you're purchasing
the land and you're paying the stamp duty on the land and then you go through the build process.
(13:30):
Can you do that with an SMSF or does it need to be a one-part contract? And
can you tell me a little bit about that, just a bit about what your clients are
purchasing and a little bit drilling down a little bit
Yeah, so you can buy
any type of property inside an SMSF. We
(13:51):
do commercial, you know, SMSF
setups for commercial properties,
also industrial, but the vast majority is residential.
The vast majority, you know, the
industrial and commercial properties, sort of one
(14:11):
in a hundred, you know, by far the most popular
is residential. And yeah, there
are differences. If you're investing in property inside super, it has to
be a one part contract. And
that's partly to do with the bear trust, with
the bear trust structure. So yeah,
(14:35):
so it has to be a one part contract. You can't buy a piece of land and
then build on it. It has to be either a completed house,
completed townhouse or a completed unit. It
doesn't have to be completed in the sense that the
actual development is completed and handed over,
(14:58):
Does that come down to, I guess that probably comes down to the single asset rule, which
is part of the Superannuation Act. I'm
assuming it would be coming down to that, and that's probably the reason you can't have
those two part contracts. That's right, yeah. With regards to,
so with referral partners, for example, that have
sort of, that you've, you know, you look after one of the key, like
(15:20):
a key account manager essentially for some other referral
partners. Tell me a little bit about, their experience
before they've used Blue Chip, they
may have been using somebody else to establish the
funds, and then something may have happened that
the process may have been not quite what they expected.
(15:44):
And then tell me a little bit about those referral partners that
you're working with that have used somebody in the past and
then have started using the Blue Chip service. And
Yeah, so one of the reasons why our referral
partners really like to use us is because of
(16:05):
what we spoke about a little bit earlier in terms of how
simple we've made it for our clients. The clients have already decided
they want to invest in property. We don't need to go through that
advice process. Some in
the past, the clients, sorry, our referral partners
might have been dealing with financial planning
(16:26):
companies or other SMSF establishment
companies that might have as
part of their process an advice part,
which means that it just adds a layer of complexity that's not
necessary. Of course, the clients are quite
(16:47):
welcome to do that if that's what they want to do, but Most of our clients
have already decided what they want to do. They don't necessarily need to
do that. So we've just taken a lot of that complexity out of it, made
it really, really simple for the clients. And
because of the simplicity of our process, it's
(17:07):
a lot faster as well, not just
because of the simplicity, but also because we've got a pretty amazing admin
team in the background. But yeah, a lot of the complexity
And do you think that comes down to more to
do with the no advice? The fact that it is a no advice model,
(17:28):
you're able to do away with obviously when
there is advice in the middle of establishing the
fund, it does. there is, that is quite a
Not just lengthy, but complex and very, very
expensive. I mean, you would know better than anyone,
you did that model for 23 years. So,
(17:52):
yeah, so we've just taken the complexity out of it. We just provide
all the legal documentation, make sure that the fund's set
Yeah. So when these clients are purchasing
residential property, for example, they may have already had
residential property, they've purchased a family home perhaps 20 years
(18:13):
ago, or they've seen some growth in that, they've maybe purchased an
investment property in their own name, they've seen some growth in that. Is it more
that they understand property, do you think, more than
any other asset class and feel comfortable with property
as opposed to being in equities, which not
a lot of people really understand. I mean, it is a beast
(18:34):
in itself when you're talking about equities. But do you think maybe it's
resi property because, I know Aussies do have
a love affair with property. Do you think they've had
some experience with bricks and mortar in the past and they're happy to
adapt that investment? sort of philosophy over
Yeah, for sure. Most of our clients, they're
(18:56):
looking to continue their portfolio.
So they might have one or two properties in
their personal name. They can't borrow any more in their personal name.
but they really want to continue building their property portfolio. And
the perfect way to do that is to continue that
(19:18):
inside superannuation. Obviously, there's some differences.
One of the main differences with owning property inside
superannuation is how the property is treated from a tax point
of view. Obviously, when you're investing
in property in your personal name, you get those tax deductions in
your personal name. Everyone's sort of heard of negative gearing
(19:41):
and how that works. When you invest in property inside super,
negative gearing doesn't really apply because the tax rate is already
very low. It's only 15%. If they were to sell the property
after owning it for more than 12 months, they'll only pay 10% capital
gains tax, which is ridiculously low. But
the magic happens at retirement. Once the
(20:02):
clients hit retirement age, which for the majority of them is
preservation age, around about 60, and then
any time after that that they decide to retire, and you
don't have to retire at 60, most people don't have the ability to retire
at 60, so whenever they decide to retire after that, when
they put the fund into pension phase, the tax
(20:24):
rate goes down to zero. You won't pay a cent of capital gains
tax if they were to sell the property. And if their strategy
was to pay the property off and live off the rental income forever and
a day until they drop off the perch, they won't pay any tax on that either. So
it's a really generous tax environment to own assets like residential property.
So yeah, so it's not just about owning property. There's
(20:46):
some pretty cool tax advantages to doing it inside Super
Yeah, that's a really powerful one when you're talking about the tax
advantages being zero. There's no other,
apart from having a company established in the Cayman Islands,
there's no other real tax benefits apart
(21:07):
from The biggest one is obviously, as you said, paying zero taxes.
You can't beat it. Yeah, that's pretty cool. What
about some sort of horror stories? Have you had
any sort of horror stories over the years that you can
sort of tell me about that clients perhaps that
might not be following, doing things they shouldn't
(21:30):
do with their fund? you know, how
do you deal with that? What do you do? Do you contact the
client? How do you fix that problem and
educate them? And what do you do in that sort
I suppose you might call it a temptation. When you have an SMSF, I
mentioned it, a little bit earlier, that there is a bank account
(21:53):
that's attached to the SMSF. And for all intents and
purposes, it is a bank account. You
don't get a bank card to go and sort of tap or anything
like that. But it is a bank account, because owning property inside
Super, you still pay all the same expenses. There's
still rates to pay. There's still those type of
(22:14):
property expenses to pay. And they must be paid out
of that bank account. I suppose for some clients there
is a temptation to use that bank account for things that they shouldn't be
using it for. And obviously, if you've got an
SMSF, you can only use your SMSF funds for one reason, one
reason only, and that is for the betterment of your retirement. For
(22:35):
some clients, there is a temptation. And we have had clients in
the past that have used the funds that are sitting in their CMA
to go on holidays. That has happened. And yeah, I
think that's about as bad a thing you
could possibly do with your SMC. To go on holiday. To go on holiday, yep.
(22:57):
So yeah, that's pretty bad. If that happens,
so with our tax team,
we've got someone that has a look at all of the transactions that
have happened with all of our funds, which is incredible. And
if there are any sort of dodgy looking transactions, legal
withdrawals, they'll be flagged. And
(23:21):
if it's one of the clients that's come through my channel, then I'll give
the client a call, ask them what they've done. usually,
I mean obviously if the client's gone on holidays they know they've done the wrong thing,
but there have been occasions where the client has,
so I'll give you an example, so a client might
(23:41):
do some banking They might have a Macquarie cash
management account, and they might do their personal banking with Macquarie
as well. And purely by accident, they may
have used the Macquarie cash management account to pay a personal bill,
and it was just a pure accident. So that happens as
well. Usually, if the client fixes it immediately, then
(24:05):
we'll just sort of write the relevant minutes, and then
it's fixed pretty quickly. But, yeah, if
the client's spent a lot of money and they've gone on holidays and they don't have
the ability to pay it back, then they're going to
Just quickly guys, if you're a busy professional fed up with traditional super
funds and overwhelmed by the setup of your SMSF, we can help.
(24:27):
Book in a call with my team using the link in the show notes and let's
build your future on your terms. Now, back to the episode.
Just on that, I know when clients
do, if a client does withdraw money before meeting
a condition of release, that money is
then added to their personal income. So if they withdraw 100 grand,
(24:49):
that then adds onto their personal income and then they're taxed
at up to 45 cents in the dollar. So not only do they have
to return the 100, they're then up for 45 grand in tax on top of that.
Pretty big no-no, but... With,
Just on that before I move on. A
(25:12):
lot of the clients, they don't realize that as part of
owning an SMSF, an external audit gets done
on their super fund every year. So they can't hide
anything. There is an external auditor that essentially
reports back to the ATO of that type of conduct. So
that type of thing can't be hidden. And
(25:37):
there's also a tax return that gets done on their SMSF as
well. So we go through all their transactions
in detail as well. So it's never going to be hidden. It's always
going to come out. Other horror stories? I'd
say that the majority of them are to do with
(25:57):
that type of thing. But there
is. So crypto is another one of those assets.
Obviously, crypto is a little bit more of a recent phenomenon.
But everyone wants to get into the crypto space. And a lot
of people are setting up self-made super funds to purchase crypto
that they may not be able to do with the industry and retail super fund. And
(26:20):
whilst a lot of clients do really, really well in the
crypto space, unfortunately, it's one of those areas where there
seems to be a lot of people getting scammed. So
there have been a few clients that have given their money to, you
know, dodgy crypto scammers and they've lost
it and they'll never get it back. So that sort of
(26:41):
created a few issues for people that want to invest in
cryptocurrency with their superannuation. A lot of the banks have
sort of cracked down on that sort of thing. And some
of them won't even allow transactions to
Yeah, well, that's pretty scary
(27:02):
when you hear sort of those stories. But would you say, like,
out of, I mean, how many of those would
you see where clients have
been scammed? And is there an education piece around that, around
if someone's contacting you, how does that phone call
come about when you chat to the client? Firstly, if
(27:25):
they're withdrawing funds when they haven't met condition
of release and then and then also what
happens when if they've been scammed and is there further education
I really try to push the point on
to our clients not to do anything that they're not 100% sure
(27:47):
about before they run it through myself or or someone in the admin
team, even if they want to get involved in a
crypto exchange, we can do some checks and balances behind
the scenes to make sure that the crypto exchange is
is legit. So I really try to press
the point onto clients is don't do anything that you're not 100% sure
(28:10):
about before you run it past us. That is a service that,
I mean, it's not even a service, really. It's just something that we
can check in the background. But, you
know, unfortunately, it is a self-managed super fund. And if
they want to sort of go off and do something under their own steam, then there's
not a lot that we can do to stop them before
(28:36):
Yeah, OK, that's pretty interesting stuff.
What about working with some of these referral partners? I just
want to delve a little bit deeper into some of
these other referral partners that may have come
across our services. I
guess what has been the feedback from
(28:59):
these guys that have set up funds in the past with perhaps
another service provider, might be a financial planner or
an accountant, and then using a sort of
a premium document service like ours? I just want
to delve a little bit deeper into that. what's been
the time frames of establishing funds and in
(29:20):
the past with whoever they were using in the past with and then
using the blue chip service. What are
This is going to sound a little bit like patting ourselves on the back, but I
can only sort of tell you what they've told us is Often,
a lot of the property guys that are out there trying to find these properties
(29:41):
are really trying to find a premium
property for their clients. They're sort of fairly sought after,
fairly hard to find. So if they do find something, then
they want to make sure that they're going to be able to secure it really quickly. So
setting up the fund in a really
quick timeframe is important to not just the client, but also for
(30:05):
the referrers that's scouring Australia trying
to find these really sought after properties. So the
fact that we can do them so quickly, our average
time frame from application through to funds
rolled over is somewhere between four and five weeks, as long as
the client's playing their part. as long as the industry
(30:26):
retail super funds aren't playing silly buggers with rolling funds over,
we can usually get the funds rolled
over in four to five weeks, which is unbelievably quick. Our
record from application through to rollovers is seven days,
which I'm pretty sure is unheard of. That's
(30:48):
not usual, but that is our record. Obviously,
all the stars had to align, but yeah, it's
usually on average about four to five weeks. So that's a really important part
of it. And part of the reason why
we're able to do it so quickly is because we've taken out
all of that unnecessary complexity and expense. So
(31:10):
yeah, so it's very much appreciated from our
Yep. And if, for example,
they need an entity name to be on a contract, can you
establish, can you at least get the entity name for
the referral partner to go on the contract? Can you get that, at least
(31:33):
have that? What sort of time frame are you looking at if a
referral partner reads you and says, Mate, I've got a property that
will really suit this client. It's the existing contract's
falling over. I need an entity name ASAP. How quickly can you
get that entity name established for
(31:54):
Yeah, we can usually have the entity names within sort of two or
three days. So most
of our referral partners have never seen that sort of speed
before. So yeah, two or three days for the actual bear
trust entity details that will go on the contract of sale. Obviously,
the roll over funds hitting the bank account, that's
(32:16):
definitely going to take usually between four
and five weeks, but we can get the entity names really quickly
And I guess that's to do with,
you know, in the middle of that, there's no advice piece in the middle of
the establishment process. So I guess that's where most of the time is being cut
(32:40):
Yeah, the first thing that we do once we get
the application and the ID and the statement, the first thing that we
do is apply for those entities. And yeah,
What about clients that perhaps have some insurances in
their existing super fund and they're
(33:02):
concerned about losing those insurances? What
We always, without question, will only
do a partial rollover to begin with. So it's always a partial rollover.
A partial rollover just means leaving the minimum balance in
the current fund, the industry or retail super fund, to maintain
(33:24):
the insurances that are in there. It would be a
pretty big no-no for us to do a full rollover, hoping
that the client's going to be able to get new insurances inside the SMSF if
for some reason they're uninsurable or maybe they've
had a health issue in the past where the insurers
(33:45):
just don't want to touch them. So we always, we're really cognizant of
doing a partial rollover. And a partial rollover just means leaving
the minimum balance, which is usually about $5,000 or $6,000, depending on
the fund. So you can just leave a small amount of money in their current fund.
That means that they can keep their insurances. We roll the rest over into
the cash management account so they can organize the property and the lending. And
(34:08):
then later down the track, if they want to apply for
new insurance inside the SMSF, we
can actually do that through our sister company, the foundational company,
which is Blue Chip Financial. That's really why that's
the main function of Blue Chip Financial these days is providing
general advice around insurances
(34:31):
Yep. And so with
regards that, once they've applied for their insurances, it's
been accepted, for example, what happens after that point?
Yep. So if they're able to successfully apply
for new insurance, once the new insurance is in force
inside the SMSF, at that point, we can close
(34:53):
down the old account, roll the
remaining funds into the cash management account, and then we can provide
details to their employer so they can start directing their
Yeah, great. So you sort of, with that type of
strategy, you're not sort of leaving the client sort of
(35:15):
in limbo without insurances for any point in time? Exactly,
So we won't close down the old accounts until the
Yeah. Yeah. Yeah, great. What about if
they can't get insurance? What happens there if they can't get insurance? They've
What happens in that scenario? In that
(35:37):
case, then, it's just status quo. They keep the insurances that they already
have. We'll keep the contributions from
their employer going into the old fund to make sure that there's always
enough funds in there, in the old fund, to keep those
insurances. And then, as they need to top up their SMSF, They
can do a rollover every three or six months or whenever they
(35:59):
like really, which is a pretty simple process. So it doesn't
really change anything. They keep the insurances they have, always
making sure to keep the minimum balance, keep the contributions going into that.
that old fund and at least they've got something, at least they've got some
sort of insurance cover in the case of the worst
Yeah, so I guess having those contributions continue
(36:23):
to go into the existing fund prevents, you
know, the policy from lapsing, for example, if they redirect it straight to
the SMSF and there's no contributions going in, then obviously the
client runs the risk of losing the losing the insurance because there's no
Some of the funds will cancel the insurance after
six or 12 months of contributions not going into the old account. So
(36:46):
it's important to make sure that contributions are going into
the old account. And then you can simply just send us
an email saying that they want to do a small rollover, whether
it's $2,000 or $3,000 or $4,000, whatever the case may be, into
Yep. And once the fund's established, it
(37:08):
needs to have a tax return audit done at the end of the financial
year. Typically, it's around February the following year.
But what happens in that scenario? Does the team reach
out to the clients? What involvement? What
do they need to provide to the team to get all the
Yeah, so our tax team will have all of our
(37:31):
clients earmarked where their return
is due. They always get them done early, plenty of
time. There's actually
some advantages for the client doing them early. And
then if it's property that they own,
it's kind of very similar to owning property in your personal name. there
(37:55):
are still items that the fund can get a
tax credit for. So depreciation, for
example, the fund, the only difference is the fund gets
a tax credit. They don't get money back in their hand. Obviously, that's
a little bit different. But all the things that you can get
a deduction for owning property in your personal name, you can still
(38:18):
Yep. So with regards to
that, so the fund is established, they have their tax return done.
Is the first year the hardest year, obviously collating
information? Or what happens after the
first tax return is done? Does it become easier and a little bit more? What
(38:38):
Yeah, I usually say to clients that You
want to make sure that they do understand that owning
an SMSF is a little bit different, maybe
a lot different to just having an industry or retail super fund where
it's just set and forget. You don't literally have to look at it ever. If
you own property, particularly inside a super fund, then there is going
(38:59):
to be an audit. There is going to be a tax return. And they are
going to have to provide documents just like they do if they own property in
their personal name. Most of the clients that have owned property before,
they know that they're going to have to come up with their rates notices and
all of those normal things and provide them to us. Some
clients are super organized. Some clients just send
(39:21):
them into us as they receive them, which is fine. And our tax
team sort of file them away on the client's file as they come
in. So however, the client wants to collate
their documents if they're really organised and they just have them all ready to
go at tax time, or if they just want to send them in as
they come in. Either's fine with us. We don't mind.
(39:43):
We're happy to work with the clients in that regard. But
yeah, it is best that they keep all
of those receipts because it's
good from a compliance point of view that if there is a transaction, Inside
the cash management account that it does sort of relate to a
Yeah, of course What about so what
(40:06):
about if the clients have funds left over so they purchased a property for
example, they've got money left over They don't
Yeah, so So it would depend on the client. Some
clients just might have property as the
cornerstone of their investment strategy, and they might just want to
have some exposure, say, for example, to the share
(40:29):
market. So it's pretty simple to set up some sort
of managed fund in the name of their SMSF so
that they get that exposure to the share market. Property is
the cornerstone of their investment strategy. Macquarie
actually have a fairly
unique product called an accelerator account. So we always
(40:49):
attach an accelerator account to the cash management account. The accelerator
account's just a higher interest savings account. It
is a type of investment, though. Whilst it is in cash,
it's still a type of investment. But they can move money in and out
of it as they see fit, and they just get a slightly higher return.
Most clients, if they do have a longer investment
(41:13):
horizon, retirement horizon, if you like, they're
going to want a better return than what cash is going to get them. So they
usually just want some exposure to shares and there's plenty of
good products out there that we can help
them establish in terms of managed
funds. Some clients are a little bit more adventurous and
(41:35):
they might be a little bit more sophisticated And they might already
be doing some trading, some share trading in
their own name. We can help them set up the platform in the
right way so they can do that inside their super fund. Some
clients, as we spoke about earlier, are right into the crypto space.
So they might have a bit of property and a little bit of crypto. So again,
(41:55):
we can help them set
When you talk about helping them set up accounts, and
probably not crypto, but certainly in the equity
space, is that something that's handled by the licensed entity
in providing any sort of general advice
(42:19):
Yeah, we won't provide the clients personal advice.
Again, that sort of comes back to what we were talking about earlier. Personal advice has
to be done very formally. And if the client does want to get personal
financial advice, they can seek someone that would do that. There
are plenty of financial planners that will provide them
with personal financial advice. Again, it's a fairly formal,
(42:42):
fairly expensive process, but there's no problem whatsoever. in
doing that when you've got an SMSF. Anything that we
do will be general advice in nature. A lot of
clients just want something that's very passive, that's just going to grow, that
they don't really have to sort of have much
involvement with. So it might just be something like a Vanguard ETF
(43:03):
that's just going to track the different indexes. They
can choose the level of risk that they want to take, whether
it's balanced or growth or high growth. And
it just sort of does its thing over time. They don't really have
Yeah, so it's good that they can obviously have
a bit of diversification if property is
(43:25):
the cornerstone of their strategy and then they
want some diversification then obviously helping the client establish
Yeah, well, it's one of the beauties of owning an SMSF. The investment universe
gets opened up to pretty much
everything. I mean, gold is another
(43:47):
really popular asset class at the moment, or precious metals, gold
and silver. You and I had a great
chat to the guys at Ainslie Bullion fairly recently, and
they've helped a few of our clients get involved in the gold. and
silver space that have been really, really helpful to a lot of our clients. So
gold's another asset that's pretty, either physical
(44:10):
gold or other types of gold investments they
Yeah, and when you spoke briefly about crypto,
and I know you're not providing advice in
that space, or we're not providing advice in that space, is that just like a referral that
(44:32):
Yeah, we've got a really good relationship with
Jake from CoinStash that's helped a lot of our clients. Obviously,
it's just a referral arrangement where a lot of the clients, they want to get involved,
but they don't know how. Jake's just been a really good contact
that if the client doesn't know who to speak to or how to get involved, we can
send an email to him and say, hey Jake, he's a
(44:54):
client. They don't know what to do in the crypto space. Can you help them
get everything together? And yeah, he's
What about, let's say, if someone wants
to Sort of buy some
industrial property or commercial and and lease it back
to themselves You know, I know most of
(45:17):
your clients are in the resi space, but can
Can someone yeah, yeah, that's a fairly fairly
popular thing to do with SMS F's a lot of a lot of business
owners, so you know, it's a fairly popular thing
to do for for doctors, accountants, they might be working out
of the premises and their SMSF can purchase the premises
(45:41):
that they work out of and they can lease it back to
their funds. So that's a pretty popular thing to do as
Yeah. And then with Regath, they are doing that. The
lease, that needs to be, I guess, at market rates. You
couldn't sort of charge your fund more than over
(46:03):
Yeah, there is some complexity. It's a little bit different, obviously,
than having a property in the residential space
where it's just a, you know, there's a residential market and
it's sort of, everyone knows how the residential property
market works. It is a little bit different within the commercial
space where you can rent the property that you're working
(46:25):
out of to yourself. So yeah, it has to be market rates.
You can't sort of jack up the rent and pay your
super fund more than what the market dictates. So it is a little bit different
Yeah. And then just in that resi space,
going back to the resi space, do you, I
mean, do you get many clients that say, oh, can I live in the
(46:48):
Yeah, that was probably
one of the horror stories that I could have spoken to you about. I
actually get asked that a lot is, can we buy a property
and live in it? Can we buy a property and rent it
to our son? A really popular thing to do or popular
thing that clients want to do is they
(47:10):
buy a property in the town or city where their
son or daughter is going to go to university. and then
have their kid rent
that property off them. But again, there's
a lot of sort of complexity around doing that. So yeah,
normally I'd say just go in the general rental
(47:33):
pool. You definitely don't want to be renting a
property to a family member or a friend. It's
a pretty big no-no. And yeah,
so that is something that a lot of clients want to do. And another really, really
common thing that I get asked a lot is if they can buy the property and
live in it or have it as a holiday home, which is obviously a
(47:56):
pretty big no-no. Once they're retired, they can do what they want
with it. But yeah, definitely not while they're working. Whilst the fund's
Yeah. Okay. What about if a client, for
example, let's say they already own a property, a residential
property, and they want their SMSF to
(48:17):
purchase it off themselves to free up cash flow. Can they do
You're throwing some pretty good ones at me now, mate. Is
it possible? It is possible, but
definitely not advisable for the same reasons. If
you were to do it, then it would have to be
(48:39):
done at market rates, Very, very
complex. It is going to cause red flags, and we would
Yeah. So yeah, it's something you definitely can't do. So
you can do it with commercial and industrial. You can purchase business
real property off yourself with your self-managed super fund. But when it comes to
(49:01):
residential property, big no-no. You can't do that.
Yeah. With
regards to any other, so property's obviously the main asset
class. I know you've spent many years in the property space.
Is there, how have you seen property
(49:22):
sort of perform over the last, say, 20 years? Like, how has
that sort of performed? If you look back to when
you first started, you know, 20 odd
years ago in the property space and being
around it for so long, How have you seen property perform sort
Yeah. I mean, if you look back, I mean, I've been in the property
(49:44):
space for 20, 25 years, something
like that. You know, at some different
place in Australia, property has generally
been booming. Whether it's the
boom that Sydney had, then it was Melbourne, and Brisbane's
sort of been more recent. But in between there, there's
(50:07):
been Tasmania, which has been an unbelievable market. Adelaide's
been really strong. Perth. So
property is one of those things. There's not just one
property market. There are many, many, many property markets in
and around Australia. And that's why we always recommend that if
you want to get involved in property, then use a
(50:30):
property specialist. I think that's really, really important. A
lot of people, though, You know, they
might know their local market and be pretty familiar, and
they might know a fair bit about their local market, and they might be really comfortable investing
in their local market. But if you have no idea what you're doing, then definitely
use a property specialist, a buyer's agent, or someone like that. But
(50:53):
yeah, I mean, over the last sort of 10 or 20 years, property has
at least doubled and then
What about, let's say, if your property
(51:14):
has obviously done quite well over the last 20 odd years, there
is obviously in all markets, there's ups and downs. There's certainly
ups at the moment, but there's certainly, obviously, looking back over
the last 20 years, there's been some downs as well. And
liquidity does become a problem at that point in time. Do
(51:35):
you, what do you sort of, is there any sort of education piece around clients
when it, during, you know, what are
you sort of saying to clients in, not so much in
the last sort of five, but, you know, in the last downturn that you can remember,
was there sort of any sort of conversational pieces around, you
know, sort of staying the course or what sort of advice do
(51:56):
you provide to clients in those sort of, in those sort
That's a really good question. I mean, one thing that we know for sure,
that if you hold the property for long enough, that it will go up in
value, whether that happens in year one or year 15. I
mean, there's a bit of a myth that you hear a lot in the property space,
(52:16):
that property doubles every seven to 10 years. That's
an absolute myth. On average, it may
have done that over time. But sometimes property may
not double for over a 15-year period,
sometimes even longer. What we do know is if you're
able to hold the property for long enough, that it will go up in
(52:36):
value over a long period of time. And the good thing
about owning property inside superannuation, superannuation is
the ultimate long-term investment. You literally can't touch it until
you get to retirement age. So in many ways, it is
a really, really good place to buy property because you
are going to hold it for a long period of time. And when you sort of factor in
(52:57):
what we spoke about earlier, that big
advantage that property has, over owning
property in your personal name, a superannuation, I should say, owning
property in super, the advantage that you don't get in your
personal name is how it's treated from a tax point of view. If you're, say,
a 40-year-old that might be holding a property for two property
(53:18):
cycles, if you were to buy that property in your personal name, and
you decide to sell it at some point, you're probably going to be up for a
tax bill in the hundreds of thousands of dollars. If you own
it in superannuation, then that money stays with you. You
don't pay that money back to the taxman. So
it is the ultimate long-term investment. And the longer
(53:41):
you hold the property, the less risk there is. One
thing that we don't advise is holding a property or
trying Own any assets and and and
get in and out really quickly and try to time the market That's really really
hard to do if not impossible Even Warren
Buffett, you know, he doesn't claim to have a crystal ball But
(54:04):
the longer you hold the property the less the less risk there is so
it's the ultimate long-term investment and it works really well within superannuation
Yeah, I guess it's a good point. It is
quite a... It is playing the long game with property,
but not just property, I guess. With most asset classes, obviously,
the longer you... It's time in the market, not time in the market, as
(54:27):
we've talked about previously. But what
about with regards
to if, let's say, you've got You
know, we talked about downturns. What about clients
that have sort of invested in other asset classes where there's been down,
you know, they may have invested in sort of shares
(54:50):
or something like that and they're experiencing some down, you
know, we're going through a trough period or there's some
sort of a... a technical recession of
some sort, or there's downturn. Is there conversational
educational pieces around that with clients? Or what happens
Yeah, all assets, whether it's property, or
(55:13):
shares, or anything else, they all go through their ups and
downs. That's part and parcel of investment cycles. And
it's not just the share market that can happen with anything. It's
the share market is a little bit more volatile than the
property market. So, you know, every
sort of every sort of few years, there is going to be a little bit of a little
(55:35):
bit of a little bit of volatility in the share
market. Usually the worst
thing to do is to sell when the markets down I
mean It's a fairly sort of basic bit of knowledge that you generally don't
try and sell when that when the markets down if you do want to sell
sell when it's high, but Usually it's better
(55:56):
to Write out the the ups and downs of any
market because we know what happens. It's it's part
and part of a part and parcel of investing and So you're
better off usually to try and wait it out, stick it out, and
let that asset class do what it does over the long period
Yep. So when
(56:20):
you are talking to clients when they're first establishing their
fund, you're sort of talking to them around why
they want to establish an SMSF and what
other conversations you're having with clients when you do receive an
application to establish an SMSF. Is it sort of like a bit of
a screening process? How does that part of
(56:43):
If we get it directly, so if we get a client that hasn't come through a
referral partner, usually if a client's come through a referral partner, they
already know what they want to do, whether it's property or
some sort of fund or crypto. But if a client comes through to us direct,
so they might have had a look at our Google reviews, for example, they're
just searching. They want to have a self-managed super fund. They're searching
(57:05):
the internet, as people do. They've come across our Google reviews, and
they've seen how many amazing Google reviews that we've
got. And it might come through as a direct lead. I
will always ask them what they're looking to do to make sure that
they're not going to become one of those horror stories that we may have spoken
about. So if the client has no idea whatsoever,
(57:26):
then it's probably even more important to take them through an
education process to explain what they can and can't do. Every
now and then that might weed someone out that wants to do something that is
not advisable to do within a self-managed super fund. But
usually when you have that conversation, most people will sort
of say, yeah, look, I have been thinking about property. Property
(57:50):
is something that we really like. We've done well with property in
the past. And if I do
establish that a client wants to invest in property, then
I will generally sort of say, have you had your
fund assessed from a lending point of view?
We spoke about that a little bit earlier. You
(58:12):
definitely wouldn't want to set up a self-managed super fund with
the intent of investing in property only to find out
that you actually can't do it. So I think it's a really good
place to start if someone does want to invest in property to
Yeah, good advice. Paul, thanks very much for
coming on the show today. I really appreciate the
(58:35):
insight as to your conversations with clients and
the horror stories that you've sort of experienced and some of the education you
provide the clients. Thanks very much for coming and explaining that all
to us. My pleasure, any time. Thanks for tuning in to this episode of
SMSF Insider. If you got value from this, make sure you subscribe so
you never miss the strategies we share to help you take control of your financial
(58:56):
future. Find us on socials at Blue Chip SMSF or
Our record from application through to rollover is seven days, which
I'm pretty sure is unheard of. That's not usual, but that is
You need an entity name ASAP. How quickly can you get that entity name
Yeah, we can usually have the entity names within sort of two or three
days. When you invest in property inside Super, Negative gearing doesn't
(00:20):
really apply because the tax rate is already very low. It's only
15%. If they were to sell the property after owning it for more than
12 months, they'll only pay 10% capital gains tax, which is ridiculously low.
Welcome to SMSF Insider, where we help busy
professionals to gain financial independence using an SMSF. Hi,
(00:41):
I'm Troy, founder of Blue Chip SMSF Services. Now over the last
20 years, I've helped thousands of Aussies manage the complexities of
self-managed super funds. And in this podcast, I'll answer your questions, break
down the myths, so you can take charge of your financial freedom. Let's get
into it. Hey guys, just a quick disclaimer and just a reminder that
this is not personal advice. So make sure you speak with a licensed advisor
(01:01):
before making any investment decision. So welcome to this edition
of SMSF Insider. Today we're going to be talking to Paul
Whitehead. He's Head of Client Relations at Blue Chip SMSF
Services. So he's going to be talking to us a little bit about the
setup process of establishing an SMSF. And he's
going to touch on a couple of little horror stories as well. But
(01:23):
Paul, welcome to the show. Thanks, Matt. Hopefully not too many horror stories.
Exactly. Hoping you could run me through a bit
about the process of establishing an SMSF. Once
you get an application that comes through, can
you just sort of maybe talk me through what happens after that
Do you want me to go back to the very beginning, getting the
(01:45):
actual lead from the outset? So when I talk
to the client and then explain the process. So my explanation of
the process to a client will explain the setup process. So
normally what would happen is one of our referral partners, so
we'll get a lead through a referral partner, or we might get
(02:06):
a direct lead from online, from Google. or
some of the marking that we've been doing. So we'll get a raw lead
coming in terms of a client. So what
I like to do is set a Zoom meeting and
run through the process in detail. So Zoom
(02:26):
meeting usually takes about half an hour. And what I
do first is give the client a bit of a background
into who we are, so they understand who they're talking with. So
the first thing that I do is explain that there are actually a
couple of companies within our organization. The foundational company is
Blue Chip Financial, which was started 23 years ago
(02:47):
by itself. It started as a fairly typical financial planning
company doing typical financial planning activities. Self-managed super funds
were a thing back then, but it has become a really popular
and prevalent thing to do. And more recently, about
five years ago, you started Bluechip SMSF Services, so
Bluechip SMSF being the sister company to Bluechip Financial.
(03:09):
And obviously all we do at Bluechip SMSF is set up and
administer self-managed super funds. And
then most of my clients come through as clients
that are interested in property as an as an asset class So,
you know That's sort of fairly typical most
people that are setting SMSFs up so they can access Assets
(03:32):
that they can't get an industry or retail super fund direct access
to residential property or commercial property and
as we discussed earlier crypto is a pretty big thing at the moment,
but I don't do it do a lot of a lot in the crypto space. But
yeah, property is a really big part of what I
talk to my clients about. Obviously, there are some differences. If
(03:55):
you're investing in property, most people are going to be looking to borrow money.
So if you're borrowing money within a self-managed super
fund, then you need to set up a second trust
called a bear trust. That's B-A-R-E, bear trust, not bear
as in grizzly bear. Sometimes called a holding trust or
a custodial trust. The bear
(04:17):
trust specifically holds the
property with a loan attached. If the client was buying a property without a
loan, which not too many people do these days, you wouldn't need
a bear trust. So the property specifically holds the property with a loan
attached. In terms of the setup
process, setting up a self-managed
(04:38):
super fund that can purchase property is a fairly complex thing to
do. That's what we do all the heavy lifting and the technical stuff
in the background for our clients. We've made it extremely
easy to get the ball rolling. There are two application forms
in relation to setting up the SMSF
with the Bayer Trust. So one's for the SMSF, one is for the Bayer Trust.
(05:01):
The application forms are actually identical except for the names.
So one for the SMSF, one for the Bayer Trust. All we need as supporting
documentation to get the ball rolling is some ID, driver's
licence front and back, and a Medicare card, and a super statement. Once
we have those items, we can get the ball rolling in the background. So
the first thing that we do is we'll apply for
(05:25):
the company entity. So the structure of
the SMSF and the Bayer Trust is a self-managed super fund
and a Bayer Trust with corporate trustees. Corporate trustees is
just a type of company. So we
apply for the ABN and the ACN and the tax file number
for those companies. Once
(05:46):
we have those, then we can generate the trust
documents. So the trust documents are the standard legal
documents that formalize the setup of the SMSF. We
express post those out to the client. Unfortunately, we're
still in the dark ages. Trust documents have to be wet signed. So
we tag them up with sign here stickers, or the guys in the office tag them up with sign here
(06:09):
stickers, makes it really straightforward for the client. send those
out. Once the clients sign their trust documents and
return them to our office, then we
can move on to setting up the cash management
account. So every SMSF must have
a bank account attached to it. It's a special kind of bank
(06:29):
account called a cash management account. The
cash management account is essentially the hub of their SMSF. Every dollar
that goes into their SMSF and every dollar that goes out
goes through that bank account. So it's a really important part
of the SMSF. Once the bank account is all
set up and compliant, then we can call
(06:51):
rollovers from their current super funds. The rollover process is
part of the process that is out of our control, in a sense. The
super funds, industry and retail super funds, like
to play games at that time. So they pretend that they've
lost stocks and that sort of thing. So that
is part of the process that's out of our control. in
(07:14):
some sense. But once we eventually get the rollover funds
into the cash management account, then it's really handed back
over to the guys that might be helping the
client with the lending part of the process and
the property part of the process. And
then the client will secure the property, usually with funding
(07:36):
from a lender as well. And then Bob's your
Fairly, so it sounds like it's a fairly straightforward, although
how you've explained it is, sounds
quite lengthy. The actual setup process sounds quite simple. You've
got two application forms, one for the
(07:57):
SMSF and one for the Bayer Trust. So that sounds pretty straightforward. Pretty
straightforward. So that's pretty much all you need apart from those
two pieces of those two documents, which you said they're identical.
So two one-page documents, one for the Bear Trust,
one for the SMSF. You just need a super statement and some ID. Is
(08:19):
Yeah. So I usually explain to the clients that, you know, it sounds
pretty simple from their point of view because it is all we need them to
do is provide those documents, which takes about 15, 20 minutes
if they really want to get the process moving. And
then we do the heavy lifting in the background, which is some fairly
technical stuff that we need to do in the
(08:40):
background, setting up the entities in the right way, generating
those trust documents, which are pretty lengthy. But
Yeah. So if the client is, you know, let's say
they've got some questions, do you give them
a call or how do you
(09:00):
sort of hold their hand through that process if they're sort of not
sure what they're signing or they want a bit more information or they're not
Yeah. So on my Zoom call, I
will always make sure that the clients program my name
and number into their phone whilst I'm on the call. And they know
that I'll be their personal contact through the setup process
(09:23):
and beyond. So if they've got questions about anything at all, they come straight
through to me. I let them know that we've got a pretty big support team,
a pretty big admin team that work behind the scenes. But
I'm the only person that they need to speak to. personal
contact details. We do have a dedicated
office line, but they don't
(09:45):
even need to call that. They can just come through to me personally. They'll also have my email
address, but most of them will text me or call
me. And I'll usually hold
their hand through the
signing of the trust documents. Some clients just sign them straight
away and just get them back, and some clients want to go through them in
(10:06):
a lot of detail. Every now and then, if a client really wants to
go through the trust documents in detail, which is fine, I'd
actually rather them do that than I'll do a
Zoom meeting for the trust documents. as well, because
the trust documents can look a little bit confronting when
the clients first do get them. They're quite thick, and
(10:27):
there's a lot of terminology which most
clients won't really understand. So I'm
Yep. And so also I noticed part of
that process is there's no advice that's given through this process. So
it's essentially what you're saying is essentially clients
(10:52):
may already know what they want to do. They might already know what they want to invest in.
They're simply using this service to
establish the fund in an efficient way without
Spot on. The majority of clients, 99 clients
out of 100 that I speak to, they've already decided what they
want to do. They don't need advice for
(11:15):
that. They've already decided that they... Most of my clients want to invest
in property. That's what they want to do. So it's probably more
important in a sense that they get
an understanding before they come to us,
they get an understanding if their fund can borrow money, that
that part of it is, you know, they get the green light and that's all been
(11:36):
ticked off. So if the client hasn't engaged a broker, I
might refer them on to a broker or tell them to
find their own broker. Obviously, they need to make sure
that if they are doing that, the broker understands SMSF lending, There
is some nuance, there's some difference with
SMSF lending as to, you know, in comparison to lending
(11:58):
in your personal name. So that's pretty important. There's no
point setting up an SMSF to purchase property if the SMSF
can't borrow money. So I always make sure that that
box has been ticked before the client sets up an SMSF. But
again, most of the clients that I speak to, they
may have been referred by a broker or referred by a property group
(12:20):
or a buyer's agent, and those guys have already sort
of ticked that box. And by the time they get to me, they
know that their fund can borrow money because that's already been assessed. They
obviously know that they want that they want to buy property. Sometimes they
may have even sort of got a bit of an idea of what type of property, or
in some cases, the property has already been selected,
(12:44):
or earmarked at least. And it's
just a matter of talking them through the setup process and getting
Yep. And just with the property,
so drilling down a little bit on the types of properties that most of
your clients are purchasing, are they residential,
industrial, commercial? And
(13:06):
can you tell me a little bit about that? And if it is a
residential, for example, is it a one-part contract
or a two-part contract? I know when you're purchasing something in your own name, You
can, or a different entity that's other than a self-managed super
fund, you can have what's called a two-part contract where you're purchasing
the land and you're paying the stamp duty on the land and then you go through the build process.
(13:30):
Can you do that with an SMSF or does it need to be a one-part contract? And
can you tell me a little bit about that, just a bit about what your clients are
purchasing and a little bit drilling down a little bit
Yeah, so you can buy
any type of property inside an SMSF. We
(13:51):
do commercial, you know, SMSF
setups for commercial properties,
also industrial, but the vast majority is residential.
The vast majority, you know, the
industrial and commercial properties, sort of one
(14:11):
in a hundred, you know, by far the most popular
is residential. And yeah, there
are differences. If you're investing in property inside super, it has to
be a one part contract. And
that's partly to do with the bear trust, with
the bear trust structure. So yeah,
(14:35):
so it has to be a one part contract. You can't buy a piece of land and
then build on it. It has to be either a completed house,
completed townhouse or a completed unit. It
doesn't have to be completed in the sense that the
actual development is completed and handed over,
(14:58):
Does that come down to, I guess that probably comes down to the single asset rule, which
is part of the Superannuation Act. I'm
assuming it would be coming down to that, and that's probably the reason you can't have
those two part contracts. That's right, yeah. With regards to,
so with referral partners, for example, that have
sort of, that you've, you know, you look after one of the key, like
(15:20):
a key account manager essentially for some other referral
partners. Tell me a little bit about, their experience
before they've used Blue Chip, they
may have been using somebody else to establish the
funds, and then something may have happened that
the process may have been not quite what they expected.
(15:44):
And then tell me a little bit about those referral partners that
you're working with that have used somebody in the past and
then have started using the Blue Chip service. And
Yeah, so one of the reasons why our referral
partners really like to use us is because of
(16:05):
what we spoke about a little bit earlier in terms of how
simple we've made it for our clients. The clients have already decided
they want to invest in property. We don't need to go through that
advice process. Some in
the past, the clients, sorry, our referral partners
might have been dealing with financial planning
(16:26):
companies or other SMSF establishment
companies that might have as
part of their process an advice part,
which means that it just adds a layer of complexity that's not
necessary. Of course, the clients are quite
(16:47):
welcome to do that if that's what they want to do, but Most of our clients
have already decided what they want to do. They don't necessarily need to
do that. So we've just taken a lot of that complexity out of it, made
it really, really simple for the clients. And
because of the simplicity of our process, it's
(17:07):
a lot faster as well, not just
because of the simplicity, but also because we've got a pretty amazing admin
team in the background. But yeah, a lot of the complexity
And do you think that comes down to more to
do with the no advice? The fact that it is a no advice model,
(17:28):
you're able to do away with obviously when
there is advice in the middle of establishing the
fund, it does. there is, that is quite a
Not just lengthy, but complex and very, very
expensive. I mean, you would know better than anyone,
you did that model for 23 years. So,
(17:52):
yeah, so we've just taken the complexity out of it. We just provide
all the legal documentation, make sure that the fund's set
Yeah. So when these clients are purchasing
residential property, for example, they may have already had
residential property, they've purchased a family home perhaps 20 years
(18:13):
ago, or they've seen some growth in that, they've maybe purchased an
investment property in their own name, they've seen some growth in that. Is it more
that they understand property, do you think, more than
any other asset class and feel comfortable with property
as opposed to being in equities, which not
a lot of people really understand. I mean, it is a beast
(18:34):
in itself when you're talking about equities. But do you think maybe it's
resi property because, I know Aussies do have
a love affair with property. Do you think they've had
some experience with bricks and mortar in the past and they're happy to
adapt that investment? sort of philosophy over
Yeah, for sure. Most of our clients, they're
(18:56):
looking to continue their portfolio.
So they might have one or two properties in
their personal name. They can't borrow any more in their personal name.
but they really want to continue building their property portfolio. And
the perfect way to do that is to continue that
(19:18):
inside superannuation. Obviously, there's some differences.
One of the main differences with owning property inside
superannuation is how the property is treated from a tax point
of view. Obviously, when you're investing
in property in your personal name, you get those tax deductions in
your personal name. Everyone's sort of heard of negative gearing
(19:41):
and how that works. When you invest in property inside super,
negative gearing doesn't really apply because the tax rate is already
very low. It's only 15%. If they were to sell the property
after owning it for more than 12 months, they'll only pay 10% capital
gains tax, which is ridiculously low. But
the magic happens at retirement. Once the
(20:02):
clients hit retirement age, which for the majority of them is
preservation age, around about 60, and then
any time after that that they decide to retire, and you
don't have to retire at 60, most people don't have the ability to retire
at 60, so whenever they decide to retire after that, when
they put the fund into pension phase, the tax
(20:24):
rate goes down to zero. You won't pay a cent of capital gains
tax if they were to sell the property. And if their strategy
was to pay the property off and live off the rental income forever and
a day until they drop off the perch, they won't pay any tax on that either. So
it's a really generous tax environment to own assets like residential property.
So yeah, so it's not just about owning property. There's
(20:46):
some pretty cool tax advantages to doing it inside Super
Yeah, that's a really powerful one when you're talking about the tax
advantages being zero. There's no other,
apart from having a company established in the Cayman Islands,
there's no other real tax benefits apart
(21:07):
from The biggest one is obviously, as you said, paying zero taxes.
You can't beat it. Yeah, that's pretty cool. What
about some sort of horror stories? Have you had
any sort of horror stories over the years that you can
sort of tell me about that clients perhaps that
might not be following, doing things they shouldn't
(21:30):
do with their fund? you know, how
do you deal with that? What do you do? Do you contact the
client? How do you fix that problem and
educate them? And what do you do in that sort
I suppose you might call it a temptation. When you have an SMSF, I
mentioned it, a little bit earlier, that there is a bank account
(21:53):
that's attached to the SMSF. And for all intents and
purposes, it is a bank account. You
don't get a bank card to go and sort of tap or anything
like that. But it is a bank account, because owning property inside
Super, you still pay all the same expenses. There's
still rates to pay. There's still those type of
(22:14):
property expenses to pay. And they must be paid out
of that bank account. I suppose for some clients there
is a temptation to use that bank account for things that they shouldn't be
using it for. And obviously, if you've got an
SMSF, you can only use your SMSF funds for one reason, one
reason only, and that is for the betterment of your retirement. For
(22:35):
some clients, there is a temptation. And we have had clients in
the past that have used the funds that are sitting in their CMA
to go on holidays. That has happened. And yeah, I
think that's about as bad a thing you
could possibly do with your SMC. To go on holiday. To go on holiday, yep.
(22:57):
So yeah, that's pretty bad. If that happens,
so with our tax team,
we've got someone that has a look at all of the transactions that
have happened with all of our funds, which is incredible. And
if there are any sort of dodgy looking transactions, legal
withdrawals, they'll be flagged. And
(23:21):
if it's one of the clients that's come through my channel, then I'll give
the client a call, ask them what they've done. usually,
I mean obviously if the client's gone on holidays they know they've done the wrong thing,
but there have been occasions where the client has,
so I'll give you an example, so a client might
(23:41):
do some banking They might have a Macquarie cash
management account, and they might do their personal banking with Macquarie
as well. And purely by accident, they may
have used the Macquarie cash management account to pay a personal bill,
and it was just a pure accident. So that happens as
well. Usually, if the client fixes it immediately, then
(24:05):
we'll just sort of write the relevant minutes, and then
it's fixed pretty quickly. But, yeah, if
the client's spent a lot of money and they've gone on holidays and they don't have
the ability to pay it back, then they're going to
Just quickly guys, if you're a busy professional fed up with traditional super
funds and overwhelmed by the setup of your SMSF, we can help.
(24:27):
Book in a call with my team using the link in the show notes and let's
build your future on your terms. Now, back to the episode.
Just on that, I know when clients
do, if a client does withdraw money before meeting
a condition of release, that money is
then added to their personal income. So if they withdraw 100 grand,
(24:49):
that then adds onto their personal income and then they're taxed
at up to 45 cents in the dollar. So not only do they have
to return the 100, they're then up for 45 grand in tax on top of that.
Pretty big no-no, but... With,
Just on that before I move on. A
(25:12):
lot of the clients, they don't realize that as part of
owning an SMSF, an external audit gets done
on their super fund every year. So they can't hide
anything. There is an external auditor that essentially
reports back to the ATO of that type of conduct. So
that type of thing can't be hidden. And
(25:37):
there's also a tax return that gets done on their SMSF as
well. So we go through all their transactions
in detail as well. So it's never going to be hidden. It's always
going to come out. Other horror stories? I'd
say that the majority of them are to do with
(25:57):
that type of thing. But there
is. So crypto is another one of those assets.
Obviously, crypto is a little bit more of a recent phenomenon.
But everyone wants to get into the crypto space. And a lot
of people are setting up self-made super funds to purchase crypto
that they may not be able to do with the industry and retail super fund. And
(26:20):
whilst a lot of clients do really, really well in the
crypto space, unfortunately, it's one of those areas where there
seems to be a lot of people getting scammed. So
there have been a few clients that have given their money to, you
know, dodgy crypto scammers and they've lost
it and they'll never get it back. So that sort of
(26:41):
created a few issues for people that want to invest in
cryptocurrency with their superannuation. A lot of the banks have
sort of cracked down on that sort of thing. And some
of them won't even allow transactions to
Yeah, well, that's pretty scary
(27:02):
when you hear sort of those stories. But would you say, like,
out of, I mean, how many of those would
you see where clients have
been scammed? And is there an education piece around that, around
if someone's contacting you, how does that phone call
come about when you chat to the client? Firstly, if
(27:25):
they're withdrawing funds when they haven't met condition
of release and then and then also what
happens when if they've been scammed and is there further education
I really try to push the point on
to our clients not to do anything that they're not 100% sure
(27:47):
about before they run it through myself or or someone in the admin
team, even if they want to get involved in a
crypto exchange, we can do some checks and balances behind
the scenes to make sure that the crypto exchange is
is legit. So I really try to press
the point onto clients is don't do anything that you're not 100% sure
(28:10):
about before you run it past us. That is a service that,
I mean, it's not even a service, really. It's just something that we
can check in the background. But, you
know, unfortunately, it is a self-managed super fund. And if
they want to sort of go off and do something under their own steam, then there's
not a lot that we can do to stop them before
(28:36):
Yeah, OK, that's pretty interesting stuff.
What about working with some of these referral partners? I just
want to delve a little bit deeper into some of
these other referral partners that may have come
across our services. I
guess what has been the feedback from
(28:59):
these guys that have set up funds in the past with perhaps
another service provider, might be a financial planner or
an accountant, and then using a sort of
a premium document service like ours? I just want
to delve a little bit deeper into that. what's been
the time frames of establishing funds and in
(29:20):
the past with whoever they were using in the past with and then
using the blue chip service. What are
This is going to sound a little bit like patting ourselves on the back, but I
can only sort of tell you what they've told us is Often,
a lot of the property guys that are out there trying to find these properties
(29:41):
are really trying to find a premium
property for their clients. They're sort of fairly sought after,
fairly hard to find. So if they do find something, then
they want to make sure that they're going to be able to secure it really quickly. So
setting up the fund in a really
quick timeframe is important to not just the client, but also for
(30:05):
the referrers that's scouring Australia trying
to find these really sought after properties. So the
fact that we can do them so quickly, our average
time frame from application through to funds
rolled over is somewhere between four and five weeks, as long as
the client's playing their part. as long as the industry
(30:26):
retail super funds aren't playing silly buggers with rolling funds over,
we can usually get the funds rolled
over in four to five weeks, which is unbelievably quick. Our
record from application through to rollovers is seven days,
which I'm pretty sure is unheard of. That's
(30:48):
not usual, but that is our record. Obviously,
all the stars had to align, but yeah, it's
usually on average about four to five weeks. So that's a really important part
of it. And part of the reason why
we're able to do it so quickly is because we've taken out
all of that unnecessary complexity and expense. So
(31:10):
yeah, so it's very much appreciated from our
Yep. And if, for example,
they need an entity name to be on a contract, can you
establish, can you at least get the entity name for
the referral partner to go on the contract? Can you get that, at least
(31:33):
have that? What sort of time frame are you looking at if a
referral partner reads you and says, Mate, I've got a property that
will really suit this client. It's the existing contract's
falling over. I need an entity name ASAP. How quickly can you
get that entity name established for
(31:54):
Yeah, we can usually have the entity names within sort of two or
three days. So most
of our referral partners have never seen that sort of speed
before. So yeah, two or three days for the actual bear
trust entity details that will go on the contract of sale. Obviously,
the roll over funds hitting the bank account, that's
(32:16):
definitely going to take usually between four
and five weeks, but we can get the entity names really quickly
And I guess that's to do with,
you know, in the middle of that, there's no advice piece in the middle of
the establishment process. So I guess that's where most of the time is being cut
(32:40):
Yeah, the first thing that we do once we get
the application and the ID and the statement, the first thing that we
do is apply for those entities. And yeah,
What about clients that perhaps have some insurances in
their existing super fund and they're
(33:02):
concerned about losing those insurances? What
We always, without question, will only
do a partial rollover to begin with. So it's always a partial rollover.
A partial rollover just means leaving the minimum balance in
the current fund, the industry or retail super fund, to maintain
(33:24):
the insurances that are in there. It would be a
pretty big no-no for us to do a full rollover, hoping
that the client's going to be able to get new insurances inside the SMSF if
for some reason they're uninsurable or maybe they've
had a health issue in the past where the insurers
(33:45):
just don't want to touch them. So we always, we're really cognizant of
doing a partial rollover. And a partial rollover just means leaving
the minimum balance, which is usually about $5,000 or $6,000, depending on
the fund. So you can just leave a small amount of money in their current fund.
That means that they can keep their insurances. We roll the rest over into
the cash management account so they can organize the property and the lending. And
(34:08):
then later down the track, if they want to apply for
new insurance inside the SMSF, we
can actually do that through our sister company, the foundational company,
which is Blue Chip Financial. That's really why that's
the main function of Blue Chip Financial these days is providing
general advice around insurances
(34:31):
Yep. And so with
regards that, once they've applied for their insurances, it's
been accepted, for example, what happens after that point?
Yep. So if they're able to successfully apply
for new insurance, once the new insurance is in force
inside the SMSF, at that point, we can close
(34:53):
down the old account, roll the
remaining funds into the cash management account, and then we can provide
details to their employer so they can start directing their
Yeah, great. So you sort of, with that type of
strategy, you're not sort of leaving the client sort of
(35:15):
in limbo without insurances for any point in time? Exactly,
So we won't close down the old accounts until the
Yeah. Yeah. Yeah, great. What about if
they can't get insurance? What happens there if they can't get insurance? They've
What happens in that scenario? In that
(35:37):
case, then, it's just status quo. They keep the insurances that they already
have. We'll keep the contributions from
their employer going into the old fund to make sure that there's always
enough funds in there, in the old fund, to keep those
insurances. And then, as they need to top up their SMSF, They
can do a rollover every three or six months or whenever they
(35:59):
like really, which is a pretty simple process. So it doesn't
really change anything. They keep the insurances they have, always
making sure to keep the minimum balance, keep the contributions going into that.
that old fund and at least they've got something, at least they've got some
sort of insurance cover in the case of the worst
Yeah, so I guess having those contributions continue
(36:23):
to go into the existing fund prevents, you
know, the policy from lapsing, for example, if they redirect it straight to
the SMSF and there's no contributions going in, then obviously the
client runs the risk of losing the losing the insurance because there's no
Some of the funds will cancel the insurance after
six or 12 months of contributions not going into the old account. So
(36:46):
it's important to make sure that contributions are going into
the old account. And then you can simply just send us
an email saying that they want to do a small rollover, whether
it's $2,000 or $3,000 or $4,000, whatever the case may be, into
Yep. And once the fund's established, it
(37:08):
needs to have a tax return audit done at the end of the financial
year. Typically, it's around February the following year.
But what happens in that scenario? Does the team reach
out to the clients? What involvement? What
do they need to provide to the team to get all the
Yeah, so our tax team will have all of our
(37:31):
clients earmarked where their return
is due. They always get them done early, plenty of
time. There's actually
some advantages for the client doing them early. And
then if it's property that they own,
it's kind of very similar to owning property in your personal name. there
(37:55):
are still items that the fund can get a
tax credit for. So depreciation, for
example, the fund, the only difference is the fund gets
a tax credit. They don't get money back in their hand. Obviously, that's
a little bit different. But all the things that you can get
a deduction for owning property in your personal name, you can still
(38:18):
Yep. So with regards to
that, so the fund is established, they have their tax return done.
Is the first year the hardest year, obviously collating
information? Or what happens after the
first tax return is done? Does it become easier and a little bit more? What
(38:38):
Yeah, I usually say to clients that You
want to make sure that they do understand that owning
an SMSF is a little bit different, maybe
a lot different to just having an industry or retail super fund where
it's just set and forget. You don't literally have to look at it ever. If
you own property, particularly inside a super fund, then there is going
(38:59):
to be an audit. There is going to be a tax return. And they are
going to have to provide documents just like they do if they own property in
their personal name. Most of the clients that have owned property before,
they know that they're going to have to come up with their rates notices and
all of those normal things and provide them to us. Some
clients are super organized. Some clients just send
(39:21):
them into us as they receive them, which is fine. And our tax
team sort of file them away on the client's file as they come
in. So however, the client wants to collate
their documents if they're really organised and they just have them all ready to
go at tax time, or if they just want to send them in as
they come in. Either's fine with us. We don't mind.
(39:43):
We're happy to work with the clients in that regard. But
yeah, it is best that they keep all
of those receipts because it's
good from a compliance point of view that if there is a transaction, Inside
the cash management account that it does sort of relate to a
Yeah, of course What about so what
(40:06):
about if the clients have funds left over so they purchased a property for
example, they've got money left over They don't
Yeah, so So it would depend on the client. Some
clients just might have property as the
cornerstone of their investment strategy, and they might just want to
have some exposure, say, for example, to the share
(40:29):
market. So it's pretty simple to set up some sort
of managed fund in the name of their SMSF so
that they get that exposure to the share market. Property is
the cornerstone of their investment strategy. Macquarie
actually have a fairly
unique product called an accelerator account. So we always
(40:49):
attach an accelerator account to the cash management account. The accelerator
account's just a higher interest savings account. It
is a type of investment, though. Whilst it is in cash,
it's still a type of investment. But they can move money in and out
of it as they see fit, and they just get a slightly higher return.
Most clients, if they do have a longer investment
(41:13):
horizon, retirement horizon, if you like, they're
going to want a better return than what cash is going to get them. So they
usually just want some exposure to shares and there's plenty of
good products out there that we can help
them establish in terms of managed
funds. Some clients are a little bit more adventurous and
(41:35):
they might be a little bit more sophisticated And they might already
be doing some trading, some share trading in
their own name. We can help them set up the platform in the
right way so they can do that inside their super fund. Some
clients, as we spoke about earlier, are right into the crypto space.
So they might have a bit of property and a little bit of crypto. So again,
(41:55):
we can help them set
When you talk about helping them set up accounts, and
probably not crypto, but certainly in the equity
space, is that something that's handled by the licensed entity
in providing any sort of general advice
(42:19):
Yeah, we won't provide the clients personal advice.
Again, that sort of comes back to what we were talking about earlier. Personal advice has
to be done very formally. And if the client does want to get personal
financial advice, they can seek someone that would do that. There
are plenty of financial planners that will provide them
with personal financial advice. Again, it's a fairly formal,
(42:42):
fairly expensive process, but there's no problem whatsoever. in
doing that when you've got an SMSF. Anything that we
do will be general advice in nature. A lot of
clients just want something that's very passive, that's just going to grow, that
they don't really have to sort of have much
involvement with. So it might just be something like a Vanguard ETF
(43:03):
that's just going to track the different indexes. They
can choose the level of risk that they want to take, whether
it's balanced or growth or high growth. And
it just sort of does its thing over time. They don't really have
Yeah, so it's good that they can obviously have
a bit of diversification if property is
(43:25):
the cornerstone of their strategy and then they
want some diversification then obviously helping the client establish
Yeah, well, it's one of the beauties of owning an SMSF. The investment universe
gets opened up to pretty much
everything. I mean, gold is another
(43:47):
really popular asset class at the moment, or precious metals, gold
and silver. You and I had a great
chat to the guys at Ainslie Bullion fairly recently, and
they've helped a few of our clients get involved in the gold. and
silver space that have been really, really helpful to a lot of our clients. So
gold's another asset that's pretty, either physical
(44:10):
gold or other types of gold investments they
Yeah, and when you spoke briefly about crypto,
and I know you're not providing advice in
that space, or we're not providing advice in that space, is that just like a referral that
(44:32):
Yeah, we've got a really good relationship with
Jake from CoinStash that's helped a lot of our clients. Obviously,
it's just a referral arrangement where a lot of the clients, they want to get involved,
but they don't know how. Jake's just been a really good contact
that if the client doesn't know who to speak to or how to get involved, we can
send an email to him and say, hey Jake, he's a
(44:54):
client. They don't know what to do in the crypto space. Can you help them
get everything together? And yeah, he's
What about, let's say, if someone wants
to Sort of buy some
industrial property or commercial and and lease it back
to themselves You know, I know most of
(45:17):
your clients are in the resi space, but can
Can someone yeah, yeah, that's a fairly fairly
popular thing to do with SMS F's a lot of a lot of business
owners, so you know, it's a fairly popular thing
to do for for doctors, accountants, they might be working out
of the premises and their SMSF can purchase the premises
(45:41):
that they work out of and they can lease it back to
their funds. So that's a pretty popular thing to do as
Yeah. And then with Regath, they are doing that. The
lease, that needs to be, I guess, at market rates. You
couldn't sort of charge your fund more than over
(46:03):
Yeah, there is some complexity. It's a little bit different, obviously,
than having a property in the residential space
where it's just a, you know, there's a residential market and
it's sort of, everyone knows how the residential property
market works. It is a little bit different within the commercial
space where you can rent the property that you're working
(46:25):
out of to yourself. So yeah, it has to be market rates.
You can't sort of jack up the rent and pay your
super fund more than what the market dictates. So it is a little bit different
Yeah. And then just in that resi space,
going back to the resi space, do you, I
mean, do you get many clients that say, oh, can I live in the
(46:48):
Yeah, that was probably
one of the horror stories that I could have spoken to you about. I
actually get asked that a lot is, can we buy a property
and live in it? Can we buy a property and rent it
to our son? A really popular thing to do or popular
thing that clients want to do is they
(47:10):
buy a property in the town or city where their
son or daughter is going to go to university. and then
have their kid rent
that property off them. But again, there's
a lot of sort of complexity around doing that. So yeah,
normally I'd say just go in the general rental
(47:33):
pool. You definitely don't want to be renting a
property to a family member or a friend. It's
a pretty big no-no. And yeah,
so that is something that a lot of clients want to do. And another really, really
common thing that I get asked a lot is if they can buy the property and
live in it or have it as a holiday home, which is obviously a
(47:56):
pretty big no-no. Once they're retired, they can do what they want
with it. But yeah, definitely not while they're working. Whilst the fund's
Yeah. Okay. What about if a client, for
example, let's say they already own a property, a residential
property, and they want their SMSF to
(48:17):
purchase it off themselves to free up cash flow. Can they do
You're throwing some pretty good ones at me now, mate. Is
it possible? It is possible, but
definitely not advisable for the same reasons. If
you were to do it, then it would have to be
(48:39):
done at market rates, Very, very
complex. It is going to cause red flags, and we would
Yeah. So yeah, it's something you definitely can't do. So
you can do it with commercial and industrial. You can purchase business
real property off yourself with your self-managed super fund. But when it comes to
(49:01):
residential property, big no-no. You can't do that.
Yeah. With
regards to any other, so property's obviously the main asset
class. I know you've spent many years in the property space.
Is there, how have you seen property
(49:22):
sort of perform over the last, say, 20 years? Like, how has
that sort of performed? If you look back to when
you first started, you know, 20 odd
years ago in the property space and being
around it for so long, How have you seen property perform sort
Yeah. I mean, if you look back, I mean, I've been in the property
(49:44):
space for 20, 25 years, something
like that. You know, at some different
place in Australia, property has generally
been booming. Whether it's the
boom that Sydney had, then it was Melbourne, and Brisbane's
sort of been more recent. But in between there, there's
(50:07):
been Tasmania, which has been an unbelievable market. Adelaide's
been really strong. Perth. So
property is one of those things. There's not just one
property market. There are many, many, many property markets in
and around Australia. And that's why we always recommend that if
you want to get involved in property, then use a
(50:30):
property specialist. I think that's really, really important. A
lot of people, though, You know, they
might know their local market and be pretty familiar, and
they might know a fair bit about their local market, and they might be really comfortable investing
in their local market. But if you have no idea what you're doing, then definitely
use a property specialist, a buyer's agent, or someone like that. But
(50:53):
yeah, I mean, over the last sort of 10 or 20 years, property has
at least doubled and then
What about, let's say, if your property
(51:14):
has obviously done quite well over the last 20 odd years, there
is obviously in all markets, there's ups and downs. There's certainly
ups at the moment, but there's certainly, obviously, looking back over
the last 20 years, there's been some downs as well. And
liquidity does become a problem at that point in time. Do
(51:35):
you, what do you sort of, is there any sort of education piece around clients
when it, during, you know, what are
you sort of saying to clients in, not so much in
the last sort of five, but, you know, in the last downturn that you can remember,
was there sort of any sort of conversational pieces around, you
know, sort of staying the course or what sort of advice do
(51:56):
you provide to clients in those sort of, in those sort
That's a really good question. I mean, one thing that we know for sure,
that if you hold the property for long enough, that it will go up in
value, whether that happens in year one or year 15. I
mean, there's a bit of a myth that you hear a lot in the property space,
(52:16):
that property doubles every seven to 10 years. That's
an absolute myth. On average, it may
have done that over time. But sometimes property may
not double for over a 15-year period,
sometimes even longer. What we do know is if you're
able to hold the property for long enough, that it will go up in
(52:36):
value over a long period of time. And the good thing
about owning property inside superannuation, superannuation is
the ultimate long-term investment. You literally can't touch it until
you get to retirement age. So in many ways, it is
a really, really good place to buy property because you
are going to hold it for a long period of time. And when you sort of factor in
(52:57):
what we spoke about earlier, that big
advantage that property has, over owning
property in your personal name, a superannuation, I should say, owning
property in super, the advantage that you don't get in your
personal name is how it's treated from a tax point of view. If you're, say,
a 40-year-old that might be holding a property for two property
(53:18):
cycles, if you were to buy that property in your personal name, and
you decide to sell it at some point, you're probably going to be up for a
tax bill in the hundreds of thousands of dollars. If you own
it in superannuation, then that money stays with you. You
don't pay that money back to the taxman. So
it is the ultimate long-term investment. And the longer
(53:41):
you hold the property, the less risk there is. One
thing that we don't advise is holding a property or
trying Own any assets and and and
get in and out really quickly and try to time the market That's really really
hard to do if not impossible Even Warren
Buffett, you know, he doesn't claim to have a crystal ball But
(54:04):
the longer you hold the property the less the less risk there is so
it's the ultimate long-term investment and it works really well within superannuation
Yeah, I guess it's a good point. It is
quite a... It is playing the long game with property,
but not just property, I guess. With most asset classes, obviously,
the longer you... It's time in the market, not time in the market, as
(54:27):
we've talked about previously. But what
about with regards
to if, let's say, you've got You
know, we talked about downturns. What about clients
that have sort of invested in other asset classes where there's been down,
you know, they may have invested in sort of shares
(54:50):
or something like that and they're experiencing some down, you
know, we're going through a trough period or there's some
sort of a... a technical recession of
some sort, or there's downturn. Is there conversational
educational pieces around that with clients? Or what happens
Yeah, all assets, whether it's property, or
(55:13):
shares, or anything else, they all go through their ups and
downs. That's part and parcel of investment cycles. And
it's not just the share market that can happen with anything. It's
the share market is a little bit more volatile than the
property market. So, you know, every
sort of every sort of few years, there is going to be a little bit of a little
(55:35):
bit of a little bit of volatility in the share
market. Usually the worst
thing to do is to sell when the markets down I
mean It's a fairly sort of basic bit of knowledge that you generally don't
try and sell when that when the markets down if you do want to sell
sell when it's high, but Usually it's better
(55:56):
to Write out the the ups and downs of any
market because we know what happens. It's it's part
and part of a part and parcel of investing and So you're
better off usually to try and wait it out, stick it out, and
let that asset class do what it does over the long period
Yep. So when
(56:20):
you are talking to clients when they're first establishing their
fund, you're sort of talking to them around why
they want to establish an SMSF and what
other conversations you're having with clients when you do receive an
application to establish an SMSF. Is it sort of like a bit of
a screening process? How does that part of
(56:43):
If we get it directly, so if we get a client that hasn't come through a
referral partner, usually if a client's come through a referral partner, they
already know what they want to do, whether it's property or
some sort of fund or crypto. But if a client comes through to us direct,
so they might have had a look at our Google reviews, for example, they're
just searching. They want to have a self-managed super fund. They're searching
(57:05):
the internet, as people do. They've come across our Google reviews, and
they've seen how many amazing Google reviews that we've
got. And it might come through as a direct lead. I
will always ask them what they're looking to do to make sure that
they're not going to become one of those horror stories that we may have spoken
about. So if the client has no idea whatsoever,
(57:26):
then it's probably even more important to take them through an
education process to explain what they can and can't do. Every
now and then that might weed someone out that wants to do something that is
not advisable to do within a self-managed super fund. But
usually when you have that conversation, most people will sort
of say, yeah, look, I have been thinking about property. Property
(57:50):
is something that we really like. We've done well with property in
the past. And if I do
establish that a client wants to invest in property, then
I will generally sort of say, have you had your
fund assessed from a lending point of view?
We spoke about that a little bit earlier. You
(58:12):
definitely wouldn't want to set up a self-managed super fund with
the intent of investing in property only to find out
that you actually can't do it. So I think it's a really good
place to start if someone does want to invest in property to
Yeah, good advice. Paul, thanks very much for
coming on the show today. I really appreciate the
(58:35):
insight as to your conversations with clients and
the horror stories that you've sort of experienced and some of the education you
provide the clients. Thanks very much for coming and explaining that all
to us. My pleasure, any time. Thanks for tuning in to this episode of
SMSF Insider. If you got value from this, make sure you subscribe so
you never miss the strategies we share to help you take control of your financial
(58:56):
future. Find us on socials at Blue Chip SMSF or
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