Featured in The West Australian on 3rd December 2018, this article by Properties & Pathways managing director Cal Doggett shows how the costs and complexity of having a SMSF can be minimised by smart investment in commercial property.
Make no mistake, self-managed super funds come with a price tag. Financial planners aren’t shy to charge up to $5000 a year to run and audit the SMSF, set-up costs are roughly $2500 and compliance costs can balloon the bill ever further.
And that’s before considering the complexities. SMSF compliance is usually too complex for investors to navigate by themselves. A simple Google search on the subject shows a flood of results on the rising costs and fears for SMSF investors.
The key for combating high costs is the same thing that likely brought investors to manage their own super in the first place: high yields. If returns can be structured to far outstrip the establishment compliance and ongoing costs of setting up an SMSF, then the investment flexibility and tax advantages of an SMSF are yours to reap.
The key is finding a solid investment vehicle to drive these high yields. Residential property typically serves sub-5 per cent yields, which can tightrope even further after financial planner’s or property manager’s fees. Nor will the ASX, which in October had its worst session in five months. And depositing your funds in the bank is no way to grow real wealth.
What can foot the bill for your SMSF is commercial real estate.
As at December 2017, SMSF investors had invested $80.1 billion in non-residential property and you can see why. Being part of a big-league commercial property investment can provide robust annual returns of approximately 8 per cent and can sometimes enter double digits, if the property is a winner.
A big commercial asset, housing a strong commercial tenant on solid lease terms, can be more secure than any house in the suburbs leased to even the most affluent family or couple.
A huge pocket of savings can also be found in the tax benefits of owning commercial property in an SMSF. There is a reason why 69 per cent of Australia’s high net worth investors now have an SMSF and would otherwise likely be taxed in the 37 per cent tax bracket.
The relatively high yields of commercial real estate investing might seem too expensive or too complex for some but with quality syndicated offerings now available, your SMSF can leverage expertise and gearing all in one place.
We’ve found 89 per cent of our investors use their SMSF to invest alongside us in stable commercial property and enjoy returns which significantly outstrip the cost of setting up and maintaining an SMSF.
As always, the best investment is good advice from a renowned finance professional first.
Cal Doggett is managing director of Properties & Pathways