Rolling over part superannuation into SMSF

[Page1905]

I am new to these boards, however I have lurked for a long time. I am hopeful that someone may be able to help me with a question in regard to establishing a SMSF.

We currently have superannuation with Australian Super but wish to establish a SMSF with the view to purchase one investment property through our SMSF.

Our problem is the Australian Super covers us for life insurance and income protection. The rates they charge are vey low and we would like to keep this cover with Australian Super. Initially I thought you could leave a balance in Australian Super to cover the insurance costs as they occurred.

I am now at a stage whereby I am trying to transfer funds from Australian Super into the SMSF account only to find that the ATO forms are stating that the amount must be the full amount from the Australian Super account (it does not allow for partial transfers into an SMSF account). Has anyone done this?

I thought perhaps a way around this is to transfer a partial amount and set up another fund account (ie. colonial superannuation fund account) with the full intention of then transferring that whole amount into the SMSF (and leaving the Australian Super account with the required balance to service our insurance needs).

Has anyone faced this problem before?

Sorry if the post is long winded.

Kind Regards
Jennifer

 

[somersoftfan]

I am also thinking about the same. Why won't you use the following form for partial rollover http://www.australiansuper.com/~/media/2E0887C4944B4E6AA44AB7FEC6391AD3.ashx

For SMSF, I think http://esuperfund.com.au/ is the cheapest if you don't need any advise.

 

[Page1905]

Hi there,

We have started the process with superfund - so far so good. The difficulties came when they emailed out transfer forms (ATO forms) which request "full transfer" of your funds into the SMSF account.

Anyone else?

 

[Redwood]

We have had a couple of 'partial' rollovers for the same reason you are mentioning. If Aus Super dopes not have its own form, most of the others don't, you can use the ATO 'transfer of whole balance of superannuation' form and attach the covering letter stating the amount to be transferred and make it clear it is partial.

With Aus Super you will also need:
1. 2 forms of ID usually certified
2. Certificate of Compliance (email me if you need a copy to tailor)
3. Partial/ whole balance form

Make sure you provide everything and request an EFT, they will send a cheque to the address listed on the ATO portal, which may be a administrator (i.e Redwood Advisory) or your home address. Cheques get lost, then need to be cancelled, so EFT is the preferred option.

Re administration, Esuper is cheap, however, not the best.

I suggest you get some quote for Insurance within the fund, match it up and see what is best. You can get a quote for free and I am happy to refer you to a planner that we use for the quote.

I prefer SMSF insurance - less of the admin burden and I say 98% of clients do also. Cheers

Hope that helps!

Cheers, Ivan

 

[Paul@PFI]

Many SMSF members do a partial rollout from their industry / retail fund to retain access to low cost insurance or to avoid a re-write of an existing policy. In some cases changed medical circumstances may mean a new policy isnt available at all or is not cost effective. This can make maintaining a "minimum balance" industry fund account attractive. Sometimes a contribution strategy needs to be considered so that contributions continue to flow to the industry fund and an (annual?) rollover occurs to switch funds to the SMSF. This can avoid the industry fund balance falling to zero and automatic cancellation of the cover.

This rollover strategy is also necessary for some smsf members who are employed by an employer in a industry that forces contributiosn to a scheme fund. eg CBus. The award may stipulate the funds and not allow a SMSF.

There are also situations where a rollover shouldnt be contemplated. eg A defined benefit fund. These issues may be reason to seek financial advice prior to acting.

To do a partial or full rollover just use the correct forms. They are similiar - In some cases the fund will have its own form and in most instances the ATO form can also be used as it contains the minimum information required to comply. Ask the fund if you are unsure. Carefully read it and follow all instructions and attach all relevant docs such as certified ID etc.

Bear in mind that a second withdrawal after a partial rollover can be refused or subject to limits. Get it right the first time and give consideration to minimum balances , liquidity etc.

Also consider this rollover process takes time. Some industry funds are notorious for finding reasons to refuse a rollover or to delay it significantly. Be diligent. Keep copies and follow things up.

 

[Sean M]

Hi Page,

I understand that price may be an important factor for you. However you should consider reviewing the insurance you have within Australian Super. You should seek advice from a financial adviser you trust to do a comparison.

Like anything you get what you pay for. Further you should read this. http://www.moneymanagement.com.au/news/insurance/2013/australiansuper-rest-insurance-sting

Also, are you underwritten for the insurance you have with Australian Super? If not when the time comes to claim that is when they will do their underwriting.


In regards to partial rollover, others here have given you the most likely solution.

 

[mupendra]

Same situation

Hi page
I am in the same situation and can you let me know what you did. I have an account with aus super and also insurance. I want to keep that and transfer partial amount.

 

[Paul@PFI]

Call the fund and they will send you a form to do a partial rollover. They wont use the ATO form as it doesn't address which investments to sell and which to keep when a partial RO is done.

 

[hysterical]

Something similar and sorry if I hijack this thread...

Is it advisable to roll over part of the super into SMSF for IP investment and retain the existing super for Shares / MF investment as the returns are pretty good for my existing super.

Also, for those who have IP investment in SMSF, do you feel that you are overweight in properties investment ?

Thank you

 

[Rob G.]

Also, for those who have IP investment in SMSF, do you feel that you are overweight in properties investment ?

The raft of advisers/promoters do not let a small (but fundamental) detail like that get in the way of suggesting an IP inside a small balance SMSF is a good idea.

After all, the only legal requirement is that trustees (not the advisers) formulate and give effect to an investment strategy.

The responsibility rests with the trustees and the SMSF members are unlikely to sue themselves if the strategy is inappropriate.

 

[hysterical]

suggesting an IP inside a small balance SMSF
.

Hi Rob

Would you consider 200k as a small balance to set up a SMSF ?

Thank you

 

[Paul@PFI]

There is no number that can be applied to the SMSF establishment decision. The ATO, ASIC and Rice warner Actuaries have all published various forms of research that address that view. ASIC once said $200k but recent Rice warner / ATO data suggests it can be lower or higher than that when the cost structure and other benefits are taken into consideration.

A SMSF with $200K where the member is an accountant who can do the accounting and tax and the fund owns the office premises may be a very very sound and cost effective strategy if that's what the trustee / members decide. However a $200K SMSF that invests in cash using a financial adviser may be a foolish strategy...Low or negative returns after adviser fees. Admin costs on top. Going balls in to property with a SMSF with a low balance and gearing may be a high risk strategy too.

I have seen some wealthy people do very badly with a SMSF. They lack the capacity, time and intelligence to follow rules and manage their own $. And low balance members who do it very very well (for little measurable benefit).

 

[Rob G.]

Well said Paul.

I believe a good adviser in this area should put all facts on the table and almost try to talk a beginner with a small balance out of such a strategy.

After the potential client has gone away and applied thought/research and still believes it is the right strategy then the adviser goes into bat for them in setting up the best system.

 

[Paul@PFI]

Rob - Well said. Candy coated advice looks great but leaves a bitter taste.

I have had more than a few people request a SMSF for low balances and a lack of strategy and I have bluntly refused. At some point we need to ask ourselves "is this good advice". Sure there will be others out there who will charge a fee and do it. I wont compromise integrity. Our firm contains a AFSL licensed financial advisory arm. For that reason we are always diligent and apply the "client best interest" test above everything.

One of my peeves is those who spruik unlicensed advice and recommend SMSFs often for property. That singular view is wrong. Its a bit like meeting someone who suggests you should become gay / vegan / communist / nudist. If you don't want the lifestyle then why would you want to...Adopting the view that a SMSF always benefits is no different..