This transcript was generated automatically and may contain small errors.
We know everything about SMSF. Easy to you, but may not be easy to so many others. Property can form a part of it. I live and breathe self-managed superannuation funds. People have superannuation, but they are too scared to think about it.
SMSF set up post-2020, a big search. $4. 6 trillion sitting in our superannuation system. We want to buy, but we can't, and super's right there. Because 55% of total Australian wealth is from their housing.
You are investing not only your money, but also banks. Who doesn't like that? And it's only for the property. I love that. You love it, yeah, exactly.
People make mistakes. Where do you find people trip up? It could be a nightmare. Nerd alert! Property nerds.
The home for data-driven property investors. Where we uncover Australia's hot and cold markets, latest headlines and trends. Welcome back to another episode of the Property Nerds podcast. And today I'm joined by Natalia from easysuper. au.
So welcome to the show. Thanks, Arjun. Thanks for inviting me. I'm so happy to be here. Well, you're an absolute expert in the space of the world of SMSF.
And obviously the word easy means that it's easy to you, but may not be easy to so many others. Superannuation is a very important topic here on the show because it's a cornerstone of building wealth. And what many people don't recognize until later on in life is that property can form a part of it. Taking out super from the vehicle that it is currently with funds and managed funds and then moving into something that might be self-managed, right? Now, it's not by any means an episode today where we're telling you to go and set up an SMSF.
It's something that you should get advice on. And obviously this is a general podcast in nature. But the power of talking through this topic is that people get to know the options that exist for them. So having Natalia here is very special because Jack does a lot of the finance space of this. I obviously help people in terms of my team adding assets.
But before that all comes the right structure, the right support, the right knowledge and ongoing guidance too. Can you briefly introduce yourself? Talk us to a little bit about your journey, the business Easy Super and how it helps Australians. I've been doing self-managed superannuation funds for the last 22 years. And I used to work for the large companies.
And then I started my own business 12 years ago. And we're specializing in self-managed superannuation funds. We don't do anything else, just SMSFs. And we know everything about SMSFs. So we do SMSF establishments.
We do SMSF compliance, consulting, tax, audits. So everything SMSFs. So I live and breathe self-managed superannuation funds. And I absolutely love this vehicle because like you mentioned, a lot of people don't understand that there is an opportunity in Australia to create wealth using this vehicle. And a lot of people have superannuation, but they are too scared to think about it or to touch it because they think it's complex.
It doesn't have to be complex. We make it simple. It's not simple in terms of technicality of it, but we are the specialists. So we care about the complexity of it and we make it simple for our customers. You know, that would have been the perfect time to basically say, we make it easy.
We make it easy, yes. I love it, love it. So I wanted to talk to you about a period in time. And what I mean by period in time is like when you're on the other side of 2020, superannuation has taken off more than ever post 2020. Why do you think that is?
Like as an SMSF set up post 2020, a big search. What do you think some of the reasons, it might not just be one reason, it could be multiple, but like what do you think some of the reasons are for so many Australians to start considering it now more than ever? I think it is awareness. There is definitely more awareness about this option that there is an option to set up your own self-managed superannuation fund and to invest in the asset class, which you're passionate about and create wealth for yourself and your family. So plus superannuation has been around for longer now.
Obviously, you know, we started in the 1990s and then a lot of people, especially business owners, they didn't think about superannuation too much. They never used to make the superannuation contributions. Now there are more and more people, even business owners, they are aware about superannuation contributions and they are aware about this type of saving for their retirement and they're actually doing it. So the superannuation balances have been growing for the last 30 years and have been growing significantly. And I think this is why people started talking about it more and more because they realized we have $4.
6 trillion sitting in our superannuation system. You know, like it means that a lot of money has to be invested. Wow. I think a lot of it came when people were having a lot of borrowing power issues and they were looking at other alternatives of how to get more lending. And, you know, we're not taking into account your super contributions in servicing anyway.
So your super contributions opens up a whole other world of borrowing capacity that people just didn't realize were there. So that's why we had a lot of conversations with clients that like we want to buy, but we can't and super's right there. So, yeah. Correct. I would agree with you because a lot of people realize that they are maxed out outside of super.
They don't have borrowing capacity anymore. But if they combine, say it's a husband and wife, if they combine their superannuation together, they have enough for the deposit. Definitely, yeah. Yeah. And I feel like also it's not a small pool.
I mean, when you mentioned the trillions there, that's a third of the size of all residential housing in Australia. And, you know, 50, I think it's 55% of the figure is like of total Australian wealth is from their housing. So it just shows you two parts of A, how big that vehicle is for people to consider, but B, like how important housing is as well for so many people when they're thinking of continuing that wealth. I think another thing past 2020 is when housing markets grew so well and I don't want to get all, you know, government or political talk here, but how many things happened in Australia that made people feel like they lost control. People wanted to take control more than ever of their financial future of these two things combined is that I don't want to be sitting here and an event like this happens in the future and I don't have the control of my own future, my own finances, and they really wanted to take action.
When you're speaking to people setting up funds, managing funds, getting help on like looking after their superannuation, lots can go wrong as well as go right. We've talked about the right, building wealth, getting leverage, getting debt, accessing borrowing capacity improvements, but what are some of the mistakes that you see people make that can actually cost them a lot of money if they don't manage it right? I think the biggest mistake is lack of education. So a lot of people jump into self-managed superannuation fund because they like the idea, they talk to their friends or relatives or someone's done it and they think, you know what, it's not that hard. I can ask ChatGPT and I can go online and I can set up my own self-managed superannuation fund.
And they do go online and they do set up self-managed superannuation fund. However, without education, first of all, they make mistakes. And the second is they are missing out on opportunities because without a specialist, without the right specialist, it's easy to miss out on opportunities to save on tax, to buy, for example, more properties even, you know, like to buy the right property at the right time. So you do need the experts. You do need the experts in their areas.
And I think people are missing out on the experts, you know, including like property specialists or mortgage broker or right SMSF specialist because people are trying to obviously save money. We understand, you know, like they look at the cost, but at the same time, they don't see the, you know, there are misopportunities which might cost them their tens of thousands or even hundreds of thousands of dollars. So this is one of the mistakes. And the second mistake I think is, again, people don't know what they can do with their super. Tune into our podcast for real life case studies, the latest data and even expert guidance on residential and commercial investing.
It's everything you need to stay sharp straight from the field. Make sure to like and subscribe to get insights that only we have. And now let's get back into the show. People get a little bit afraid of touching their super because they think, oh, I better leave it with the industry or retail superannuation fund. So because I'm not actually, I'm not sure what I want to do with my super.
But it again, it comes down to the right education. It comes down to the right specialist. So if you are surround yourself with education and right specialist, then it doesn't have to be complex, the whole process. And it opens up the opportunities again to build wealth, to build wealth in the retirement rather than rely on whatever your industry or retail superannuation fund will deliver, which we know usually between say 7% and 9%. Yeah.
I mean, you bring up a good point because if you don't get the right advice when setting it up, like I've seen a couple of trustees with individual trustee. And I mean, even And this is a very good word you mentioned before, because people say we want to have a control over our money, because people look at superannuation as their money. Yes, we know the rules. You can't spend it until retirement, but people feel like they want to have more control. And this is when they come to us.
They say, OK, we have enough to make a difference in our future and also invest in something like property, because obviously for property you need a deposit. And because you need a deposit, so you do need to have some sort of like balance. Usually people wouldn't start a SMSF if they have under $100,000. Have I seen people start a SMSF with less than $100,000? Absolutely.
But again, without providing advice, it has to have a common financial sense. So, yeah, people between $150,000 and $1 million in combined balances, people who usually, usually want to buy like the asset class they cannot buy in there, they cannot invest in their current superannuation fund. Say, for example, in Australian super, you cannot say, I want to buy property. Plus people who understand the power of leverage, because in a SMSF you can leverage, you can buy property, and it means you are investing not only your money, but also bank's money. So who doesn't like that?
And it's only for the property. I love that. You love it. Yeah, exactly. So that gives you opportunity and it gives you an option to actually go and do it, especially for people who say they have a house, they have a family house, they have a mortgage, and they might have one investment property, but very often they wouldn't because they have young families, they're paying their school fees, and then they think, oh my God, but I can invest outside of our personal finance, so without putting pressure on our personal finance, and we have this superannuation sitting there and doing nothing.
This is what they say, again, it's not being judgmental towards the industry or retail superannuation funds, but a lot of Australians feeling like we open our annual statements and we feel it has done nothing in the last year. I hear that a lot. Aussies aren't dumb, especially ones that are looking at their super balance. They can see the growth, they can see the fees. A lot of them are just thinking, why don't I just do this myself?
My own family members did that. I was probably the youngest person to ever start an SMSF. I went in with my parents, and then when they retired, I started my own with my brother, but he was the same. He's like, it's a no-brainer. They're taking so much fees, and the growth isn't even that good.
When it comes to the super, I want to go through a couple more technical questions as well. There's obviously a surge in property and leverage being a part of that journey in superannuation. Now, buyer's agents are one profession, and some clients get mixed advice or mixed guidance on this. Some people say, oh, look, you've got to wait till everything is fully set up, rolled over, getting going, and then you can work with a buyer's agent to start the property journey. Some people go, well, no, you can take out funds personally, pay some of the onboarding, and then set up your fund, go through everything.
The agreement of your onboarding was in the name of the buyer's agency for the super that you're setting it up, and then your super can reimburse you for that commitment because you are buying a property in the super name. It was for guidance in the super name, but it was just to start one, you needed the other. You know what I mean? Do you have cases like that that can come up, and this reimbursement can be common if it's for the purpose to do with the super, or is it like in no way can you ever be reimbursed for anything irrespective of if it's for the super or not? How does that work in your world?
Does it depend, or what do we often see here? It is a very good question, of course. First of all, we don't take a long time to set up self-managed superannuation fund. So definitely people have to wait until they set up self-managed superannuation fund because if you incur expenses before setting up a SMSF, it's not going to be tax deductible. That's it.
So even the SMSF establishment fees, you can reimburse yourself from the SMSF, but it's not going to be tax deductible because they incurred before SMSF existed. So the tax part that doesn't always come in, but you can reimburse it, but it's more like the tax part, you're missing out the full benefit. Yeah, you don't want to miss out on that. So I would suggest just wait until everything is established. Like I said, it takes 10 days, maximum two weeks to set up a SMSF, make sure it's compliant, open a bank account, do a rollover.
You can wait for two weeks. And see, this is the one big part that you're already showing a big difference in, which is the speed. Because we hear some accountants with their clients are like, mate, it could be four to eight weeks to get this going. Is this because they lack the specialization, resources, and tailored focus, and they're just trying to say yes to too many things and then do it? It's because they're lacking the specialization.
They don't know how to deal with industry or retail superannuation funds because it could be a nightmare. Try to get your money out of the retail or industry superannuation fund, and you'll find out it might take months, months until you get it. We do it in a matter of a few days because we know what needs to be done. We dealt with all the delays over the years, obviously, because we set up so many SMSFs. So now I have a special team who does only SMSF establishment, so they know everything about every single step.
So this is what I said. This is what could make a difference, huge difference, in someone's journey is having the right specialist at the right time doing the right thing. Now, again, sticking on these type of interesting, unique scenario questions, Jack has lenders that he finds that don't need minimum buffers or leftover amounts and things. No liquidity requirements, right? Like minimum balance, like 100 to 150K is a minimum balance, but then no liquidity left over in the fund.
Yeah, and now that might be fine from a lending perspective, but where does that sit from a compliance perspective in terms of how much liquidity someone should have over? Because when you're buying a property and you have a 200K balance, you might use 120, 140, 150 of it. Now, what's the perfect number? Is there a perfect number? Can you have 10K left behind for some repayments, or should you always have 50K left behind or 30K left behind if you're buying a property and it's 200 balance and you used 130, 150 of it?
How do you navigate this as a person who's thinking about all these things, trying to not over-leverage on a property but also trying to make sure they meet all the guidelines and rules? It is a very common question people ask, and the answer is there is no right answer. In terms of the superannuation legislation, there is no minimum balance required to set up a SMSF. As long as self-managed superannuation fund has an asset. Asset, it's like 10 bucks.
It's an asset, right? So there is no minimum requirement. There used to be some sort of guidance from ASIC, which was $200,000 you need to have in a SMSF to set it all up, and then it was $500,000, which was ridiculous. Then they dropped to $200,000 again, and now there is no guidance. So if someone tells you, oh, you need to have minimum $200,000 or $300,000, they are playing five years old playbook from the ASIC.
There is no minimum. Yes, ASIC is monitoring, and ASIC doesn't like low balances SMSFs, of course, because you're paying fees, plus there is a compliance hurdle potentially with low balances. However, to answer your question, so there is no minimum balance required by the law, and in terms of having a buffer, a cash buffer, again, you have to play by ear and understand. So if you need to do some repairs for your property and you have self-managed superannuation fund and you invested 100%, say there is no cash in the bank account, what's your plan B? How are you going to do repairs?
There is always option to put money into self-managed superannuation fund because there are contributions caps and they will be available for most people, but you have to have this plan B. So if I need to pay some, or if property is vacant for some time, again, what do I do? Can I put more money in? But remember, if you put money into self-managed superannuation fund or any superannuation fund, you cannot take it out. You cannot lend to your SMSF.
Once the money in and classify as a contribution, you cannot take it out. So you have to plan for it as well. Makes a lot of sense. Makes a lot of sense. My last one on this technical angle then, just because I really enjoy this because it gives a lot of learning to, you know, our property podcast is called The Property Nerds.
That's second, just like you've got easy as your word, we've got nerds as the second one. So we have these data lovers, these T's and C's lovers who want to learn all these things. Don't tell me you're a nerd. I'm a nerd. Oh, really?
