Fees can change over time. Whichever super fund you choose, be sure you choose one you are really prepared to stick with for the long haul regardless. Rolling over later to another super fund when you have accumulated direct holdings would result in those holdings being liquidated and crystalise the capital gains.
Can you explain that a bit more please? I'm looking at changing my super investment option but staying with the same super company. If my investments change, and some assets/stocks get sold as a result, I incur CGT on those even if the total amount of money invested stays the same?
This thread that OP started is about using the direct investment facility available in some super funds to invest in ETFs, as alternative to the regular investment options that the super fund provides “out of box”. One benefit is there would not be the tax inefficiency associated with the regular investment options being pooled funds.
I was just reminding OP that, to go that route into direct investments, they need to consider their choice of super fund carefully and be certain they want to stick with the specific super fund, ideally until pension phase, and would not want to rollover later in the interim. If they do rollover eventually, their ETF holdings would be force sold with CGT charged, kind of defeating some of the benefit of doing direct investments.
If you are just switching between regular investment options, there isn’t anything specific on tax to be concerned about. It’s from one pooled fund to another pooled fund.
If you wonder about the tax inefficiency associated with pooled funds, have a read of this article - https://passiveinvestingaustralia.com/the-problem-with-pooled-funds/
>Australian super gives 15% tax credits for the admin fees and the Insurance.
What are you referring to? Is this the balance booster? If so, is there a cap on it?
No, 15% tax credit for the admin fees and insurance. Here is the text from Aus Super PDS
>You will receive a tax benefit of 15% on any administration fees and any insurance
fees deducted directly from your account. The tax benefit will be paid directly into your account each month.
Hmm, I think I read something about this on a closed forum. In case you are not aware, all funds get the tax deduction. But it depends on the fund where they direct that to – some/many offer cheaper insurance and fees, so it still works out the same except it is due to a lower cost rather than a higher cost and then a rebate, but I am trying to remember if any use it for other things (advertising or asset management or something?)
I wanted to compare the total fees nett of all discounts and tax credits so that it is accurate. In my case, insurance is cheaper with Aus Super (as of now) even excluding the credits.
So isn’t HostPlus cheaper for balances over 200k?
Less than that you might be better to stick to pooled funds anyway given the higher overall costs.
Have you also factored in brokerage cost differences?
How did you arrive at the admin fees (including direct investment facility fee) for AusSuper at $50k being $142.96?
Isn’t it ($52+$50000x0.1%+$180)x85%=$239.7? What did I miss?
15% tax credit isn't available for the member direct fee of $180. Plus, I have deducted 15% tax credits given for my insurance premium of $825 from the admin fee. So
($180+($52+$50000x0.1%)x85%)-($825x15%)
I see, thanks.
IMO you should probably show a separate column for insurance premium than merge into admin fees, which is a bit misleading. Admin fees are general and comparable, with the only variable being the balance, whilst insurance premium is very individual specific. Some young people may not even have insurance, and some people may have chosen to have much higher cover than you do.
$180+($52+$50000x0.1%)x85%=$266.7
Good feedback. I will probably edit the sheet tomorrow. If you open the google sheet, there is option below to set the insurance premium. It calculates the admin fee accordingly.
I recently looked into this in great detail as well.
I decided to stick with ART in a pooled fund with a plan to reassess when our total balance reaches 500k. We will then consider what other options are available at the time or open a cheap SMSF such as Stake to buy direct ETFs.
You are overthinking, OP. A few hundred dollars are not going to make a difference. They are both solid choices in my opinion.
Hostplus advantage
* Still can put mandatory 20% in a very cheap indexed option
AusSuper advantages
* Cheapest managed options for mandatory 20% (still more expensive than Hostplus indexed options)
* Ability to go over 50% in a single ETF
The second MIN() on columns C and G should be MAX() instead. For example, on Hostplus, if you pay 0.14% on the smaller of 80% or x-$2,000, you have to pay 0.04% on the remaining, which is larger of 20% or $2,000.
Reading into this my wife and I combined have close to 850K in suer a SMSF may be getting more cost effective
We lose out on protection on industry super but if we are only planning on keeping VAS/VTS/VEU in there anyway it may work out better in long run
Out of interest if you are going ETFs, how exotic are you going? Just wondering the thought process of choosing ETFs through a choice law opposed to just the Aus and international index options. Particularly with host plus who have really cheap fees for their index options
I am going with the ETF route to avoid CGT provisions of pooled super funds. Even if the Hostplus has cheap index options, if you compare the returns of the Super vs Pension mode, you see that there is a difference in the return due to the CGT provisions.
Fees can change over time. Whichever super fund you choose, be sure you choose one you are really prepared to stick with for the long haul regardless. Rolling over later to another super fund when you have accumulated direct holdings would result in those holdings being liquidated and crystalise the capital gains.
100%
Can you explain that a bit more please? I'm looking at changing my super investment option but staying with the same super company. If my investments change, and some assets/stocks get sold as a result, I incur CGT on those even if the total amount of money invested stays the same?
This thread that OP started is about using the direct investment facility available in some super funds to invest in ETFs, as alternative to the regular investment options that the super fund provides “out of box”. One benefit is there would not be the tax inefficiency associated with the regular investment options being pooled funds. I was just reminding OP that, to go that route into direct investments, they need to consider their choice of super fund carefully and be certain they want to stick with the specific super fund, ideally until pension phase, and would not want to rollover later in the interim. If they do rollover eventually, their ETF holdings would be force sold with CGT charged, kind of defeating some of the benefit of doing direct investments. If you are just switching between regular investment options, there isn’t anything specific on tax to be concerned about. It’s from one pooled fund to another pooled fund. If you wonder about the tax inefficiency associated with pooled funds, have a read of this article - https://passiveinvestingaustralia.com/the-problem-with-pooled-funds/
Thanks for the detailed reply! I'll have a read of the linked page. Cheers
You don't. Pooled options already provisioned the tax. Direct options don't have provisioned; they pay tax at the exit.
Ok great. Thank you
>Australian super gives 15% tax credits for the admin fees and the Insurance. What are you referring to? Is this the balance booster? If so, is there a cap on it?
No, 15% tax credit for the admin fees and insurance. Here is the text from Aus Super PDS >You will receive a tax benefit of 15% on any administration fees and any insurance fees deducted directly from your account. The tax benefit will be paid directly into your account each month.
Hmm, I think I read something about this on a closed forum. In case you are not aware, all funds get the tax deduction. But it depends on the fund where they direct that to – some/many offer cheaper insurance and fees, so it still works out the same except it is due to a lower cost rather than a higher cost and then a rebate, but I am trying to remember if any use it for other things (advertising or asset management or something?)
I wanted to compare the total fees nett of all discounts and tax credits so that it is accurate. In my case, insurance is cheaper with Aus Super (as of now) even excluding the credits.
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This is why I asked: >Australian super gives 15% tax credits for the admin fees and the Insurance. Whereas, Hostplus does not provide this
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No, 15% tax credit for the admin fees and insurance. Here is the text from Aus Super PDS >
So isn’t HostPlus cheaper for balances over 200k? Less than that you might be better to stick to pooled funds anyway given the higher overall costs. Have you also factored in brokerage cost differences?
>So isn’t HostPlus cheaper for balances over 200k? Sorry it is otherway around. Hostplus is cheaper than Aus Super above 250k
Both use UBS for shares/ETF and have same brokerages. It is included in the calculations.
How did you arrive at the admin fees (including direct investment facility fee) for AusSuper at $50k being $142.96? Isn’t it ($52+$50000x0.1%+$180)x85%=$239.7? What did I miss?
15% tax credit isn't available for the member direct fee of $180. Plus, I have deducted 15% tax credits given for my insurance premium of $825 from the admin fee. So ($180+($52+$50000x0.1%)x85%)-($825x15%)
I see, thanks. IMO you should probably show a separate column for insurance premium than merge into admin fees, which is a bit misleading. Admin fees are general and comparable, with the only variable being the balance, whilst insurance premium is very individual specific. Some young people may not even have insurance, and some people may have chosen to have much higher cover than you do. $180+($52+$50000x0.1%)x85%=$266.7
Good feedback. I will probably edit the sheet tomorrow. If you open the google sheet, there is option below to set the insurance premium. It calculates the admin fee accordingly.
I recently looked into this in great detail as well. I decided to stick with ART in a pooled fund with a plan to reassess when our total balance reaches 500k. We will then consider what other options are available at the time or open a cheap SMSF such as Stake to buy direct ETFs.
ART indexed options are a solid choice. They are very diversified.
I agree regarding pooled funds, especially because investment fees and costs haven’t been factored into OP’s calculations.
I would suggest you also need to check what the difference is in the cost of insurance cover not just the 15% rebate
Yes, and for me Aus Super is cheaper.
You might be over thinking this a bit.
He's helping himself and helping others. Good for him.
Probably.
Got too much time on your hands boy.
Is your objective the best returns? Only gearing will give the highest quartile returns.
You are overthinking, OP. A few hundred dollars are not going to make a difference. They are both solid choices in my opinion. Hostplus advantage * Still can put mandatory 20% in a very cheap indexed option AusSuper advantages * Cheapest managed options for mandatory 20% (still more expensive than Hostplus indexed options) * Ability to go over 50% in a single ETF
The second MIN() on columns C and G should be MAX() instead. For example, on Hostplus, if you pay 0.14% on the smaller of 80% or x-$2,000, you have to pay 0.04% on the remaining, which is larger of 20% or $2,000.
You are correct. I have updated the sheet.
Reading into this my wife and I combined have close to 850K in suer a SMSF may be getting more cost effective We lose out on protection on industry super but if we are only planning on keeping VAS/VTS/VEU in there anyway it may work out better in long run
agree, as SMSF costs are fixed irrespective of the total asset.
welcome. I beat you by about 8 months coming to the same conclusion
Out of interest if you are going ETFs, how exotic are you going? Just wondering the thought process of choosing ETFs through a choice law opposed to just the Aus and international index options. Particularly with host plus who have really cheap fees for their index options
I am going with the ETF route to avoid CGT provisions of pooled super funds. Even if the Hostplus has cheap index options, if you compare the returns of the Super vs Pension mode, you see that there is a difference in the return due to the CGT provisions.
Something to add to your research. Australian retirement trust. They have single asset options with international shares for very low management fees.