How much super do you need to set up an SMSF?

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Bill
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How much super do you need to set up an SMSF?

Postby Bill » Mon Aug 19, 2019 8:19 pm

Hi, I’ve made the maximum concessional contribution to my super for quite a while. So, I’m looking to set up a SMSF and purchase a couple of investment properties. I’m not quite sure how much funds I need in my super to set up an SMSF? I’ve heard there’s a $200,000 minimum requirement, some say more. Can you clarify the minimum/ recommended funds needed for a SMSF loan?

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Otto Dargan
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Re: How much super do you need to set up an SMSF?

Postby Otto Dargan » Mon Aug 19, 2019 8:33 pm

Hello Bill. Welcome to the forums.

The $200,000 minimum super requirement is a helpful guide as to the amount required to set up a self-managed superannuation fund (SMSF). It is taking into account the cost of setting up and operating a SMSF and the investment returns. The Australian Taxation Office (ATO) has estimated operating expenses ratio on SMSFs is 0.50%.

The truth is there isn’t any minimum balance requirement but it’s highly not advised to set up an SMSF with funds below $200,000. Some experts even suggest a minimum balance of $300,000 or more.

From a strictly lending (home loans) perspective, the minimum balance required is $150,000 with a few of our lenders. Although, some lenders have a higher min balance requirement between $200,000 and $800,000.

It should be noted that all major banks pulled out of SMSF lending however, there are a range of non-bank lenders and specialist lenders still offering SMSF loans at competitive interest rates. And that’s who we’re working with.

We strongly recommend seeking financial and legal advice prior to setting up your own SMSF.

We specialise in SMSF loans.

Speak with one of our specialist mortgage brokers by giving us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a SMSF loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Bill
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Joined: Mon Aug 19, 2019 8:18 pm

Re: How much super do you need to set up an SMSF?

Postby Bill » Mon Aug 19, 2019 8:40 pm

I already have over $300k in my super, so that’s not a concern. Can you give me a breakdown of all the costs involved with buying a property within a SMSF? If for example, I wanted to buy a $700k IP.

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Otto Dargan
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Re: How much super do you need to set up an SMSF?

Postby Otto Dargan » Mon Aug 19, 2019 8:49 pm

Hi Bill,

Here’s a breakdown of funds required and all the costs involved when purchasing a $700,000 property within your SMSF:
  • Deposit (30%): $210,000 (Most lenders will limit the LVR to 70% for newly established SMSFs)
  • Loan amount: $568,000
  • Gov costs/ Stamp duty: $35,500 (estimated costs of 5% of the purchase price, discounts may apply for off the plan purchases)
  • SMSF set up costs: $6,050
  • Loan costs: $9,900
  • Liquidity buffer: $42,000 (This buffer allows for 18 months worth of interest coverage at an interest rate of 5% p.a.)
The minimum Super Funds Required will be $303,450.

We strongly recommend seeking financial and legal advice so other costs for Financial Planning/ Statement of Advice may apply.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Bill
Posts: 3
Joined: Mon Aug 19, 2019 8:18 pm

Re: How much super do you need to set up an SMSF?

Postby Bill » Mon Aug 19, 2019 9:00 pm

Since this will be a new SMSF, how will my serviceability be calculated? Can I use the proposed rental income from the IP? Can I also declare extra contribution?

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Otto Dargan
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Re: How much super do you need to set up an SMSF?

Postby Otto Dargan » Mon Aug 19, 2019 9:17 pm

Hi Bill,

The servicing for a SMSF loan of a newly established SMSF is calculated using:
  • Proposed rental income: Lenders will typically only use 80% of the rental income to account for property repairs, maintenance and fees.
  • Regular super contributions
  • Other super fund income
Lenders can also consider salary sacrifice that has not yet commenced with the appropriate documentation.

Alternatively, you can use our SMSF borrowing power calculator to work it out.

Give us a call on 1300 889 743 or fill in our free assessment form to compare SMSF loans.
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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