Wednesday, June 28, 2017

When Super isn't super

Superannuation. The joy of my existence. Not.

Eight years ago my husband and I formed a Self-Managed Super Fund (SMSF) on the advice of a financial planner. Let's call this financial planner Knobhead. That means you have an idea of how wrong it all went from this sentence onwards.

I had about $70K and my husband had about $35 in our respective industry super funds. Both of us had taken a hammering with the GFC - three years before my fund had in excess of $100K in it. We both wanted our super to perform better.

We really didn't have enough in our existing super to form a SMSF but Knobhead said, "You've just got enough. Form the fund, buy a investment property within the fund. Property is booming, you can't lose." And Knobhead duly produced a colleague - Arsebuckets - who specialised in finding properties for mugs like us to buy.

Because setting up the fund cost a bomb including using Knobhead's lawyer who specialised in setting up super funds - let's call him Rich Bastard because why not - we only had enough money for a 10% deposit on a house and land package in Tarneit, a commuter-belt suburb an hour out of Melbourne. We could afford the smallest property in the development. Just.

Knobhead found us insurance, too. Can you believe that? Life insurance and Trauma Insurance we would pay premiums on from within the fund, so it would be a tax deduction. We thought it was a bit pricey but he assured us the insurance company was one of the best around. And hey, it was a tax deduction. What's not to love?

While Knobhead and Arsebuckets got commissions and kickbacks, we gamely wrote cheques for the builders and watched, from 1000km away, our house go up.

Finally it was finished and it rented very quickly.

Here's what happened over the years. The rent didn't really cover the mortgage and outgoings such as the strata fees (as the house was in a managed estate), and as insurance premiums rose each year it certainly didn't cover them.

We had a specialist SMSF accountant that we found ourselves (didn't want Knobhead recommending one) who worried that the fund was losing money.

Meanwhile the house wasn't gaining in capital value. More development estates had grown around it, and most of the houses were bigger - four or more bedrooms compared to our little three. The bloody thing was worth less than what we'd paid for it after a couple of years. Given the buoyant Australian property market, that was insane.

We told our accountant we'd wait until the property gained in value before we sold it or else we'd lose too much money.

Finally it boomed last year as a railway station had been built in Tarneit the year before. We sold the house for a $30K profit after having made a loss on the fund every single year. We settled up in February and put the money into our SMSF bank account. Our accountant told us a month ago to try and wind the fund up this financial year.

So it was time to wind up the fund and - sigh - put our money back in industry super funds. The SMSF was going to die. It was costing us a couple of grand each year in accountant and auditor fees.

So we had a bit more in the fund that what we started with. I was looking forward to getting my $70K back.

But here's the shitty, shitty bit. The bit Knobhead didn't tell us about eight years ago. The bit our SMSF accountant SHOULD have told us earlier. When both husband and wife - or whomever - start a SMSF, and each puts in a different amount, the government deems that profit or loss is appointed percentage wise for the life of the SMSF.

So my percentage of the fund was much bigger than my husband's when the fund started. I copped a higher percentage of the loss EVERY SINGLE YEAR.

Reader, my $71K is now $28K. Ironically, as my husband suffered less of the loss and has held a paid job with a generous employer for the last six years, he has nearly $100K to put into an industry super fund.

And now this week with the financial year drawing to an end I'm frantically organising the demise of the SMSF, starting up industry super fund accounts for us both, cancelling the expensive insurance and taking cheaper policies out within the industry funds, and having a cow as the Tax Office gave me a rebate into the SMSF AFTER I'd drawn cheques and got it at zero balance. I'm now panicking to move that out of the account into the industry fund by 30 June or else, by law, I will have to keep the SMSF open for another year and pay $1000 auditor fees on a sum that's around $27.

I've been feeling sick and stressed all day trying to get everything done, and furious at Knobhead - and myself - about the SMSF and how it's sucked my money. At this rate I can never afford to stop work unless we sell our house - which I love as I grew up here - and move somewhere else.

This week has not been super at all.

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