My son is starting uni this year. He is also seriously picking up part time work to support himself. Some of those employers, casual and part time, require nomination of a super fund for the SG.
He expects to earn about (say) $15 - $25,000pa, giving rise to a $1,425 - $2,375 SG payment.
The choices are:
1. Retail fund
2. My wife and my SMSF
3. Employer designated fund (one position is govt, so its specifically a govt fund)
The issues with (1) is that
(a) very few allow the member to opt out of Life Insurance (Australian Super does), and
(b) the annual fees will be a significant bite on the annual contribution (eg, most funds will charge circa $200 pa as a minimum, or an 8.4% fee! This will go down as the super account grows, of course, but its pretty steep for a few years and may be more than the fund returns). Add in the insurance cost and the net position may be near zero!
The issues with (2) is
(a) He must become a trustee of the fund or a director of the trustee company, the former entailing a lot of work, the latter not so much,
(b) His investment drivers will not be aligned to his parents', and
(c) In the longer term, being a director may be onerous if he moves interstate or, more so, overseas (of course, he could transfer out of the SMSF any time)
The issues with (3) is that
(a) You cannot opt out of life insurance
(b) govt funds aren't generally good performers
(c) fees are pretty high also, though better hidden(!), BUT
(d) govt funds don't generally deduct the 15% contribution tax until you transfer out (at least the one he would go into).
I expect I aren't the first one with this dilemma. Does anybody have any experience with this? Are there any pitfalls (there will be!), or traps for young players?
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