Aaron is a 32-year-old IT professional who lives in a rented apartment in Adelaide with his

stepbrother Toby who is 20. At the age of 18 Aaron's father encouraged him to invest a small

amount of money in shares and over the years he has actively and successfully traded his share

portfolio to the point where it is currently valued at $165 000. The cost base of his portfolio for CGT

purposes is $88 000. The current balance in Aaron's industry superannuation fund was $172 000. On

the last statement from his superannuation fund Aaron noticed that the indirect cost ratio was

0.61% and investment fees was 0.21%. The fund charges an admin fees of $78 per year plus 0.19% of

the account balance. Aaron is considering establishing an SMSF but is unsure whether the costs of

establishing and running an SMSF would be less than the costs charged by his industry fund. As Toby

has recently started working as an apprentice mechanic, earning $55 000 a year, Aaron is wondering

if it is advisable for Toby to join his SMSF if he were to set up one. If Aaron does establish an SMSF

he would like to contribute his share portfolio as an in-specie contribution which he would continue

to actively manage inside his SMSF. Aaron is planning to then use the share portfolio in his account

as a collateral to enter into margin loan with his bank to buy more shares. He also has an uncle who

knows a bit about accounting but nothing about SMSF who has offered to help Aaron set up and run

his SMSF.

Requirements Your task is:

(a) Firstly, provide evidence-based research to compare the relative advantages and disadvantages

of Aaron remaining in an industry fund versus moving into a SMSF. Your findings should include a

comparative cost analysis.

(b) Secondly, research and provide Aaron with recommendations to guide him in managing his

superannuation savings

(a detailed 3 page answer required)