Just to put some clarity around the capital growth versus cashflow debate.

Head to the supermarket tomorrow and suggest that you’ll pay for your groceries with forecasted capital growth. See how that goes. I suspect you’ll leave without the groceries. This should help make he bank’s position clearer in why they too are uncomfortable with lending against assumptions that don’t pay their way.

The reality is it makes it cheaper up front to get into the market, but over the long term you’d pay more in the annual land tax than you would have in stamp duty.

Hm, say you were to get caught for fraudulent claiming of FHOG.

I find that people are so busy focusing on how to get themselves out of the workforce in the next 5 years that they overlook the obvious pot of untapped money in their super. It is quarantined money that is quite often whittling downwards in balance that can so easily be resurrected into a SMSF and used to acquire property. Yes it is true that it funds income for retirement years, but this is not to say it is money that should be ignored. Why not work on the short term outside of super AND the long term inside super. The money is there… might as well use it! :)

Hi Liana

How much have you saved so far?

Hi Kiwi

In response to your questions:

1. Find out how much I have built up?

As has been mentioned, you can contact your existing super fund and simply ask what your fund balance is as at today. Some of them get a bit funny about it and dodge the question by saying it’s hard to answer because it depends on the precise balance when they hit the rollout button, so it is easier to say “Hypothetically speaking, if rollout of my entire balance was initiated right now, what would the rollout amount be?”

2. How do I instigate the process to get funding placed into my company trust account?

A Self Managed Super Fund is different from any company you may already have set up. It’s nominated purpose at the time of setup is different, so let’s reword your question to “How do I instigate the process of getting my superannuation money into a Self Managed Super Fund?”. An appropriate organisation can set up the self managed super fund. This setup can take anything up to a day. ABN and Tax File Numbers can take a couple of weeks to be issued. From there a SMSF bank account can be opened. From there it is possible to ask your employer to start directing your superannuation contributions straight into your Self Managed Super Fund Bank Account, and it is also possible to request a rollover from your existing retail fund into your Self Managed Super Fund.

3. How long does this process normally take?

To be realistic, assume that the process described above in #2 takes about 7-8 weeks. It depends how slow the bank is at setting up your bank account, and how slow your retail fund is to let go of your money, and how quickly you can bank the rollover cheque into the SMSF bank account. If you leave the cheque sitting on your kitchen bench for 2 weeks, it would obviously slow the process down.

4. Can you access all the fund available? or a Percentage?

It depends on the rules of your retail fund, however note that inside your retail fund you likely have death & TPD (total & permanent disability) insurance. It is generally cheaper to keep this policy rather than start over with a new policy, so it is best to ask your retail fund how you can remain eligible for this insurance. Normally the response will be something like “Keep a minimum balance of at least $3000 at all times, and of course keep in mind there are admin fees and insurance premium costs each month to ensure you have covered.” So generally it is wise to do something such as leave say $5k in there, roll the rest out, and perhaps every 2 years do a rollover of a couple of thousand from your SMSF to your retail fund to top its balance up to be able to afford the admin fees and insurance premiums for the next couple of years.

5. Are there any costs? if so what are they?

There is a cost to set up the SMSF. The price of this depends on the provider, however assume about $2100 for a SMSF with a Corporate Trustee. After the SMSF is set up, ASIC will charge your SMSF approximately $45 per year for the right to keep the SMSF open. There will also be a charge of approximately $240 per year to keep the Corporate Trustee open. Assume annual costs of $1100 for the annual tax return and audit as arranged through an appropriate SMSF accountant. Bank fees will be about $8 per month. If the SMSF intends to buy a property a Bare Trust is required. Assume about $1000 for that (And since it is a PTY LTD, ASIC will hit your SMSF with a bill of $240 per year for the right to keep it open.)

6. Who specialises in this? or can you go on your own steam.

There are all manner of operators out there with different pricing and service levels. Be very sure you are going with an operator that doesn’t get to control absolutely everything you do (eg forcing you to use their accountants, their mortgage brokers etc) and be crystal clear that they’ve done loads of SMSF setups for SMSFs that intend to and successfully go on to purchase property with loans attached. If a SMSF is not set up for this purpose you can run into expensive strife. Your SMSF can also be found to be non-compliant, and worst case scenario you can be forced to sell its assets and close up shop. This is not an area to let someone have a go at something for the first time.

You don’t need a car worth $50k. You can have a perfectly good new car for around $15k if needs be. I agree with the others. Sell the car and put the money into an investment.

Cleaning is very cheap. Mostly elbow grease.

Painting can have a dramatic effect. Perhaps combined with changing doorhandles of kitchen cabinetry.

Gardening.

What is required to rent it out? Steps and costs involved in making it a separate dwelling?
It depends on your council’s ruling, but the easy answer is “nothing needs to be done unless you as the landlord are not prepared to pay for the utilities usage (gas/water/electricity). Ideally the downstairs flat would have its own set of bins and its own letterbox, but that will be a flag to council to ponder hitting you with two sets of council rates.”

What would be the cost of installing separate power meter and water meter? Also I assume separate garbage collection?
Regarding power meter and water meter, depends on what your local water company charges for meters, and what your local tradies charge. A quick call to a local electrician and plumber should give you a ballpark answer. Separate garbage collection if you ask council for another set of bins, but remember in doing so they might decide to rate the downstairs flat separately.

Parking requirements- there is one separate carport for the flat.
Bonus.

Would I be able to make some of the interest on the mortgage tax deductible or not?
Yes. However discuss with your accountant to understand the impact to your capital-gains-tax-exemption on your primary residence.

If I renovated the flat would the costs be tax deductible ( given that the mortgage would be covering the whole dwelling)?
Improvements are generally depreciated over time (not immediately claimable like repairs and maintenance can be).

Anything else I haven’t thought of?
Don’t confuse separately renting the downstairs flat with trying to subdivide it onto its own title. If you go down that path then yes, it’ll require its own gas, electricity and water meter. It’ll have to comply with fire ratings so you might have to make alterations to the ceiling (because that is what separates it from upstairs). A local builder could comment on this. Also it’d need its own letterbox and bins, and would have to comply with your local council planning rules. Each “dwelling” would have to have the right amount of parking and private open spaces etc etc.

Hi Angela

You’ll have trouble accessing equity in the property if your intention is to use the equity for a purchase in Australia.

You couldn’t borrow back the entire $100k anyway. Assuming you are wanting to release the equity for investment into another property in NZ, then in a mortgage refinance situation, the refinancier would take you to a maximum of 90% of the property value. 90% of $440,000 is $396,000. Then you figure out usable equity like this:

$440,000 * 0.9 = $396,000.
$440,000 – $396,000 = $44,000.
Then because you pitched $100k deposit into the deal you would do this: $100,000 – $44,000 = $56,000.

So in theory, you’d able to release $56,000 for investment purposes. This is presuming you had a lender that was happy to provide you with this refinance facility (it is a borrowing event, and they have to be convinced you can afford to repay it).

Hope this helps.