I know you can buy your business premises with your Super fund and pay rent back to the fund.
Is it possible to buy your place of residence with your Super fund and pay a market rate of rent back to your fund? From what I’ve heard, I doubt that you can. However, what is the difference with the two situations that one should be discriminated against?
If you can clarify the situation, please let me know.
Wes.
Hi Wex, a self managed super fund must meet the following Compliance filters
1. Prohibition from lending & giving financial assistance to members & relatives Sec 65
2. Restriction on asset acquisition from related parties Sec 66
3. Prohibition on borrowing Sec 67
4. Investment must be at arm’s length Sec 109
5. In-house assets restrictions Sec 69
6. Sole purpose test Sec 62This is not an area of law to test without first seeking professional advice but on the face of it I’d say “NO”.
Amanda
“It is better to be inconspicuously wealthy, than to be ostentatiously poor…”NO, NO, NO and a further NO for good measure.
Actually I cannot stress this enough. The people who jumped into this prior to 1999 are now facing no end of problems in re-arranging their affairs to manage upcoming issues.
The reasoning for not allowing the family home through a superannuation fund is based in the sole purpose test of superannuation, where the benefits accumulated in superannuation are only to be used for the purpose of funding your own retirement. The legislators at the time believed that this meant not acquiring your own house within the fund. Is it fair? Probably no, but since you can’t borrow in any case you need to have a massive superannuation balance in any case.
The difference between the two…
– A residential lease versus a commercial lease (i.e. termination rules and the like);
– Improvements on the house are more likely to add less value (from a sale perspective) than improve the quality of life (in the mind of the regulator) and therefore you are deriving a benefit before retirement;
– Being forced to sell the house at retirement to fund your retirement income would be politically terrible consequence;The same goes for any non commercial premises (i.e. a holiday house) leased back to the members or their associates (i.e. family).
For background, I am run a superannuation consulting practice and have lectured extensively on the issue and have seen this end in tears too many times. It is an extraordinarily expensive exercise to fix (last one cost over $60,000 in stamp duty).
Craig
Craig
We should never be judged against others. See, the common wisdom is you must build wealth through Super. I don’t entirely disagree. However, I took the opportunity some years back to salary sacrifice and significantly boost my Super, such that I don’t want to pursue that option anymore.
I want to build wealth outside Super. Surprise, surprise this has merit also! And yes, I could afford to buy a residence with my Super fund if the Govt wasn’t so rigid in treating everyone the same, i.e. “you are all so stupid, we need to protect you from your money by not allowing you access until you retire”. [angry2]
Paying rent to my fund for new investments would constitute building savings for my retirement would it not? The rent money would go to me and not be lost forever. By the time I retire it may be a good option to sell the house. Think about different possibilities, not just what is done conventionally. Afterall, that is exactly what Steve Mac is always saying and rightly so. Think differently.
If it were possible to buy my residence through my Super fund and pay rent for many years into the fund until retirement, please explain to me how that doesn’t benefit my retirement. In fact, why is it so different to buying rental property through the fund? The only diff is that I would be the one renting my own property.
Wes.
I don’t have a super fund and don’t know much about them so my question may be a bit naive but I don’t understand what their purpose is????
why have one?
Dosen’t it make more sense to fund your retirement with properties purchased in a trust?
Dosen’t it make more sense to be able to LEVERAGE off your investment properties and grow your portfolio?
Dosen’t it make more sense not to be bound by all the constraints and rules imposed by these superfunds?
I just don’t see why they exist and why people use them??????
Very confused ??????[confused2][confused2][confused2]
Xenia Ioannou-Mena
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Property Sales Consultant
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M. 0412 437 582Xenia
I agree. But Super is complusory, so why not set up your own fund so you can control it yourself.
Terryw
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Parramatta
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Hi,
We have our own super fund and it has not held us back from investing in property, you can go partners with your super fund to buy property or if you have enough super, buy a property outright. You cannot borrow with your super fund and all super funds are checked by accountant yearly to make sure you are complying with rules. We have used our super fund with ourselves as partners 3 times now and have had no problems, buying a property to live in with your super fund is something I would check out with an accountant. Super contributions are also a means of creating a tax deduction when needed.
Dondjr
I couldn’t agree with Don more.
I have several properties in my Super Fund both buy and holds and wrapped properties. Under a SSMF there is nothing I cannot do in an ungeared position outside my Super Fund than inside (with exception of using it to run a business).
Whats more CGT in a Super Fund for a property held 366 days is only 10% bit less than in Trust.
Richard Taylor
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Licensed Financial Planner
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Dr. X
You must have always owned your own business to have never come in contact with Super. You must be a one person show with no employees either.
It is compulsory for every employee to have a Super fund and employers must pay contributions for them. It’s as simple as that. There is no getting around it. It is legislation.
Care to tell us why you have never had anything to do with Super? [biggrin]
Wes.
Yep that’s me!
No employees (yet!), and no job!
I have just started a business but have had a passive income from investments since 19. My main income is not from my business but from rents and developments! (and loving it!)
The only “real job” I ever had was overseas, prior to that I was paid a tax free scholarship to undertake PhD studies and did causal lecturing. I think both were exempt from compulsory super???
I guess that explains my stupidity to the whole thing [biggrin]
But have to say, regardless of how in the dark I am about what this super thing is all about,
I LOVE BEING SELF UNEMPLOYED!!!!!!
Xenia Ioannou-Mena
Property Manager &
Property Sales Consultant
E: [email protected]
M. 0412 437 582Wes
Sorry to contradict you but this is not correct
It is compulsory for every employee to have a Super fund and employers must pay contributions for them. It’s as simple as that.
The following employees are not covered by the Superanuation Guarantee Act:
1) Employees who earn less than $450 / month.
2) Employees under the age of 18 and working part time (less than 30 hours a week)
3) employees aged 70 and over.
4) employees who elect to be exempt because their accumulated benefits are in excess of the Pension RBL.Point 4 above has been super seeded by the May Budget.
Richard Taylor
Residential & Commercial Finance Broker
**NODOC loans from 7.14%**
Licensed Financial Planner
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[email protected]
Ph: 07-3720 1888Richard Taylor | Australia's leading private lender
No problems, Richard, you appear to know more about it than me. Generally speaking though, most employees must have Super was the point I was making. I shouldn’t have made my statements so clearcut. I wasn’t really aware of the exceptions you pointed out, but thankyou for correcting me.
Wes.
No worries Wez.
Sorry wasnt trying to correct you just pointing out the variations.
As a Fin Planner Super & SMSF are 2 areas I actually enjoy talking about.
Richard Taylor
Residential & Commercial Finance Broker
**NODOC loans from 7.14%**
Licensed Financial Planner
http://www.yourstatefinance.com
[email protected]
Ph: 07-3720 1888Richard Taylor | Australia's leading private lender
Hi Xenia,
Most employees will have superannuation held in work superannuation like “Gosuper” or “AMP” etc. but a self managed super fund is more personal. It usually consists of up to 4 family members that pool their superannuation into a SMSF. This is a seperate legal entity that must prepare finiancial accounts and lodge tax returns just like a trust or company, at the concessional tax rate of 15%, however it must also be audited each year, and follow strict laws as set down by the Tax Office. These funds must be held by the SMSF for the sole benefit of the members on retirement.
Most people self employed or in business will use a SMSF to allow them a tax deductible contribution, thus reducing their personal income tax bill. By managing the fund yourself, providing you follow the “rules” you can decide yourself where and what the fund invests in.
I hope this has made it a bit clearer !!Amanda
“It is better to be inconspicuously wealthy, than to be ostentatiously poor…”
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