Hi All
A friend of mine recently dropped the hint that they were setting up a SMSF as a vehicle to invest in property.
I myself have about 20-30k in Super which I would be happy to use to buy into a property.
Does anybody know the pro’s and cons or can maybe direct me to a post or website which details how I can do this.
Thanks
Hi there
One big downside is that you cannot borrow money in your SMSF which means everything you do needs to be paid for in cash.
Given the costs of set up and the ongoing costs I normally recommend a minimum of $75 -$100K to my clients before establishing a SMSF.
One big plus is flexibility and choose of investment platform.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
New Shared Equity scheme has arrived – Email us for details.Richard Taylor | Australia's leading private lender
But cant you borrow money in your name and pay it into the super fund as a deposit, effectively loaning enough money to the fund to buy the asset.
Yes you can borrow in your name (that is assuming you own a unencumbered house and take a borrowing against it) and make an contribution into the SMSF but the interest charged on the borrowings would not be tax deductible.
You are unable to buy the property jointly with a Unit Trust these days and offer the property as security.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
New Shared Equity scheme has arrived – Email us for details.Richard Taylor | Australia's leading private lender
Or you can find a very cheap property to purchase.
Hi Chetnik,
Here’s an extract of an article off our website about Self Managed Super Funds:
A self managed superannuation fund (SMSF) is a superannuation fund that you operate and run by yourself.
Managing an SMSF is strictly regulated by the tax office to ensure it complies with the Superannuation Industry (Supervision) Act 1993 (SIS). An SMSF performs the same role as other funds by investing contributions for the sole benefit of members upon retirement.
Usually consisting of 1-4 members, an SMSF is also required to have trustees that are also fund members. A SMSF is required to keep separate records, lodge a tax return and have the financial accounts audited by an approved auditor.Rules on running a SMSF
An SMSF must follow an investment strategy through compliance filters:Cannot borrow funds and cannot lend to members or relatives
Cannot invest in an asset that is subject to a security and cannot operate a business
Investments must be at arm’s length
The investment must be carried out for the sole purpose of providing for the members’ retirement benefit
Investments purchased from a related party (“in-house assets”) must not exceed 5% of total fund assets.Advantages of an SMSF are that you control investment decisions and diversity, and a 15% flat tax rate applies. Where assets are held for over 12 months, a 331/3 CGT discount applies. Also, members’ life insurance premiums are tax deductible and there is a tax exemption status in pension mode. The main disadvantages are that the SMSF must comply with the SIS Act, and so maintaining the SMSF can be time consuming.
AmandaBS
http://www.propertydivas.com.au
FREE online Property Resources“It is better to be inconspicuously wealthy, than to be ostentatiously poor…”
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