SELF MANAGED SUPERANNUATION FUNDS (SMSF’s)
Self-managed superannuation funds (SMSF”s) have become the retirement vehicle of choice for many Australians. They have been growing in strength since their commencement in 1994 and as at 30th June 2013 they now number 500,000 with members reaching I million and assets of $500 billion.
In 2007 the government announced one of the most important strategies for an SMSF – the ability to borrow to purchase property – one of the few areas where SMSF’s are permitted to borrow and is very suited to the long- term nature of SMSF investments.
It is particularly important to look at alternative wealth creation strategies to overcome superannuation funding reduction and to increase future wealth for retirement. Property is an excellent investment for an SMSF and members of SMSF’s are able to purchase a property inside their superannuation fund using part of their superannuation funds as a deposit.
- By investing in property inside their SMSF, members have the opportunity to significantly grow funds for their retirement.
- The fund provides asset protection , since no claim against the super fund trustee can result in a claim on other fund assets.
- The maximum tax rate paid by SMSF’s is 15%.
- Future capital gains are taxed at only 10% after one year and zero in pension phase.
HOW DOES IT WORK?
- Step 1. A deed ideally with a corporate trustee is required to be set up.
- Step 2. A holding trust with a corporate trustee is set up to hold the legal title of the property.
- Step 3. A member can then borrow to purchase a property.
- Application for finance is made to the bank/finance company.
- In certain circumstances members are able to lend to the fund themselves.
- The SMSF outlays the deposit for the property, which is owned by the trustee.
- Rent is received into the SMSF.
- Expenses are paid by the self managed superannuation fund.
- When the property has been paid off ownership is transferred to the fund.
- If the property is sold, gains on the sale are taxed at 15% or if retained for one year 10% tax is payable.
- If the member is aged over 55 years and is drawing a pension from the SMSF gains on the sale are tax free.
- If the member is aged 60 years or over gains on the tax are tax free when sale proceeds are withdrawn.
Orion’s Mac Read previously served as Queensland State Manager of Austrust & Executor Trustee (Austrust) a trustee company and self- managed superannuation specialist and has substantial experience concerning the establishment of SMSFs for the benefit of financial planners and their clients.
Our partners can also provide administration, audit and insurance services for SMSFs at competitive rates.