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Why not own property through a SMSF?

Friday, July 27, 2012

Why not own property through a SMSF?

Many people feeling depressed and out of control due to the recent turmoil in global financial markets are looking for different ways to invest their superannuation.

How does a SMSF work?

It works very much the same as a other superannuation funds. It accepts contributions from members, and invests and manages those contributions and subsequent earnings.

You become the trustee of the SMSF and are involved in all the decision made by the fund. This means you are responsible for tasks such as administration and accounting, managing tax implications and ensuring an investment strategy is in place. However, SMSF professionals at WFS Canberra www.wfscanberra.com.au are able to complete all of the administrative tasks for you and assist you in every aspect of running your fund.

What are the benefits of a SMSF?

- You have control over how and where and when your money is invested.
- There can be fee savings if you use the services of WFS Canberra.
- The potential to use tax savings strategies not possible in other types of funds.
- Purchase your business' real property.

- Puchase residential investment property

Amendments to the Superannuation Industry (Supervision) Act 1993 ("SIS Act"), effective from 24 September 2007, allows superannuation funds to borrow money to acquire any asset which a SMSF is permitted by law to acquire directly, which includes Property

Case Study: Borrowing to Purchase Residential Investment Property

Assumptions:

Josh is 48 years old.
Josh is looking to purchase an investment property for 400,000 (net 5% yield).
Josh wants to fund the investment property through an quity line of credit against his principal residence.
Josh has accumulated $200,000 in superannuation and has a SMSF.
Josh could fund the investment property purchase though his SMSF with himself as the lender to his SMSF.

 

Benefits:

The benefits of Josh owning the investment property in his SMSF are substantial:

 

                                                        Individual                                 SMSF

Rental Income (30yrs)                          $878,054                                $878,054
Interest Expense (30yrs)                      ($780,000)                              ($585,000)
Rental Tax Liability/Benefit (30yrs)        ($40,692)                                ($9,921)
Capital Gain on Property                      $418,563                                 $418,563
CGT Payable                                      ($86,852)                                 $0  

Total Return                                        $389,073                                $701,696

Structure Benefit                                                                              $312,623

* Key Assumptions:
5% rental yield
2.5%pa rental growth
5%pa capital growth

Tax Saving Strategies / Super

Friday, June 15, 2012
If you have any spare cash now is a good time to consider boosting your 'concessional' superannuation contribution before 30 June.  Any contribution made is tax deductible and can save you tax.  Employee's need to contribute via salary sacrifice whereas self employed or retirees can contribute directly.   From 1 July onwards the contributions cap for over 50's is reducing to $25,000 so now is the time to consider whether to take advantage on the higher $50,000 cap that applies until June 30. For more information visit http://www.wfscanberra.com.au/

Salary Sacrifice into Super to save tax

Thursday, November 24, 2011
Hi SS, Yes you can reduce tax by salary sacrificing into super. You can save your marginal rate of tax but your super fund will pay 15% tax. You should seek advice as, at your age, it may actually be more worthwhile paying off your home mortgage or focusing on building up investments outside super.

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