Can you sacrifice speculative profits into a SMSF
- Thread starter Sheryn
- Start date
Profit from a property deal would count as income and be subject to the ATO rules and regulations.
Depending on other income there is possibly a deduction for a contribution of $50K to super, but any profit above this would be subject to the usual tax rates. Once tax is paid you could then put it into super if you want.
As always, check with your accountant.
Marg
Depending on other income there is possibly a deduction for a contribution of $50K to super, but any profit above this would be subject to the usual tax rates. Once tax is paid you could then put it into super if you want.
As always, check with your accountant.
Marg
strange way to do it imho
why couldnt you buy the land in the SMSF, build and sell the whole project at 0% tax within the smsf whilst in pension phase.
debts a problem but theres prob a way around it
why couldnt you buy the land in the SMSF, build and sell the whole project at 0% tax within the smsf whilst in pension phase.
debts a problem but theres prob a way around it
I was thinking along the lines that building 2 x spec houses a year eg build one house and sell, then build the next house and sell and so on.
This would create an income stream, yes it could turn into a business but more a way of diversifying a relative's wealth and getting them into the property market. I agree you can't run a business in a SMSF worst luck and paying tax on profit is not all bad but if some of the profit can be put in a SMSF at 15% tax that would be a good outcome.
Example of bank interest return = Passive management of money:
400K @ 6% interest makes = 24K return a year.
Example of basic spec build return = Proactive management of money:
400K spec home x 2 = 40K return a year.
(allowing that you made a minimum of 20K on each house). Yes I do know experts say you should make a minimum of 30% on a development but I am just trying to beat bank interest rate return for relative as the relative has no exposure to property.
Regards
Sheryn
This would create an income stream, yes it could turn into a business but more a way of diversifying a relative's wealth and getting them into the property market. I agree you can't run a business in a SMSF worst luck and paying tax on profit is not all bad but if some of the profit can be put in a SMSF at 15% tax that would be a good outcome.
Example of bank interest return = Passive management of money:
400K @ 6% interest makes = 24K return a year.
Example of basic spec build return = Proactive management of money:
400K spec home x 2 = 40K return a year.
(allowing that you made a minimum of 20K on each house). Yes I do know experts say you should make a minimum of 30% on a development but I am just trying to beat bank interest rate return for relative as the relative has no exposure to property.
Regards
Sheryn
My advice is that a SMSF is not allowed to develop so it cannot buy land & build. It can, however, buy & sell houses just as it can buy & sell shares.
Hi Ms Jade,
I am under the impression that this depends on the trust deed and what it allows. It may be difficult for Sheryn to achieve her outcome, however I have raw land in our SMSF, that I will develop (and hold) for rental streams.
I may or may not sell it off in the future, however the intent is not to run a business.
Do you mean that the SMSF isn't allowed to buy land and build a box to keep? My trust deed allows me to develop, however not in a business sense. Of course the fund cannot borrow (using the complying SMSF loans thru bare trusts) to actually develop/build. It can only borrow to purchase existing investment property assets.
I am interested in this, so would be keen to hear more about what type of professional offered such advice.
Does the SMSFee have other salaried income? If you can be considered self-employed, for example, by getting an ABN and charging yourself a "management fee" for the spec home build, and you earn less than 10% from salaried employment, you can make pretax contributions to super (up to the contribution limits). I reckon this would be the angle to look at it from. If you exceed the 10%, then maybe you sacrifice more of your salary and live off the spec profits.
Sorry Player, my post was misleading & yours provided the essential missing condition: borrowing. In my example I had to borrow to build so that's what the advice was based on. My little fund could not buy & build on it own, unfortunately. But nice to know that if ever gets enough funds it will be able to do so!
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Trick is he is over 60 years so can take money out of SMSF and pay no tax to live on .
Thanks
Sheryn
