new super rules and property
- Thread starter hungry
- Start date
There has been some discussion. Check out this link http://www.somersoft.com/forums/showthread.php?t=39175
Thanks for sharing BV. Who have you decided to go with? I heard the trustee and legal set-up and running costs are astronomical. As opposed to say buying traditional instalment warrants over shares. Plus now that the no personal guarantee has to be removed by the lenders, they will charge accordingly in the rates or reduce the LVR. eg. I think the Macquarie Lever product only has a max of 55-60% LVR. I think we're talking no-doc style rates - circa 11%.
I'm sure the professionals would've crunched the numbers for you on the exit side with it being tax free and all. Otherwise, the strategy wouldn't be flogged so hard by the providers since the SIS change. Think its a great strategy but if your years away from accessing super, its a lot of resources to be tied up for all that time.
asdf
Running costs will be around $2K for me
I have an accountant who gives me a package deal
STGeorge is the best lender with 72% LVR and 9.45% lending rate.
Seiza can go up to 75% LVR with a 9.85% lend
but with Seiza and for a similar size loan the loan costs jump
from $3.5K to approx $7K
These are new products so I hope that as more people start
borrowing through their SMSF the LVR's will increase and the interest rates will drop a little.
There was a seminar at the SIG meeting last month and
there is some more info on SMSF's towards the back of this thread.
http://www.somersoft.com/forums/showthread.php?t=40954
Mike is the MB who gave me the above lending rates
http://www.somersoft.com/forums/member.php?u=9933
Cheers
Running costs will be around $2K for me
I have an accountant who gives me a package deal
STGeorge is the best lender with 72% LVR and 9.45% lending rate.
Seiza can go up to 75% LVR with a 9.85% lend
but with Seiza and for a similar size loan the loan costs jump
from $3.5K to approx $7K
These are new products so I hope that as more people start
borrowing through their SMSF the LVR's will increase and the interest rates will drop a little.
There was a seminar at the SIG meeting last month and
there is some more info on SMSF's towards the back of this thread.
http://www.somersoft.com/forums/showthread.php?t=40954
Mike is the MB who gave me the above lending rates
http://www.somersoft.com/forums/member.php?u=9933
Cheers
SMSF set up costs
Hi all,
has anyone got a breakdown on all the fees payable/total cost of a SMSF including advice, loan set up, warrants etc. I have been quoted $20K by a financial planner. This seems a little on the high side. (however the right advice is usually the real bargain). Has anyone used BankWest for SMSF warrants???
JTW
Hi all,
has anyone got a breakdown on all the fees payable/total cost of a SMSF including advice, loan set up, warrants etc. I have been quoted $20K by a financial planner. This seems a little on the high side. (however the right advice is usually the real bargain). Has anyone used BankWest for SMSF warrants???
JTW
JTW
As some additional info... I just got this thru in an email tonight - forgive the cut and paste.
Recent changes the Government has made to Self Managed Superannuation Funds
(SMSF) allow them to borrow money to purchase investment property.
nab has launched a Home Loan offer to facilitate this and a brief summary of what we can offer your clients follows:
Available on standard variable and fixed rate home loans
Interest only options are available
Max LVR is 70%
Normal loan terms up to 30 yrs
Minimum loan size of $20k, no maximum
Standard $600 application fee + Legal & Document preparation fees
apply to all loans
As some additional info... I just got this thru in an email tonight - forgive the cut and paste.
Recent changes the Government has made to Self Managed Superannuation Funds
(SMSF) allow them to borrow money to purchase investment property.
nab has launched a Home Loan offer to facilitate this and a brief summary of what we can offer your clients follows:
Available on standard variable and fixed rate home loans
Interest only options are available
Max LVR is 70%
Normal loan terms up to 30 yrs
Minimum loan size of $20k, no maximum
Standard $600 application fee + Legal & Document preparation fees
apply to all loans
Hi JTW
In my opinion $20K is very much on the high side of costs no matter how good the advice may be.
For budgeting purposes on the SMSF Loan side of things only , you should expect the following;
Documentation -SMSF Trust & Security (Bare) Trust Approx $2,000 - $3,000
SMSF Loan 0.5% of loan amount or greater
Mortgage Stamp Duty - Depends on loan amount and in which state security property is.
Property valuation - $350 for a residentail property up to 1% plus GST of purchase price for a commercial property.
Lender legals - $1,750 + (This includes vetting of trust deeds and settlement)
As to your other question, Bankwest do not currently have an SMSF loan offering and whilst they were looking at it earlier this year they decided not to proceed. My information was that their UK owners decided to wait and see. I don't expect them to change their decision any time soon.
In my opinion $20K is very much on the high side of costs no matter how good the advice may be.
For budgeting purposes on the SMSF Loan side of things only , you should expect the following;
Documentation -SMSF Trust & Security (Bare) Trust Approx $2,000 - $3,000
SMSF Loan 0.5% of loan amount or greater
Mortgage Stamp Duty - Depends on loan amount and in which state security property is.
Property valuation - $350 for a residentail property up to 1% plus GST of purchase price for a commercial property.
Lender legals - $1,750 + (This includes vetting of trust deeds and settlement)
As to your other question, Bankwest do not currently have an SMSF loan offering and whilst they were looking at it earlier this year they decided not to proceed. My information was that their UK owners decided to wait and see. I don't expect them to change their decision any time soon.
SMSF set up costs
Thanks for the quick reply. The financial planner I contacted told me the finance would be via BankWest, so that is why I asked. I will be checking around alot more before I commit. $20K seemed high to me, I will also look into how the cost is incurred, what included and what is not.
The reason I want to look at the SMSF is that I am planning on making some very substantial capital gains in the next few years, no need to access it really. I am in my late 40's and can get by comfortably on my other investments, so the CGT minimisation and asset protection are my main objectives. I am looking at a 15 year plan. Do you think a SMSF is a suitable strategy to achieve these outcomes?
The down side to this seems to be the restrictive loan rules. Can I loan the SMSF the money from my own cash reserves. Can I borrow via a warrant at a later stage to undertake improvement/development on the site? How much can I contribute to the SMSF to start the fund.
jtw
Thanks for the quick reply. The financial planner I contacted told me the finance would be via BankWest, so that is why I asked. I will be checking around alot more before I commit. $20K seemed high to me, I will also look into how the cost is incurred, what included and what is not.
The reason I want to look at the SMSF is that I am planning on making some very substantial capital gains in the next few years, no need to access it really. I am in my late 40's and can get by comfortably on my other investments, so the CGT minimisation and asset protection are my main objectives. I am looking at a 15 year plan. Do you think a SMSF is a suitable strategy to achieve these outcomes?
The down side to this seems to be the restrictive loan rules. Can I loan the SMSF the money from my own cash reserves. Can I borrow via a warrant at a later stage to undertake improvement/development on the site? How much can I contribute to the SMSF to start the fund.
jtw
You need advice from someone who is not selling you a product or service
At your age if you already have some super you can roll it over into a D.I.Y. fund as long as your happy to be a hands on investor. Under the age of 50 you can only contribute $50,000 a year into super as an individual or $100,000 as a couple. Above that and the tax man turns into a stand and deliver bandit so no you cannot loan your smsf any money unless you have a business you want to sell and roll it into super and you have less than 6 million is assets
Also your SMSF cannot run a business and that includes developing property. If its an old building and you want to upgrade it to get a better yield that's ok but say its an old commercial shop and you want to tear it down and build a boundry to boundry you beaut commercial property I suspect the ATO may take a dim view.
At your age if you already have some super you can roll it over into a D.I.Y. fund as long as your happy to be a hands on investor. Under the age of 50 you can only contribute $50,000 a year into super as an individual or $100,000 as a couple. Above that and the tax man turns into a stand and deliver bandit so no you cannot loan your smsf any money unless you have a business you want to sell and roll it into super and you have less than 6 million is assets
Also your SMSF cannot run a business and that includes developing property. If its an old building and you want to upgrade it to get a better yield that's ok but say its an old commercial shop and you want to tear it down and build a boundry to boundry you beaut commercial property I suspect the ATO may take a dim view.
SMSF acquiring asset
Once again thanks for the prompt and helpful replies. This area is a potential minefield if I get it wrong. I am throwing around some ideas that clear the hurdles of the SMSF rules, borrowing criteria and the correct ownership structure to be able to use the asset as collateral in the short term and minimise CGT in years to come.
Would this work: I currently own a commercial asset with a registered business (ABN & GST) and have no debt on it. If I borrow an additional amount of money ($2 mil) develop the site and on completion, sell it to my SMSF for money owing (eg $2.4 mil after capitalised interest). The actual value of the property could be as much as double this. My business then commences leasing the site back at about 15% of the purchase price which would be about market value for the lease. The capital gain would grow in the SMSF for about another 10-15 years until sold for retirement. Could the money then be held in the SMSF and pay me a yearly pension. Is there a limit on how much my fund could pay me as a pension (I would be in my early 60's)
JTW
Once again thanks for the prompt and helpful replies. This area is a potential minefield if I get it wrong. I am throwing around some ideas that clear the hurdles of the SMSF rules, borrowing criteria and the correct ownership structure to be able to use the asset as collateral in the short term and minimise CGT in years to come.
Would this work: I currently own a commercial asset with a registered business (ABN & GST) and have no debt on it. If I borrow an additional amount of money ($2 mil) develop the site and on completion, sell it to my SMSF for money owing (eg $2.4 mil after capitalised interest). The actual value of the property could be as much as double this. My business then commences leasing the site back at about 15% of the purchase price which would be about market value for the lease. The capital gain would grow in the SMSF for about another 10-15 years until sold for retirement. Could the money then be held in the SMSF and pay me a yearly pension. Is there a limit on how much my fund could pay me as a pension (I would be in my early 60's)
JTW
You need to cross your t's and dot your i's with super
Hello again; The problem is your proposing to gift a portion of the property to your super fund. In legal terms for "love and affection". You immediately fall foul of the $50,000 contribution cap per annum in your age group (under 50)
Prior to 1st of July 2007 you could have contributed a property into your super fund up to a value of $1 million but that window has now closed.
Do you have a reasonable amount of super in a retail or industry fund that is in shares that you could convert to cash and roll over into a D.I.Y. fund?
The other way around it is if your commercial property is placed in a unit trust and remains ungeared your super fund could acquire units in the trust to the equivalent of $50,000 a year until such a time that your fund owned the property outright. The key is the unit trust must not have any borrowings against the assets in the trust or you fall foul of the SIS regulations with regard to the in-house assets rule
If you have other property that you have equity in you could borrow against that to develop the commercial property (prior to your super acquirring units in the ungeared trust). You then set up a rental agreement with the ungeared trust where your rental payment is the development of the property for your business over time. I think you could claim the interest as a expense through your business. Obviously this would require you to have sufficient equity in other property outside your super.
You would also have to factor in stamp duty to transfer the property into the trust and the ungeared unit trust would also have to be registered for GST so you could claim this back when the transaction of the property being moved into the trust would be a GST transaction that the trust pays and claims back.
Hello again; The problem is your proposing to gift a portion of the property to your super fund. In legal terms for "love and affection". You immediately fall foul of the $50,000 contribution cap per annum in your age group (under 50)
Prior to 1st of July 2007 you could have contributed a property into your super fund up to a value of $1 million but that window has now closed.
Do you have a reasonable amount of super in a retail or industry fund that is in shares that you could convert to cash and roll over into a D.I.Y. fund?
The other way around it is if your commercial property is placed in a unit trust and remains ungeared your super fund could acquire units in the trust to the equivalent of $50,000 a year until such a time that your fund owned the property outright. The key is the unit trust must not have any borrowings against the assets in the trust or you fall foul of the SIS regulations with regard to the in-house assets rule
If you have other property that you have equity in you could borrow against that to develop the commercial property (prior to your super acquirring units in the ungeared trust). You then set up a rental agreement with the ungeared trust where your rental payment is the development of the property for your business over time. I think you could claim the interest as a expense through your business. Obviously this would require you to have sufficient equity in other property outside your super.
You would also have to factor in stamp duty to transfer the property into the trust and the ungeared unit trust would also have to be registered for GST so you could claim this back when the transaction of the property being moved into the trust would be a GST transaction that the trust pays and claims back.
SMSF plan starting to come together
Non recourse,
Thank you so much you have cut through the fog for me. I am starting to see a possible course of action.
I assume the 'gift' is the value of the property over and above value paid. (eg value $4.8 mil sell $2.4 mil = $2.4 mil gift)
How much can I contribute after I turn 50years?
Can I run my business in the premises owned by my SMSF? or is this a conflict of interest. Can I pay above the market rate for the rent?
Could a unit trust borrow (using the commercial asset as security) 50% of the money, I use my PPOR (as security) for other 50% develop and repay the 50% the trust owes by the SMSF obtaining a compliant loan (warrant) thereby clearing the debt. The SMSF then slowly purchased X number of units @ $50k until it owns it?
Thanks in advance
JTW
Non recourse,
Thank you so much you have cut through the fog for me. I am starting to see a possible course of action.
I assume the 'gift' is the value of the property over and above value paid. (eg value $4.8 mil sell $2.4 mil = $2.4 mil gift)
How much can I contribute after I turn 50years?
Can I run my business in the premises owned by my SMSF? or is this a conflict of interest. Can I pay above the market rate for the rent?
Could a unit trust borrow (using the commercial asset as security) 50% of the money, I use my PPOR (as security) for other 50% develop and repay the 50% the trust owes by the SMSF obtaining a compliant loan (warrant) thereby clearing the debt. The SMSF then slowly purchased X number of units @ $50k until it owns it?
Thanks in advance
JTW
Rolling into Super SMSF
NON RECOURSE stated : no you cannot loan your smsf any money unless you have a business you want to sell and roll it into super and you have less than 6 million is assets
Question: Can you explain this a little further please.
I currently have a business. Could I conduct the development via the business and then sell it (and roll it) to the SMSF. The value of the business asset would be less than the 6 million.
NON RECOURSE stated : no you cannot loan your smsf any money unless you have a business you want to sell and roll it into super and you have less than 6 million is assets
Question: Can you explain this a little further please.
I currently have a business. Could I conduct the development via the business and then sell it (and roll it) to the SMSF. The value of the business asset would be less than the 6 million.
The in's and out's
Hello Again; Before we start. I am not an investment advisor or qualified to give any development, Investment or super advice. I have my own SMSF which I started back in 1995 and have two business properties in the SMSF. The compound growth has been in excess of 33% per annum since 1995......so I'm biased
You can run your business from a property owned by your super provided you pay a commercial rent and have a commercial lease. You cannot buy a house through your super and live in it while it is controlled by your super fund. You cannot buy a holiday house in your super and stay in it even if you pay the commercial going rate. Business property means business not pleasure.
You need to be careful how much rent you pay it has to be commercially justifiable A way around that is to sublet part of the property to another business or business's not related to you. Then you can attain yields that will allow you to pay off the warrant in ten years or less.
After the age of 50 you will still only be able to pay $50,000 plus whatever the CPI increases are. Its only the lucky baby boomers 1964 and earlier who can contribute $100,000 per year or $450,000 each 3 years untill 2012. Sorry
Your unit trust could borrow as long as the trust is ungeared when your super acquires units in the unit trust. ( To avoid the in-house assets restriction) You would also need to be mindful of having to pay capital gains twice if there is a significant increase in value first when you transfer the property into the trust and again when your super fund acquires units in the trust. You will need good legal advice on this as the GST laws have changed and there are new anti-avoidance rules. You need to be willing to pay for advice and not try to do it on the cheap. Most importantly you need to know the right questions to ask. A good tax lawyer or QC. is worth their weight in gold only if you go in with an end in mind and your questions can tease out the solution.
If you have a partner that is another $50,000 a year that can be contributed to your SMSF. Do you have two late teenage children that can also join your super fund/
Selling your business is a retirement strategy and usually has to been a going concern for 15 years so the development part unless it was going that long.........? You cannot operate a business that is owned by your super fund only the proceeds of the sale of your business are treated favourably if you put it into super. It was the govenments way of encouraging people with assets outside super to provide for themselves in retirement so that the public purse could be devoted to providing for those who spent their money in the public bar
Hello Again; Before we start. I am not an investment advisor or qualified to give any development, Investment or super advice. I have my own SMSF which I started back in 1995 and have two business properties in the SMSF. The compound growth has been in excess of 33% per annum since 1995......so I'm biased
You can run your business from a property owned by your super provided you pay a commercial rent and have a commercial lease. You cannot buy a house through your super and live in it while it is controlled by your super fund. You cannot buy a holiday house in your super and stay in it even if you pay the commercial going rate. Business property means business not pleasure.
You need to be careful how much rent you pay it has to be commercially justifiable
A way around that is to sublet part of the property to another business or business's not related to you. Then you can attain yields that will allow you to pay off the warrant in ten years or less.After the age of 50 you will still only be able to pay $50,000 plus whatever the CPI increases are. Its only the lucky baby boomers 1964 and earlier who can contribute $100,000 per year or $450,000 each 3 years untill 2012. Sorry
Your unit trust could borrow as long as the trust is ungeared when your super acquires units in the unit trust. ( To avoid the in-house assets restriction) You would also need to be mindful of having to pay capital gains twice if there is a significant increase in value first when you transfer the property into the trust and again when your super fund acquires units in the trust. You will need good legal advice on this as the GST laws have changed and there are new anti-avoidance rules. You need to be willing to pay for advice and not try to do it on the cheap. Most importantly you need to know the right questions to ask. A good tax lawyer or QC. is worth their weight in gold only if you go in with an end in mind and your questions can tease out the solution.
If you have a partner that is another $50,000 a year that can be contributed to your SMSF. Do you have two late teenage children that can also join your super fund/
Selling your business is a retirement strategy and usually has to been a going concern for 15 years so the development part unless it was going that long.........? You cannot operate a business that is owned by your super fund only the proceeds of the sale of your business are treated favourably if you put it into super. It was the govenments way of encouraging people with assets outside super to provide for themselves in retirement so that the public purse could be devoted to providing for those who spent their money in the public bar
SMSF planning
Thanks Nonrecourse,
I appreciate that you are being helpful and I am not expecting you to provide professional advicevia an open forum. The information you have provided is like gold. thanks.
I need to get my head around the possibilities and the implications so that I am not given a snow job. It is amazing how much better result you can achieve by asking you professional advisor the right questions. I think it helps the Advisor as well.
I am going to research the tax break of being able to roll your business into SMSF if you sell after 15 years etc. Also I was born before 1964 so I might be able contribute more on a yearly basis.
JTW
Thanks Nonrecourse,
I appreciate that you are being helpful and I am not expecting you to provide professional advicevia an open forum. The information you have provided is like gold. thanks.
I need to get my head around the possibilities and the implications so that I am not given a snow job. It is amazing how much better result you can achieve by asking you professional advisor the right questions. I think it helps the Advisor as well.
I am going to research the tax break of being able to roll your business into SMSF if you sell after 15 years etc. Also I was born before 1964 so I might be able contribute more on a yearly basis.
JTW
Have fun on your journey
Hi JTW; Less than 4 1/2 % of men have more than $100,000 in super and 2 1/2% of women have more than $30,000 in super. The vast majority of baby boomers are looking for someone to look after them in retirement. At the moment the tax benifits of investing in super are very attractive.
Having said that I would not put all my assets into super as the government be it hard Labour or the boy's in blue are not averse to double dipping in your stash. My approach is to have 1/3rd of my assets in super, 1/3rd in my family discretionary trust and another 1/3rd in another investment trust.
There is a lot of good free advice on this site and like everywhere else there are a lot of tall poppie cutters.
There is a lady by the name of Pat on this site who knows a great deal about the ins and outs of super she is a super advisor and I think an accountant. Having said that we all have clay feet take nothing as gospel and tripple check everything that you are told including my dross.
Regards
Hi JTW; Less than 4 1/2 % of men have more than $100,000 in super and 2 1/2% of women have more than $30,000 in super. The vast majority of baby boomers are looking for someone to look after them in retirement. At the moment the tax benifits of investing in super are very attractive.
Having said that I would not put all my assets into super as the government be it hard Labour or the boy's in blue are not averse to double dipping in your stash. My approach is to have 1/3rd of my assets in super, 1/3rd in my family discretionary trust and another 1/3rd in another investment trust.
There is a lot of good free advice on this site and like everywhere else there are a lot of tall poppie cutters.
There is a lady by the name of Pat on this site who knows a great deal about the ins and outs of super she is a super advisor and I think an accountant. Having said that we all have clay feet take nothing as gospel and tripple check everything that you are told including my dross.
Regards
Have fun on your journey
Hi JTW; Less than 4 1/2 % of men have more than $100,000 in super and 2 1/2% of women have more than $30,000 in super. The vast majority of baby boomers are looking for someone to look after them in retirement. At the moment the tax benifits of investing in super are very attractive.
Having said that I would not put all my assets into super as the government be it hard Labour or the boy's in blue are not averse to double dipping in your stash. My approach is to have 1/3rd of my assets in super, 1/3rd in my family discretionary trust and another 1/3rd in another investment trust.
There is a lot of good free advice on this site and like everywhere else there are a lot of tall poppie cutters.
There is a lady by the name of Pat on this site who knows a great deal about the ins and outs of super she is a super advisor and I think an accountant. Having said that we all have clay feet take nothing as gospel and tripple check everything that you are told including my dross.
Regards
Hi JTW; Less than 4 1/2 % of men have more than $100,000 in super and 2 1/2% of women have more than $30,000 in super. The vast majority of baby boomers are looking for someone to look after them in retirement. At the moment the tax benifits of investing in super are very attractive.
Having said that I would not put all my assets into super as the government be it hard Labour or the boy's in blue are not averse to double dipping in your stash. My approach is to have 1/3rd of my assets in super, 1/3rd in my family discretionary trust and another 1/3rd in another investment trust.
There is a lot of good free advice on this site and like everywhere else there are a lot of tall poppie cutters.
There is a lady by the name of Pat on this site who knows a great deal about the ins and outs of super she is a super advisor and I think an accountant. Having said that we all have clay feet take nothing as gospel and tripple check everything that you are told including my dross.
Regards
Hi Jeff and Non-Recourse,
I am actually a man. Yes I am surrounded by a bunch of vivacious ladies at GGA but I am definitely a man.
We are experts on the tax side of SMSF Lending and also on the tax side of trusts for investing and small business.
Our financial advice is handled by our business partners so this part we don't get involved in.
I agree Non-Recourse info on the Forum is not actual advice but it does give people a good guide on property related topics
I am actually a man. Yes I am surrounded by a bunch of vivacious ladies at GGA but I am definitely a man.
We are experts on the tax side of SMSF Lending and also on the tax side of trusts for investing and small business.
Our financial advice is handled by our business partners so this part we don't get involved in.
I agree Non-Recourse info on the Forum is not actual advice but it does give people a good guide on property related topics
