Percentage Share of Ownership for Investment Property between husband and wife.

[Paul@PFI]

Paul, are there examples of situations where you think super will NOT be a good idea?

Loads of circumstances. Some investors hate super. I dont agree but its their $. Hard to argue with a person aged 75 with a portfolio of property worth $10-$20+ million. It is their super. Only problem is they are paying taxes. One often quoted example is where there is a need to exit before age 60....eg : Sell the factory with the business.

My views arent solely in favour of super but indicate that a prudent investor seeking great tax outcomes should factor in super if they are in it long term. From the perspective of buying in own names its one of the fatal flaws investors make. They get to age 50+ and say "I wish I had...".

 

[alexlee]

Are there genuine circumstances where super should not be considered, as opposed to the 'clients are misguided and don't know what's good for them' examples that you are so fond of. They are entertaining, but distract from a balanced consideration of when super, for example, is an appropriate structure.

Can you give me an example of a client (made up, composite, whatever) where you would suggest they NOT use a super fund?

 

[Paul@PFI]

The Loan was under both our names. However for tax purposes we intentionally made the ownership on the title as 95% for me and 5% for wife.

The Bank don't really care about the 95/5% breakdown as if they have no interest to know about it, Its more like we ask our conveyancer at that time to make it 95/5% on the title, for taxation purposes.

Hence, Before I posted this question on this forum, I thought it has nothing to do with the Bank. Just what is shown on the title.

Its always of interest to the lender. They must approve changes to title since its their loan security. Procedurally its probably easy for them to change title, redraw new loan and payout old loan. Costs ?

 

[Aaron_C]

The loan docs wouldn't really change with a lender but as said earlier the loan will have to be reapproved / redone as it is considered a material change.

 

[Paul@PFI]

Are there genuine circumstances where super should not be considered, as opposed to the 'clients are misguided and don't know what's good for them' examples that you are so fond of. They are entertaining, but distract from a balanced consideration of when super, for example, is an appropriate structure.

Can you give me an example of a client (made up, composite, whatever) where you would suggest they NOT use a super fund?

Most common issue:
- Not sufficient super to warrant the cost, trouble etc. ie $100K in super. Its a waste of time and cost. Very inefficient. Even if LT strategy is to increase it would have to be very compelling to consider.
- Propose to borrow in SMSF but have insufficient super to sustain positive returns. Way too common at present sorry to say. Too many people are hearing wrong msg.
- Young person. Spoke to a tax client aged 25 yesterday. Big on IP. No point considering super now and his balance is tiny. Later maybe. Preservation would be a concern for him also. However may be a good strategy if he accepts this as part of broad LT property strategy.
- Poor compliance individuals. If they cant follow rules super is NOT for them. they will end up penalised.
- Bankrupts, insolvencies etc (They cant be trustee hence no SMSF)
- Poor marital positions. ie : Frequent marriage splits. Poses a future concern of repeat behaviour and may be costly to break it.
- People seeking to use it as "asset protection" as they are encountering marital split, ATO issues etc. Legal advice may suggest its too late and not the correct path.
- Old age. 71+. Super lump sum contributions may pose obstacles and prevent strategies. Fund may be limited to existing $$$.
- Those who may lack capacity. eg : Current client 60+ single no kids. If she was to become ill or lose capacity who manages fund ??
- People with medical concerns - Mental health etc
- Stupid people (they make a mistake and would blame an adviser). Often these people mask as entrepreneurs rather than speculators and risk takers. They cut corners.
- Common problem is people who think super may be a great idea but thinking of retirement, see super as a problem, dont enagage etc. May be wrong path for them longer term.

It really comes down to "know your client" and understanding their drive, motivation, $$$ and their objectives. I'm always happy to say no if I feel it doesnt suit. There is no one strategy.

 

[alexlee]

Most common issue:
- Not sufficient super to warrant the cost, trouble etc. ie $100K in super. Its a waste of time and cost. Very inefficient. Even if LT strategy is to increase it would have to be very compelling to consider.
- Propose to borrow in SMSF but have insufficient super to sustain positive returns. Way too common at present sorry to say. Too many people are hearing wrong msg.
- Young person. Spoke to a tax client aged 25 yesterday. Big on IP. No point considering super now and his balance is tiny. Later maybe. Preservation would be a concern for him also. However may be a good strategy if he accepts this as part of broad LT property strategy.
- Poor compliance individuals. If they cant follow rules super is NOT for them. they will end up penalised.
- Bankrupts, insolvencies etc (They cant be trustee hence no SMSF)
- Poor marital positions. ie : Frequent marriage splits. Poses a future concern of repeat behaviour and may be costly to break it.
- People seeking to use it as "asset protection" as they are encountering marital split, ATO issues etc. Legal advice may suggest its too late and not the correct path.
- Old age. 71+. Super lump sum contributions may pose obstacles and prevent strategies. Fund may be limited to existing $$$.
- Those who may lack capacity. eg : Current client 60+ single no kids. If she was to become ill or lose capacity who manages fund ??
- People with medical concerns - Mental health etc
- Stupid people (they make a mistake and would blame an adviser). Often these people mask as entrepreneurs rather than speculators and risk takers. They cut corners.
- Common problem is people who think super may be a great idea but thinking of retirement, see super as a problem, dont enagage etc. May be wrong path for them longer term.

It really comes down to "know your client" and understanding their drive, motivation, $$$ and their objectives. I'm always happy to say no if I feel it doesnt suit. There is no one strategy.

Insightful and informative. Thank you.

 

[devank]

Is it possible move the money from current super to SMSF and still keep the current super?
Here is an example.
I have about 110K and my wife has about 100K in our individual super schemes.
Her super is great as her company pays for her insurances, super fees and also match her additional 2.5% contribution. So I don't want to leave that super.
However, I'm wondering if it is possible to move whole of my super and say 95% of her super into one single SMSF?

 

[Paul@PFI]

Someone just emailed me about what I wrote : "Poor marital positions"

Who said accountants cant be funny.

 

[Paul@PFI]

Is it possible move the money from current super to SMSF and still keep the current super?
Here is an example.
I have about 110K and my wife has about 100K in our individual super schemes.
Her super is great as her company pays for her insurances, super fees and also match her additional 2.5% contribution. So I don't want to leave that super.
However, I'm wondering if it is possible to move whole of my super and say 95% of her super into one single SMSF?

Great post. Yes. Before considering rollovers to a SMSF its important to consider the individual members. Each of them.
- Loss of insurance especially if they have medical issues, preexisting etc. Cheap group cover can often be important to retain.
- Employers that match extra contributions (ie Defence)
- Problems frequently occur with defined benefit members. They might not be able to rollover at all. Redirecting contributions (if permitted) might have terrible consequences.
- Industry funds can impose minimum balance rules and limit frequency of rollovers. ie annually leaving a $5k min balance. Important costs of the retained small balance be understood. Rewriting insurance might be cheaper too.

One strategy that can be considered is rollover all but maybe $5K or $10K etc. Use that to fund insurances. Depends on premiums etc Also do you understand all the insurance polict rules ?? eg TPD might require constributions to be maintained. Also review where contributions should be made. ie in the example quoted maybe retain to employer fund and "sweep" balance once a year might be a strategy ??

Just bear in mind some SMSF lenders like to see the contributions to the SMSF to factor it into serviceability calcs.

Note I dont recommend you proceed based on my post. Its not general or product advice and in the absence of personal advice and all your circumstances I cant form an opinion.

Every SMSF is now required to consider insurance for all members. They dont "have" to have a policy but must consider it. ie a member aged 62 may not have a need. A member aged 40 with kids and a mortgage might. Your proposed strategy may address part of the problem. It doesnt address you.

 

[DealSeeker]

Sorry Guys, Back to my orig. topic.

Can I confirm if I give 45% share to my wife (currently is 95/5 share between me and my wife) , will I be taxed for CGT or my wife will be taxed?

Thanks

 

[Terry_w]

Sorry Guys, Back to my orig. topic.

Can I confirm if I give 45% share to my wife (currently is 95/5 share between me and my wife) , will I be taxed for CGT or my wife will be taxed?

Thanks

You will be disposing of an asset so will have to pay CGT unless one of the exemption applies.

Be careful with 'gifting' as this would have ongoing long term tax impact.