Saving our IP from sale.....

[888Katone]

I'd love some advice on the following...

My husband and I have a combined super of $250K in traditional non-SMSF accounts. My husband gets 20% return a year on his super. We will retire in 15-20 years respectively.

We have one IP (a unit) which is mortgaged at $247K. It is currently worth $350K.

Firstly, we are wondering if we placed our unit with a remaining mortgage of $240,000 into the SMSF and we brought our $250K superfunds into it - can we have it fully paid off this way ?

Secondly, if we have a fully paid off IP in the SMSF - can we use the rental income it receives ($320 per week) ourselves, or does it just go straight into the SMSF. If we are putting our own percentage of our incomes into the SMSF as well - does the government reward us for putting in the extra rental income in ?

Thirdly - is it confirmed that we cannot borrow against the fully paid off unit in the SMSF ?

Fourthly - we can only keep the unit if we do something like this as we are also paying off a mortgage on our PPOR - budget is very tight. Is it worth putting the unit into a SMSF - or just selling it - considering my husband is getting a 20% return on his superfund every year unless he loses his job ?

 

[topcropper]

Is it worth putting the unit into a SMSF - or just selling it - considering my husband is getting a 20% return on his superfund every year unless he loses his job ?[/FONT]

20% from super? How will he get that this year? What sort of super fund is it?

See ya's.

 

[BayView]

A bit off topic, but needs saying;

If you assume you are always going to get 20% per year from your super, you are headed for a very big disappointment.

Every superfund made those returns over the last few years. I haven't received my last financial year's statement yet, but I'll bet it's not as good as the year before.

Let's see how well they do over the next few years. Not well, I'm tipping.

 

[handyandy]

I would suggest that by transferring the IP to the SMSF you would trigger a CGT event and also be up for the full stamp duty.

Further the current mortgage loan on the IP would not be transferable and you would need to refinance. In my reading of property in SMSF the interest rates are substantially higher as they need to be none recourse loans.

All up I really don't think that the idea of transferring the IP to a SMSF is the answer to your affordability problems. Have you considered a debt recycling strategy? This may alleviate some of the stress of your PPOR mortgage over time.

Cheers

 

[coastymike]

An SMSF cannot acquire residential rental properties from a related part of the fund unless the related party owns numerous rental properties and carrying on a business of providing rental properties.

In your case you would probably be unable to transfer the residential unit to your SMSF.

 

[marg4000]

I am in a defined benefit government super fund, my super goes up by a percentage each year regardless of market conditions, but I don't get 20% unless you include contributions.
Marg

 

[tobe]

If you talk to a financial planner, they will say sell the unti, and make a contribution to super, as they have an interest in a higher super balance via trail commissions, or sales bonuses etc. If you talk to a property ethusiast, they will tell you to hold the unit and buy more.

If you cant continue to hold the property in the short term and have looked at all the alternatives (borrow more to drip feed into repayments? convert both O/O loan and investment loan to I/O, raise the rent, find an equity partner such as a gen y family memebr), then you will have to sell it. You will have to allow for capital gains tax with the proceeds. You can then either spend the proceeds, put them in a low tax environment like super, or buy another investment with them.

 

[Sunder]

My husband and I have a combined super of $250K in traditional non-SMSF accounts. My husband gets 20% return a year on his super. We will retire in 15-20 years respectively.

That's what we've all been getting till 2007... But check out this year:

http://www.news.com.au/business/money/story/0,25479,24088799-5013954,00.html

The BEST performer this year, LOST 1.7%

Firstly, we are wondering if we placed our unit with a remaining mortgage of $240,000 into the SMSF and we brought our $250K superfunds into it - can we have it fully paid off this way ?

I've been doing a lot of reading on SMSF, but I am not an accountant or a lawyer, so please take everything from this point on, with a grain of salt. DYOR as usual.

I believe that only shares and commercial property can be transfered in-specie (as-is) from a fund member. That is, you can use the SMSF to buy a residential property, but you cannot transfer it "as is" into the fund, from a person who is a member of the fund.

I don't know if husband to wife transfers/sales are considered member acquisition in-specie, so if you set up a SMSF, it might be possible to buy the property from him.

Secondly, if we have a fully paid off IP in the SMSF - can we use the rental income it receives ($320 per week) ourselves, or does it just go straight into the SMSF.

You could not draw the rent out of the SMSF, any more than you could ask for the dividend payments from your current fund managed superfund.

If we are putting our own percentage of our incomes into the SMSF as well - does the government reward us for putting in the extra rental income in ?

"Reward"? Reward how? If you're earning under a certain amount, then yes, the government will co-contribute. If you're earning above a certain amount, you will pay less tax, but what do you mean by reward?

Thirdly - is it confirmed that we cannot borrow against the fully paid off unit in the SMSF ?

Correct. You cannot use your superfund as a security to a loan, as it is "untouchable" by creditors if you default.

Fourthly - we can only keep the unit if we do something like this as we are also paying off a mortgage on our PPOR - budget is very tight. Is it worth putting the unit into a SMSF - or just selling it - considering my husband is getting a 20% return on his superfund every year unless he loses his job ?

That's an opinion question, and not a fact question, so I'll decline to answer. However, wait till you get your statement this year to believe you got 20% again.