SMSF and Property in it - Benefits

[Aries]

1. This would depend on how much cash you have in super, and/family has in super.

It would also depend on potential returns, opportunity costs and how much control you want.

Also your situation. eg. you may own a commercial property and be running a business in this property. It may be a good idea to sell this property to your SMSF for asset protection, release of cash (to pay down your home loan) and tax reasons - pay rent to your own SMSF and claim it as a deduction saving say 30% tax but the fund only paying 15% tax

2. Some benefits will be financial and easy to calculate others will be no financial - asset protection, estate planning etc

I would suggest you do some spreadsheets and play around with some numbers for the financial aspects. See if your potential returns could justify the cost and hassle of setting up and running a fund.

1. With the amount of cash in super, potential return and control, is it a case of "more is better", while with opportunity costs is "less is better"?

With the commercial property example you gave, would it work with a residential property?
For example:
a person wants to upgrade his PPOR and turning the existing PPOR that has been paid off into an IP.
Will selling the existing PPOR to his SMSF work in a similar way?
I am thinking, by doing this, he gets asset protection on the existing PPOR which has been turned into IP, as well as releasing the cash for a new PPOR's deposit.
From PaulG's post, it appears this may work if the IP is not negatively geared.
But what about the costs associated with the transaction (setting up and running an SMSF, selling the existing PPOR to SMSF to turn it into an IP, etc)?

2. For the financial aspects:
- contribution tax (15%) vs income tax at marginal rate
- CGT exemption on sale of IP held in SMSF.
- costs of setting up and running an SMSF.
- opportunity costs (what costs are included here & how can we calculate this?)
Any other financial aspects to be considered?

Thanks again.

 

[geoffw]

As I understand, you cannot sell or buy a house which you own from or to your SMSF. You may derive no benefit from anything in your super find- except the explicit exclusion of a business property for a business you run. You couldn't even own a holiday let and live in it for a week's holiday.

 

[Terry_w]

1. With the amount of cash in super, potential return and control, is it a case of "more is better", while with opportunity costs is "less is better"?

With the commercial property example you gave, would it work with a residential property?
For example:
a person wants to upgrade his PPOR and turning the existing PPOR that has been paid off into an IP.
Will selling the existing PPOR to his SMSF work in a similar way?
I am thinking, by doing this, he gets asset protection on the existing PPOR which has been turned into IP, as well as releasing the cash for a new PPOR's deposit.
From PaulG's post, it appears this may work if the IP is not negatively geared.
But what about the costs associated with the transaction (setting up and running an SMSF, selling the existing PPOR to SMSF to turn it into an IP, etc)?

2. For the financial aspects:
- contribution tax (15%) vs income tax at marginal rate
- CGT exemption on sale of IP held in SMSF.
- costs of setting up and running an SMSF.
- opportunity costs (what costs are included here & how can we calculate this?)
Any other financial aspects to be considered?

Thanks again.

Geoff is right. You are prohibited from selling your property to a SMSF of which you are a member.

You may also have to factor in stamp duty on commercial property. But in NSW this may be only nominal, $50 or $500.

Opportunity cost could be what else the money could have been used for.

 

[Aries]

Thank you Geoff and Terry.