SMSF Questions

[macdub]

Hi all,
Great forum and learning a lot. I have few questions (may be few dumb) in relation to SMSF and would be very grateful if can get some answers. Apologies if they have been already covered elsewhere.

1. What is the minimum amount needed in super to acquire a property through SMSF or minimum to be eligible to setup SMSF? I currently have around 75k and partner have around 30k.

2. Is it a good idea to use both or just mine? If both, SMSF running costs also double?

3. the running costs for SMSF get paid through Superfund itself or that's out of pocket from my salary (this might be dumb question))

4. My understanding of buying property through SMSF is that you pay deposit 10-20% from super to buy property and then take the loan for the rest? Is that loan interest only? Also, the repayments for this loan get paid through my super contributions,if that not enough, remaining out of pocket?? OR the repayments must be paid through my salary and you can only use super to fund the deposit ??

5. We acquired our first IP last year and we have LOC setup on PPOR where rents come in. Is it possible to get the rents into this LOC from the property acquired through SMSF?

Please note that employer super contribution is 15.4% for me.
Thanks in advance

 

[ScottyB]

See below my comments inserted into your questions

Regards

ScottyB

Hi all,
Great forum and learning a lot. I have few questions (may be few dumb) in relation to SMSF and would be very grateful if can get some answers. Apologies if they have been already covered elsewhere.

1. What is the minimum amount needed in super to acquire a property through SMSF or minimum to be eligible to setup SMSF? I currently have around 75k and partner have around 30k.

No minimum amount however you will hear most people talking about 100k minimum however i disagree. If you get a "cheap" SMSF set up with low ongoing costs saving a large amount in annual fees etc while you build it up then this is a real benefit.

2. Is it a good idea to use both or just mine? If both, SMSF running costs also double?

Set the SMSF with a Corporate stance in both names and have 1 set of fees.

3. the running costs for SMSF get paid through Superfund itself or that's out of pocket from my salary (this might be dumb question))

Paid from the SMSF

4. My understanding of buying property through SMSF is that you pay deposit 10-20% from super to buy property and then take the loan for the rest? Is that loan interest only? Also, the repayments for this loan get paid through my super contributions,if that not enough, remaining out of pocket?? OR the repayments must be paid through my salary and you can only use super to fund the deposit ??

20% is the minimum deposit amounts for SMSF, or the lowest i have found, if you know of someone doing 10% deposits let me know! Yes in simple terms the SMSF borrows for the remaining amount however seperate frameworks are required to do this. You can get interest only but again depending on the product. Repayments come from your SMSF. Really important that you understand that the SMSF rules are strict, no taking money in or out as you see fit as it could lead to prosecution and fines.

5. We acquired our first IP last year and we have LOC setup on PPOR where rents come in. Is it possible to get the rents into this LOC from the property acquired through SMSF?

No your SMSF needs to be kept seperate from this purchase

Please note that employer super contribution is 15.4% for me.
Thanks in advance

 

[macdub]

Thanks a lot Scotty B.

So this means all the rent gets deposited into SMSF fund and the loan repayments get deducted from the same? And the gap between rent and repayments will be covered by my ongoing contributions??

Also, what happens if we want to sell the property before retirement?
Can we do that?

 

[ScottyB]

Thanks a lot Scotty B.

So this means all the rent gets deposited into SMSF fund and the loan repayments get deducted from the same? And the gap between rent and repayments will be covered by my ongoing contributions??

Also, what happens if we want to sell the property before retirement?
Can we do that?

Hey macdub,

The fund will hold a Bank acount in it's name. Mines is with ANZ, correct rent in and repayments out happen in this account.

Check out http://www.esuperfund.com.au/ which is what i use, cheap and cheerful low cost option.

Check the terms and conditions though because you are restricted to the lenders you can use (St George)

You can sell the property before retirement but not access the SMSF funds unless you have special circumstances which ATO would need to approve e.g. hardship, ill health etc.

Regards

ScottyB

 

[twodogs]

Hey macdub,



Check out http://www.esuperfund.com.au/ which is what i use, cheap and cheerful low cost option.

Check the terms and conditions though because you are restricted to the lenders you can use (St George)

Regards

ScottyB

Hi ScottyB,

How did you find the eSuper property setup process, loans, paperwork etc. Any problems along the way? I'm with them but have not had a loan approval done yet, too much info on the proposed property that I do not know at this time.

 

[Terry_w]

5. We acquired our first IP last year and we have LOC setup on PPOR where rents come in. Is it possible to get the rents into this LOC from the property acquired through SMSF?

Get some advice on this potentially dangerous practice asap!

 

[ScottyB]

Hi ScottyB,

How did you find the eSuper property setup process, loans, paperwork etc. Any problems along the way? I'm with them but have not had a loan approval done yet, too much info on the proposed property that I do not know at this time.

Hi twodogs

TBH it was not ideal, my best advice is to get pre approval early.

We discovered that we needed to update our SMSF deed even though it was the latest revision. This takes time of course. The process is fairly slick after that just allow yourself a good month. You can upload info etc online via the portal which helps speed things up.

We are finding with ESuper that other areas are not great e.g. CMC Markets account keeps you to an old online version of their webmaker software which is vastly outdated. CMC refuse to upgrade ESuper customers to their new platform which has all of the bells and whistles.

Regards

ScottyB

 

[Paul@PFI]

SMSF / Property

Around nine out of ten clients approaching me for SMSF advice are advised NOT to buy a property in a SMSF. One of the advantages of licensed advice perhaps ?? I generally recommend several other alternatives such as an ungeared unit trust, members loan to the SMSF & NOT a bank or a joint ownership suituation (NOT Joint title). This can often allow a longer term strategy in some states to shift ownership without duty etc

Depends on many factors incl equity in home or other property as well as how much available in super. But benefit is the large neg gearing losses get claimed by the taxpayers rather than dumped into the fund and saving 15%. Longer term a strategy to swing beneficial ownership from mum & dad (and their fund) towards the fund. That way 100% rents and capital gains by time they are in 60's is tax free.

I also dont use just any old deeds for funds and trusts I get involved with. I use a very reliable provider who is legal practitioner who also do tax.

By the way esuper dont give financial advice and I'm seeing clients approach us asking for sign-off on their financial strategy !! So where does the sale end and the advice start ?? This is something ASIC warn about. So I dont get involved. I stopped a while back. Havent seen a single strategy that smells safe. I'm not suggesting "spruikers" but I worry about unlicensed advisers setting up funds and establishing a financial product (SMSF loans since July 1 are a product!!) without AFSL. They asking them to find a planner who will agree with them.

And I have seen a new strategy I want to warn about...Its going to end in tears for many. Major smsf administration company suggesting smsf loans today to buy a house and in three, five, ten years smsf sells it to a member. Apart from the sole purpose test the ATO and Treasury have proposed rules to prevent sale of a SMSF investmnet to a member even on arms length terms.. Not illegal yet but its gotta happen soon from feedback I get from ATO. They seeing growth of this "deposit building" scheme too.

 

[Paul@PFI]

Terry's view

I will be more blunt than Terry ..."No".

Get some advice on this potentially dangerous practice asap!