One strategy which is hardly ever used by SMSF trustees : Purchasing your retirement home by your SMSF using borrowing.
Most people do not want to live in their current home after they are 65, so instead of purchasing your retirement home when you get to 65 - it can be cheaper if you buy it now (say if you are 40 - 50) about 25 years earlier - then when you are ready to retire - all you have to do is sell your PPOR and simply move into the property owned by your SMSF.
The above strategy is perfect, however Section 71 of the SIS Act - "In- house assets" does not allow trustees or related entites to lease a residential property owned by the SMSF.
To counter Section 71, all the member of the SMSF has to do is purchase the property from the trustees of the SMSF when he / she is ready to move into the property. Care should be taken on how this happens - as SMSF gets only 1/3rd discount and not 50% discount - however if the SMSF is in pension phase - the property can be sold by the SMSF to a related party without paying any CGT.
Provided the member has cash to pay for the property, as the property cannot be paid as a "pension" to the member as some silly rule that all pensions have to be paid in cash.
If the member does not have enough cash - all he has to do is borrow the money from the bank for one minute - pay the SMSF - get the property out - then get the cash out as a pension the next minute and return the loan to the bank. Note a pensioners over 60 do not have to include pensions in their income tax returns.
Gold Coast!, here i come....
Most people do not want to live in their current home after they are 65, so instead of purchasing your retirement home when you get to 65 - it can be cheaper if you buy it now (say if you are 40 - 50) about 25 years earlier - then when you are ready to retire - all you have to do is sell your PPOR and simply move into the property owned by your SMSF.
The above strategy is perfect, however Section 71 of the SIS Act - "In- house assets" does not allow trustees or related entites to lease a residential property owned by the SMSF.
To counter Section 71, all the member of the SMSF has to do is purchase the property from the trustees of the SMSF when he / she is ready to move into the property. Care should be taken on how this happens - as SMSF gets only 1/3rd discount and not 50% discount - however if the SMSF is in pension phase - the property can be sold by the SMSF to a related party without paying any CGT.
Provided the member has cash to pay for the property, as the property cannot be paid as a "pension" to the member as some silly rule that all pensions have to be paid in cash.
If the member does not have enough cash - all he has to do is borrow the money from the bank for one minute - pay the SMSF - get the property out - then get the cash out as a pension the next minute and return the loan to the bank. Note a pensioners over 60 do not have to include pensions in their income tax returns.
Gold Coast!, here i come....
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