Super funds can now borrow to buy IP's

[MPmelb]

Just read it in this weeks AFR.

Super rules are changing to allow your self managed super fund to borrow to buy IP's. And many other commercial super funds are likely to follow suit.

Great for tax advantages, but I don't think you're allowed to leverage the equity to buy more assets later...but I'm not exactly sure.

 

[buzzlightyear]

The follow-up question is then, what lenders will provide borrowings to SMSF's to purchase property? And what rules are associated with these loans?

 

[geoffw]

It's allowed by using warrants. There's been a few threads in recent months.

http://www.somersoft.com/forums/showthread.php?t=37030
http://www.somersoft.com/forums/showthread.php?t=35770

 

[NedKelly]

I am sure that will make property more affordable for aussie battlers!

 

[Laup]

I am sure that will make property more affordable for aussie battlers!

For further clarification of new legislation re: borrowing to invest via an smsf refer to
SIS Act 1993
Part 7
Section 67 - Borrowing

 

[Jindaro]

There is a 1 page write up on this in this month's API magazine if anyone is interested. I sure am

 

[Peter 14.7]

More demand to add to the already low supply.

Peter 14.7

 

[Property WA]

This Money Management article is quite a good overview.

 

[buzzlightyear]

Ok, so a SMSF can borrow to invest in property. Who are the financial institutions offering funds for these types of loans then?

 

[Peter 14.7]

Ok, so a SMSF can borrow to invest in property. Who are the financial institutions offering funds for these types of loans then?

I have no doubt the big banks and few small ones will get on board some enough.

However this is scary. Ic an see spriukers seeling seminars on how you should set up a SMSF ( using thier soliciotrs) and then invest (in thier property) and lease it (thier agents).

Trouble is we are talking about people life savings. How many unsavy 50year old are going to be enticed and end up at 55 with nothing?

Peter

 

[asdf]

I think Babcock has recently issued some property warrants and then theres quantum were already doing this even before the new legislation. I'm sure there will be more. As long as the deal is structured on a non-recourse basis back to the Trustee and/or its assets, it should be fine.

 

[lizzie]

interesting .... hmmm .... food for thought ...

 

[Property WA]

I'd bank my money on Macquarie being one of the first groups to have something at market.

Also just got this link e-mailed. Suppliment info to what's been discussed so far. http://www.ato.gov.au/super/content.asp?doc=/content/00110806.htm

 

[JamesGG]

As long as the deal is structured on a non-recourse basis back to the Trustee and/or its assets, it should be fine.

Hiya,

The non-recourse part is crucial; I believe this is mandatory and part of what got the legislation over the line.

And I understand products are starting to filter their way onto the market. It will be interesting to see the reprecussions from this...

Cheers

James.

 

[Pat]

Ok, so a SMSF can borrow to invest in property. Who are the financial institutions offering funds for these types of loans then?

Hey Buzz,

Try www.diysuperwarrants.com.au and www.quantumwarrants.com.au, diy allow you to choose your own property but up until now quantum require you to buy thier product. Be careful though they will hit you harder then the evil emperor Zurg with charges and fees.

More competitive financing is on its way shortly.

 

[buzzlightyear]

Hey Buzz,

Try www.diysuperwarrants.com.au and www.quantumwarrants.com.au, diy allow you to choose your own property but up until now quantum require you to buy thier product. Be careful though they will hit you harder then the evil emperor Zurg with charges and fees.

More competitive financing is on its way shortly.

OMG, you were right about the charges...Tell 'em, they're dreaming!

Application Fee
$1,100

Establishment Fee
5.5% of the purchase price of the property

Borrowing Fee
Up to 0.77% of the Loan amount

Annual Fee
1.1% per annum of the of the Property purchase price

 

[JIT]

OMG, you were right about the charges...Tell 'em, they're dreaming!

Application Fee
$1,100

Establishment Fee
5.5% of the purchase price of the property

Borrowing Fee
Up to 0.77% of the Loan amount

Annual Fee
1.1% per annum of the of the Property purchase price

They'll probably tell you it's all tax deductible as their selling point...but SMSF is a very low-tax structure anyway!

 

[alexlee]

I'm just thinking, those people who sold their IPs fast before the Jun 07 deadline because they can't move IPs into SMSFs probably aren't happy with this.
Alex

 

[sailor]

I'm just thinking, those people who sold their IPs fast before the Jun 07 deadline because they can't move IPs into SMSFs probably aren't happy with this.
Alex

Such an understatement Alex!
I know a few who were cashing up to put money into super. Couldn't for the life of me understand the logic...despite the tax concessions.

Nevertheless, could someone please explain the difference between buying a property in a HDT and buying in a SMSF? I would have thought it would be basically similar.

 

[alexlee]

It made sense for some people, especially 50+ business owners who wanted to sell their business anyway, or people who wanted to sell their PPOR and downsize. The main benefit of super is tax, but if you do it while young you lock your money in until 55+ and you run the risk of the govt changing the rules before you hit that age.

A recent Australian article said that boomers have less investment assets than previously thought, and so may run out of money before they die. I suspect if this really happens (say the age pension expense suddenly goes up) then the govt may change the super rules again.
Alex