Who has their own SMSF?

[josko]

I have just started my own SMSF and am rolling the fund I have from the company I worked for
The company Super has been terrific until the last 3 months
So I have decided to run my own
If you buy and sell shares and make a profit is the capital gains tax treated
the same with a SMSF
What advantage is there to have IPs in a SMSF and how do you structure this

Bill

hi Bill.
The advantages with property is that when you plow more money into your SF you can send it into the mortgage of the property and reduce the interest. The superfund also pays for my Tax Return and a portion of the expenses related to the property.

My SF has gone into a Joint Venture with my Trust to buy property.

Jo

 

[landlubber]

Non-recourse ,
I'm also interested in some details if you care to share.

1) Did you use the commercial properties in the unit trust as security for the loans?
2) In which case, how the heck do you get around the no borrowing rules?

The SMSF owns all the units in the unit trust. The units are therefore encumbered ???

Thanks
LL
PS Feel free to PM me if you wish.

 

[nonrecourse]

Think and grow rich

Well, there you are then. Many SS investors are the "common garden variety" type. Many SS investors still do not invest via trusts - and some, , even use their own name! Just terrible!

There are good reasons to invest via trusts, as individuals, TIC's JT's etc etc blah blah. It depends. Any professional that says it's ALWAYS good to invest one way without giving full consideration to current and future considerations is, IMO, your 'common garden' type.

Answer; The name of the game is not to look at investing with your headspace where it is now but to look where you want to end up. Even Jan sommers today looks at purchasing using superannuation and that involves using a trust.


Hey mods' can't we get a little smilie that looks like the 'cool' one, but does a little 'jiggle' down a pathway?

Non, It's (seriously) great that you're super fund is doing well. I'm happy for you. I am interested in your approach though - because I doubt the setup would pass muster today. Not the fact you invested in business real property, but at the time you got around the borrowing rules by going via a unit trust. With the current issues regarding installment warrants it'd be a nice case study. Care to share the history with us?

Now, have to go practise that walk...

Hi Programmer; Robert Kiyosaki (author of rich Dad poor Dad) made the observation that he often has people tell him, "you can't do that in this country its illegal". ..... The problem is no sayers do not rely on personal research, they rely on what someone else tells them and often that someone doesn't own a brass razzoo. The first investment book I read was Think and grow rich by Napolean Hill. Unfortunately most people just don't think,.... that is why only 8 & 1/2 % of adult men and 4% of women have more than $100,000 in super.

I got around the borrowing restrictions because I joined the tax payers association way back in 1994. Part of that group had a subsection run by a lady by the name Phillipa Smith. She wrote a manual called D.I.Y. superannuation. The manual was about $250 and it was about 700 pages of dry super rules and regulations. I sifted through it and after 3 months the updates came in which were about another 700 pages and every three months another bundle would arrive.

What I learned was that super funds could invest in property trusts.... A bit of lateral thinking got me into a unit trust which the super fund purchased units in and the corporate trustee of the trust purchased the properties and used the properties as security.

At the time there was no law against this as D.I.Y. super laws were evolving....... It was a licence to print money because we operated our business out of the two buildings and earned extra income subletting as well. We were about to purchase a third building ( I had a super investment plan that would have seen us purchase another 8 buildings in 10 years through our super) when around 1998 we started to hear the rumblings of a major policy change. The retail super industry was out telling porkies about D.I.Y. funds rorting the tax system and the end result was on the 11th of August 1999 the law changed.

We were ok because of a grandfather clause that allowed us to continue to not only own the buildings but also allowed the super fund through the trust to reborrow in future up to the amount owing as of 11th of August 1999.

As for today using a property warrant to purchase a commercial property in your super fund.... The reforms are bloody brilliant...... Why? Unlike the old outlawed method that we used the property loans now are a limited recourse loan.

What does that mean? If you screw up and buy a dog you will only lose the property and the installments your super has paid the rest of your super is protected. For the moment the pollies have improved super but its an evolving beast.

 

[Programmer]

Thanks for that nonrecourse. Re the SMSF->trust arrangement - that's how I figured it happened. That is, unfortunately, no help for people today.

Yep, I understand your point re "doing it" rather than mucking around. I read both the books you mention years ago, and they were a great inspiration at the time (although I think Kiyosaki's constant rehashing of 'old' material into new books devalues himself and the original text - but that's another argument ).

 

[redwing]

We started up our SMSF last year with near $100k in it; with the wife only doing some part time work and the fee's on her Super and Mine being more than both combined in the SMSF it made sense to go it alone..

Plus I'm still sore about paying one of the Big Companies, Management Fees to loose money in the days of -8% returns, at least If we loose it we have no one else to blame but ourselves?

Plus we're getting an education in the Market and having fun as well as now having an interest in Super

Can't ever see us ever retiring on what we have in Super, but the road ahead with what we've done outside of Super, with the properties looks much brighter

Just picked up the March chq to add to the Fund...Gotta go

 

[Pat]

I have just started my own SMSF and am rolling the fund I have from the company I worked for
The company Super has been terrific until the last 3 months
So I have decided to run my own
If you buy and sell shares and make a profit is the capital gains tax treated
the same with a SMSF
What advantage is there to have IPs in a SMSF and how do you structure this

Bill

Hi Bill,

For any assets held longer than twelve months in Super the tax rate on the sale of those assets is 10% a 33% discount on the normal Super tax rate of 15%.

To borrow through your super for a property is extremely tax effective with the ability to get a substantial tax break in paying off loan principal and the property if sold after age 55 will be tax free if advised correctly.

 

[redsquash]

Hi Bill,

For any assets held longer than twelve months in Super the tax rate on the sale of those assets is 10% a 33% discount on the normal Super tax rate of 15%.

To borrow through your super for a property is extremely tax effective with the ability to get a substantial tax break in paying off loan principal and the property if sold after age 55 will be tax free if advised correctly.

Would it not then make a lot of sense to buy property for a smsf as one nears 55 using warrents. Selling 5 or 10b years later would produce no CGT payments

if one is much younger it might be more profitable to not buy in a smsf . Negative gear the property and then approaching 55, say around 50 proceed with a smsf purchase.
I am assuming most properties would be negatively geared for quite some time which isn't good for a smsf but good if bought in ones own name