BV & JIT
What i have mentioned in this thread is just a tip of the iceberg - SMSF strategies are just too good to be true - And I have taken it upon myself to expose them - after all they are my strategies!
How to pay no income tax on rental income & pay no tax on contributions
Assume that you have a $100K from selling your investment property - or you can withdraw from your own home and say you are 35 years old and between yourself and wife have $50K in super - since the kids are young and the two of you earn only $80K (spouse works part time $20K and the other $60K) - 9% is $7200. (Since the two have been working on this wage for the past 10 years - you should have at least $50K in joint super)
Step 1 - create the fund
The last thing you can do is put that $100K in your super fund - give that money to your dad or mum who is under 65 year old - and if you are 35 - dad and mum have to be at least 20 years older or about 55 years age - pick the parent who is not working - then mum or dad will contribute this $100K in a newly formed SMSF - as non-concessional contribution - this is called "Tax Free component" - the parent will sign a biding death nomination - which means on death - the money comes to you and not to other siblings etc - since the money is "Tax Free" component - when it is ultimately paid out to you - it will be tax free in your hands.
Step 2 Roll over your super in your SMSF - balance $150K
Step 3 - Purchase IP with installment warrant
Step 4 - Put dad on pension
Step 5 - The negative will be about $7200 including depreciation - when contributions are made - 9% - no tax is paid
Step 6 - if there is more negative - salary sacrifice - dad can withdraw and give you the money to you tax free as his pension will be tax free.
This strategy assumes that dad does not have a tax problem and is under 65 years old and is not eligible for Govt. Pension
Once dad is 65 and is eligible for Govt. Pensions - check the asset test as account based pension are included in assets - up to $252,000 of assets do not reduce your Govt Pension.
Anti Detriment payment
There is no limit on how many years a SMSF can live - Section 295 - 485 of ITAA 1997 allows a deduction to the SMSF for all contributions tax paid by the member in a life time - so when a death benefit is paid - additional payment is made from a reserve account to the dependent of the member - then this amount is grossed up by the tax rate - this grossed up amount is then a deduction available to the next generation of members who can make contributions to the fund without paying any tax.
This is a very complex issue and beyond the comprehension of your suburbia accountant - you will need a SMSF Specialist accountant who can be found on the website
www.spaa.asn.au
I will try and explain it with help of an example.
Dad contributes $300,000 to a SMSF - the SMSF pays $45K in contribution tax over the years - SMSF earns income - this income is not credited to any member account but to a "reserve account" - when dad dies - mum gets the balance of dads account + $45K from the reserve account as a Anti - detriment payment - this then creates a $300,000 deduction in the SMSF - this loss is carried forward - so when contribution are made by son in future years - no tax is paid by the fund. This loss in the fund can be carried forward for ever.
If dad did not set up the fund - at least you can consider to be dad for your son's.
Purchase of installment warrants instead of shares
Instead of buying shares of say CBA - the fund can purchase IW of CBA - this means for the same money - there are two shares of CBA as underlying asset of the SMSF - when CBA pays dividends - the SMSF gets 60% imputation credit instead of the normal 30% - the extra Imputation credit creates a tax shelter for new contributions....
I hope the above helps - but for some one who thinks that you lose only $5850 in owning an investment property - it is a bit uphill.
How to pay only 3% interest on PPOR
This is a very simple strategy developed by me - but for it to work - you have to have equity in your own home.
this is how it works
You are 45 years old and my house is $500K and i owe to the bank $250K at his point of time - i convert my home loan to interest only.
Then I take another loan say line of credit
please print the below - if you cannot understand the below
For paying interest for my loan of $250K - i withdraw from the line of credit - which means that i do not use income to pay interest to the bank - i use banks money (line of credit) to pay interest on $250K loan.
I pay nothing to the bank
no principal reduction and no interest payment - i live in the house for free for the next 15 years.
Now i earn say $60K including super - i now salary sacrifice $25K into super - i am left with $35K and my spouse does the same - we both have $32K each after tax of $3K each - or $64K together - we can look after our children with this $1200 + per week cash - there is no need to save - as we are both contributing $50K in super - if we have SG in our super - this $50K will pay very little tax - say 10% instead of 15% - so $45K is being accumulated for 15 years - in super - with the rule of 72 money doubles every 7 years - cumulative interest - in 7 years we accumulate $5K times 7 $315K which doubles or becomes $630K and another $315K or say about $1
Yes, there are some legislative risks - plus interest rates may go down or up and the returns of super may not be the same - in any case - it is an interesting strategy
Manoj
