SMSF and Property Ownership
In recent times, we have had more clients enquire about an SMSF to purchase property and other investments
An SMSF is not always appropriate, as there are additional ASIC/ATO responsibilities and costs.
However, some of the potential benefits and issues of an SMSF include:
• More flexible investment choices, including direct shares and real property
• Many business owners like to purchase their practice building using their superannuation as equity, plus bank finance
• The property would normally be purchased in a special security trust
• The security trust holds the property in trust for the SMSF beneficiaries
• The security trust also holds the loan with the bank
SMSF, Property and Tax Effective Pensions
• For people 55 and over, the Super fund can commence a Transition to Retirement pension (TTR) (or an account based pension after retirement)
• Once the pension commences, then the tax rate on earnings within the pension component of the Super fund is reduced from 15% to zero
• That effectively increases the net return by 15%
• The bank loan interest is deductible
• The bank loan capital repayments can be paid down with ongoing super contributions (that can save around $150,000 assuming a $500,000 loan and 45%+ MTR – this can be a significant benefit)
• If the property is eventually sold, and the SMSF is in pension mode (zero tax), there will be no capital gains tax on the capital profit
• Asset protection – property and other assets owned within super are normally fully protected from creditors
A financial x-ray and report of findings
CCA Financial Planners are happy to review your business structure, superannuation, investments and risk management to identify how your position may be improved.
Naturally, any advice must be appropriate for your current situation and long term goals.
Please call our office on 03 8651 6555 to arrange a confidential teleconference, Skype meeting, or meeting in our boardroom.