A Super Revolution - Using Super to Build Wealth
Luke Atkins Manager, SMSF Consultants Pty Ltd
Disclaimer‌ ďƒ˜This presentation is prepared for general information having regard to our interpretation of the laws as they stand today.
Question… What’s your idea of superannuation? What’s your idea of a SMSF? Have you heard of a PMSF?
Answer… Super – there for your retirement; hopefully those looking after it have done a good job & there’s enough to live on SMSF / PMSF – both designed for your retirement SMSF – you are responsible PMSF – team of professional to help you benefit TODAY! o Build assets TODAY! o Help your family TODAY!
SMSF. PROS & CONS Advantages
Disadvantages
More control over investments
Establishment costs
Greater investment choice
Trustee responsibilities and obligations Strict penalties for noncompliance Time burden for administration
Ability to borrow to fund investment Tax control Estate planning advantages Potential ongoing cost savings (depending on investment selection)
Inability to access government compensation scheme Reduced access to dispute resolution bodies
Why are you here tonight… To support Owen Hodge Lawyers / WSIB To understand the rules behind SMSF borrowing and property To find out the benefits of investing in super instead of your own name
Why are you here tonight… The rules behind SMSF borrowing and property o
Meet Ben and Mary …
https://youtu.be/Y0BHb6b6T-I
Purchase in SMSF… Hot topic at the moment You may already have a deposit Contributions, rent & other income used to repay debt Review insurance in case of an event Profits remain in SMSF for future investment / retirement
Purchase in SMSF (cont.)… Unable to live in property – relatives included Unable to use equity for future investment Tax rates in super o
Income taxed at 15%
o
Capital gains taxed at 10%
o
Once you start living off your super – NO TAX!
Purchase in your own name… Do you have a deposit – mortgage insurance? Negative gearing – you have to fund the shortfall Once property turns positive income taxed at marginal rates: anywhere between 0% – 45% Capital gains tax on sale o
50% tax free
o
50% at marginal rates: anywhere between 0% – 45%
Types of property that can be purchased… Commercial property o
If owed personally / related entity may be eligible for stamp duty concession
Residential property o
Unable to purchase if owned by you or a relative
Types of property that can be purchased… House & land packages o
Strick rules –bought under a single contract with settlement occurring once construction has been completed
o
Can be problematic – bank valuations on completion
Types of property that can be purchased‌ ďƒ˜Buying vacant land to develop o
Can be done however strict rules apply
Case study… Assumptions: o
Couple earning $130,000
o
Purchase $700,000 investment property
o
Property doubles in value by time of sale
Individual
SMSF – Accumulation
SMSF – Pension
Total Gain
$700,000
$700,000
$700,000
Less: CGT Discount
$350,000
$233,333
$0
Ass. Gain
$350,000
$466,667
$0
CGT Payable
$131,035
$70,000
$0
$61,035
$131,035
Tax Saved
Australia’s only on-shore tax haven‌ Super Fund
Rent
Accumulation
Pension
15% income
0% income
10% capital gains
0% capital gains
Contributions Other income
Recap… You can use your super today o
Residential – only from a third party
o
Commercial – can buy off yourself (possible stamp duty concessions)
o
You / relative can’t live in it
o
Profits from sale remain in super
Recap (cont.)… Tax rates in Super o
Income taxed at 15%
o
Capital Gains taxed at 10%
o
Once living off your Super – NIL income / capital gains tax
Recap (cont.)… Investing in your own name o
Do you have a deposit?
o
If negative geared – you have to fund the shortfall
o
Once positively geared, income assessed at marginal rates •
Capital gains – 50% tax free
•
Capital gains – 50% assessed at marginal rates
Ben Jenkinson… “I turned 40 and the ‘penny dropped’ on securing our financial future for retirement, when Luke presented an easy pathway for us to create our own Professionally Managed Super Fund. Using Luke’s guidance, within 2 years we have not only caught up to our peers, but surpassed them in the value of our superannuation portfolio.”
What next… Book an appointment – diary blocked for Tuesday 26 th May and Wednesday 27th May for tonight’s attendees.