Self Managed Super Funds
SMSFs are the largest and fastest growing sector in Australian Superannuation. As at June 2021, there were 597,900 SMSFs in Australia with a combined total of 1.1 million members. Although this represents less than 5% of Australia’s population, they accounted for $822 billion in assets, or about 25% of the $3.3 trillion invested in superannuation. *
SMSFs are an option for investors wanting more control over their superannuation investment strategy.
A SMSF can provide greater investment choice, such as property or even artwork (collectibles), potentially provide better performance compared to retail & can be tailored to your unique financial circumstances.
However we are also realistic & sometimes advise that SMSFs are not for everyone as not everyone can meet the time, costs, risks and obligations associated with establishing and running a SMSF.
A SMSF is most appropriately suited for those:
- With over $250,000 to $300,000 in their current (collective) super fund(s)
- Who want to use their super to invest in property or collectibles
- In possession of a clear plan for how to manage their SMSF
- Individuals who have a firm grasp of investment knowledge
- Those who have the help of a team of expert financial advisors to help guide them
Since 1 July 2021, SMSFs can have up to six members so you can include your family, giving the fund more to invest and potentially reduce the fees for everyone.
However because of the costs associated with SMSFs, the help of a professional advisor has never been more important.
We act as your go-to source of guidance when it comes to deciding whether an SMSF is the right option for you.
We can also help you set a clear plan for managing your SMSF that will ensure you’re on track to create your dream future.
We will work with you to help make the process as stress-free as possible by referring you to specialist administrator to make sure you’re getting the most out of your super fund while meeting all your obligations to ensure the SMSF remains compliant by submitting the member contribution statements, the fund’s annual tax returns and the fund’s annual audit.
* Source ATO
Buying Property In A SMSF
A Tax Free Property Portfolio
Many investors want to have more control over their superannuation & its investments; and with Australia’s love affair with real estate, many are now looking to invest their super into property.
The Australian Government has introduced changes that now allow Super Funds to borrow to invest in assets such as property. Consequently, we have seen an increased demand from Australians looking to purchase investment property with their super.
Whilst individuals can be taxed up to a maximum rate of 46.5% on earnings, superannuation funds will only pay a maximum rate of 15% or even less.
Furthermore, after age 60, any payment from a super fund is tax-free.
Consequently in retirement (and in pension phase), superannuation may effectively be considered a tax-free retirement account.
HIGHLY RECOMMENDED BY OUR CLIENTS
Why would I buy property in a super fund?
One consideration for most property investors is Capital Gains Tax (CGT).
Individuals can be taxed up to a maximum rate of 46.5% on Capital Gains, or if the asset is held over 12 months, the tax is reduced to 23.25%.
In contrast, Capital Gains in super are taxed at a maximum of 15% tax, whilst if the asset is held over 12 months, the tax is reduced to 10%.
Furthermore, in pension phase a super fund will pay zero Capital Gains Tax.
This could potentially save you ten’s to hundreds of thousands of dollars. Consequently in pension phase, your Super Property Portfolio can become a Super Tax Free Property Portfolio.*
Commercial Property and SMSFs
One question we are often asked is, “can I transfer my existing residential investment property into a SMSF?” and unfortunately the answer is no. There is however an exemption allowing the transfer of an existing commercial property into a SMSF.
Now depending on the circumstances with a commercial property transfer, we may be able to eliminate some or all of the CGT & in NSW, we may be able to reduce stamp duty to nominal $50.
Potential Tax Free Property Portfolio
- Power of leveraging your Super
- Concessionally taxed SMSF environment
- NSW stamp duty of $50 on Commercial Property transfer
- Personalised, expert advice is always recommended
We highly recommend seeking taxation advice from an accountant.
* A Tax Free Property Portfolio is assuming the client is over age 60, is retired and in pension phase
# after meeting a condition of release
^ subject to certain conditions
~ Leveraging can increase returns, but can also increase risk
