SMSFs allow people to have greater control over the investment of their funds for retirement. This kind of flexibility has seen over a million Australians take control of their superannuation and start a SMSF, with over $15 billion invested in direct property.
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What is an SMSF?
What is a trustee?
When you set up an SMSF, you take on the role of either a:
– trustee, or
– director of a company that is a trustee (called a corporate trustee).
A trustee is a person or company that holds and invests a fund’s assets for the benefit of the members’ retirement.
A corporate trustee is a company incorporated under the Corporations Act that acts as a trustee for the fund. Generally, to be an SMSF, all directors of the company need to be members and all members need to be directors of the company. If you already have a company you can use it as trustee.
As a trustee or director, you’re responsible for running the fund and making decisions that affect the retirement interests of each fund member, including yourself. You need to comply with the super and tax laws so your fund is entitled to tax concessions and members’ interests are protected.
– Act in the best interests of all fund members when you make decisions
– Manage the fund separately from your own affairs
– Ensure the money in the fund is only accessed where the law allows it
– Know, understand and meet your responsibilities and obligations
– Ensure your SMSF is independently audited every year
– Lodge your SMSF annual return every financial year
– Pay the supervisory levy.
Can I buy property using my superannuation?
Yes. You are able to purchase residential investment and commercial property (such as shops, business premises, offices and factories) within a self managed super fund (SMSF).
What are the benefits of owning property inside super for my retirement?
During pension phase, trustees have the opportunity to benefit from tax-free income from property rental income. No capital gains tax on the sale of a property asset during pension phase can help investors save hundreds of thousands of dollars.
How much superannuation do I need to get started?
This is dependent on the cost of the investment property being purchased. Establishment costs, a minimum deposit of 20%, purchase costs and a reserve of 1 years negative cashflow is needed. Take into consideration you are able to combine up to 4 individual member’s superannuation into an SMSF to increase the capital available.
What are the potential tax benefits of owning property inside my superannuation?
Within the Superannuation environment rental income from investment properties
is taxed at 15%. This rate also applies for Capital Gains tax in the first year of ownership, after which it drops to 10% and no capital gains tax is payable on the sale of a property in pension phase.
What legislation do I need to be aware of?
SMSF are governed by the Australian Tax Office (ATO) and are regulated by the SIS Act. ASIC regulates the advice financial planners provide and the department of human services manage early release requests. Its important to note that APRA does NOT provide consumer protection to Self Managed Super Funds. Superannuation Property strives to communicate all relevant legislation to our clients.
What are the costs of setting up and running a SMSF?
Most of our clients begin their SMSF with approximately $150,000, either from their own individual superannuation account or an accumulation of up to 4 trustee’s superannuation accounts. When starting a SMSF, there are no out of pocket expenses incurred by members of the fund, as the costs go toward the SMSF itself.
The ongoing costs of running an SMSF may be around $2,000 a year, including the annual supervisory levy. If you set up or join an SMSF, you will also need to consider having adequate insurance in case of a death among the trustees or if they are unable to work because of an illness or accident. As a trustee, you are required to consider insurance cover for fund members as part of the fund’s investment strategy.
How do I prepare an investment strategy?
Every SMSF must have a written investment strategy. We are passionate about investment solutions that suit your current lifestyle and circumstances while aiming to reach your retirement goals, so don’t stress thinking you have to figure it out alone. We will be with you each step of the way.
Your investment strategy provides you and the other trustees with a framework for making investment decisions to increase members’ benefits for their retirement.
When preparing your investment strategy, you are required to consider whether to hold insurance cover for one or more members of your SMSF.
Our financial advisers can help you prepare an investment strategy, but you and the other trustees are responsible for managing the fund’s investments.
You must review your investment strategy regularly to take the changing circumstances of your fund and its members into account (for example, a new member may join). You don’t need to change your strategy every time you review it but regular reviews will ensure you maintain an awareness of the investment landscape and make adjustments promptly as required. Your review and any decisions made may be documented in the minutes of meetings held during income year.
Can I buy the property before setting up the SMSF?
No. You can not go to contract of or commit to buying a property before your fund has been established correctly for property and finance.
How much will the bank lend me to buy a property with my SMSF?
Generally, banks will lend between 70% and 80% of the property value. Each loan is assessed on a case-by-case basis and you should consult a Superannuation Property finance specialist for more information on your borrowing capacity.
Who can rent my superannuation property?
The only rule when renting an investment property owned buy an SMSF is you cannot rent the property to a related party. This means a member’s relative, or spouse.