Setting Up a SMSF: A Super Revolution

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.