If you are considering investing in property via a self managed super fund, how much do you need to have in super?: Thor McDowell
If you are considering investing in property via a self managed super fund, how much do you need to have in super?
When it comes to self-managed super funds, many people don’t realise there are several ways to boost your super balance – especially when it comes to purchasing direct property via a SMSF structure. One of the most effective options is a self-funded loan.
“I often see opportunities for clients to invest in property overlooked. This can be because the retail consumer doesn’t understand that they can potentially use their equity outside of super. On the other hand, it can also occur in cases where the client’s previous adviser did not understand this either.” Writes Thor McDowell, SuperShift Affiliate Vivid Advisory.
For example, consider the following scenario:
You are 50 years old.
You only have $50-60,000 in superannuation (due to being self-employed most of your life).
You have significant equity in property (PPOR, other investment property/s).
You can potentially leverage off this equity by borrowing funds (in your own name) and lending it across to your SMSF. Effectively, this means you can purchase an investment property in a cost effective, low tax vehicle (SMSF).
Some of the benefits are:
If the property increases in value, it is potentially quarantined – meaning you pay no capital gains if the property is sold during the pension phase.
You can service the debt before tax as opposed to after tax.
The bottom line is you don’t need to have a lot in super to take advantage of an SMSF LRBA strategy - investing in property through super.
Some of the other options worth investigating include:
Salary Sacrifice
To boost your super balance, salary sacrificing can often be a suitable strategy to grow your superannuation savings. Salary sacrificing to super can cultivate higher investment returns, once tax is taken into account. This is because the maximum tax on investment earnings inside super is 15%, whereas the same investment earnings outside super are taxed up to 46.5%.
Non-concessional contributions
Making a non-concessional contribution can boost your superannuation balance dramatically. Under the 3-year “bring forward” rule for non-concessional contributions, you are entitled to make contributions of up to $450,000 if you are under the age of 65.
Pool your super with up to 3 others
Unlike traditional super funds, SMSFs allow you to include up to 4 members in the fund. This allows you to “pool” the funds of all 4 members to invest in assets of their choice, including direct property.
If you’re interested in an SMSF LRBA, and are looking for ways to boost your super, talk to Vivid Advisory who can set you on the right path to success.
About Crown Group:
Crown Group is a leading Australian property group, active in property development and property investment in Sydney.
The company was co-founded by architect Mr Iwan Sunito and engineer Mr Paul Sathio in 1996.
Crown Group was awarded the Master Builders Association Excellence in Housing award 2012 for its innovative, waterfront development Sanctum by Crown and in 2007 was awarded the HIA (Housing Industry Association) CSR Housing Awards 2007 Apartment Project of the Year for the hugely-successful ICON at Homebush.
Today, Crown Group has grown to become one of Australia’s leading property development companies with successfully completed major developments in some of Sydney’s best locations including Bondi, Bondi Junction, Parramatta, Ashfield, Epping, Homebush, Newington, Pennant Hills and Rhodes.
Crown Group is currently developing four major projects, Top Ryde City Living, a seven tower development in Top Ryde, Viking by Crown, a 10-storey residential complex in Waterloo, V by Crown, a 27-storey residential tower in Parramatta and Skye by Crown a 20-storey development in North Sydney launched in June 2013.
Crown group will launch Viva by Crown, the final stage of Top Ryde City Living, in September 2013.
About Vivid Advisory:
Vivid Advisory is a fresh new face in the SMSF advice space. Vivid Advisory has been specifically set up to attract advisors who specialise in the SMSF area. The Vivid Advisory team are qualified and authorised SMSF advisors who educate and advise clients on the significant opportunities that SMSFs present.
Vivid Advisory focus on strategies that provide asset protection and tax advantage - this allows for greater control and helps Vivid clients make the right decisions. Ideal investments are complemented with the most effective structures and personalised strategies - enabling our Vivid client investments to work to their very best capabilities.
Disclaimer: The information provided in this document is general in nature only and does not constitute personal financial advice. The information has been prepared for information purposes only, and without taking into account your financial situation, needs or objectives. Before acting on any information contained in this document we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.
