With a vast number of “Baby Boomers” now speeding towards retirement, many are taking a much closer interest in the health and wealth of their superfund’s and are seeking alternative ways to consolidate their nest egg.
One of the legacies left by the Howard government in 2007 was the changed laws surrounding the ability for enabling self-managed super funds to borrow to purchase both commercial and residential investment property, plus have the ability upon retirement or pension phase to pay zero tax or 15% over $100,000 per annum. Mark Hay stated that these two major fundamentals have been the biggest moves within the property investment sector, since the Keating/Hawke era re-introduced negative gearing.
Features Include;
1. Ability to borrow and gear your superfund via a Trustee.
2. LVR (loan to value ratios) can fundamentally borrow 65% to 70% for residential and 55% to 60% for commercial property.
3. Superfund income is taxed at only 15% and capital gains at 10%.
4. Once converted to pension phase upon retirement, up to 15% tax applies no matter if you have $100,000 or $10,000,000 in your superfund.
5. The loan structures are set up as non-recourse i.e. if something went wrong the banks wouldn’t be able to claim anything further from you, other than that one particular property.
Mark indicated that with over $1.4 trillion held in superfund assets with the majority held directly or indirectly in the share market, he believes this new ruling on superfund investment has been deliberately kept quiet to ensure the big fund managers don’t see a major exodus from the “Superfund Management” sector, which would gravely erode the current high fees everyone pays to have their superfund managed, regardless of whether the fund makes or loses money for you.
Mark also notes some basic fundamental points surrounding this type of investment;
1. Approximately $70,000 plus would be a minimum amount to start. This could be made up by rolling superfund contributions that may have been paid into other various superfunds from previous.
2. Monies would need to be placed into a self-managed superfund structure which would be set up with a suitably qualified accountant.
3. Such self-managed super funds needs to be audited and a tax return filed each year.
4. When purchasing the property, it is essential that correct wording is placed upon the contract to represent the trustee structure; it is too late to change once an offer is made.
5. Such property (either commercial or residential) needs to fit certain criteria specific to the superfund i.e. location, type, tenancy/ lease, professional management etc.
6. The ‘trustee for’ needs to satisfy themselves of the property, the lease and ongoing contributions to the superfund.
Not all of your superfund money needs to be self-managed. You could choose to have a balance or split or direct to your Self-Managed Super Fund and the remainder left in your other fund.
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