This document provides information about a master class webinar on using a self-managed superannuation fund (SMSF) to invest in property. The webinar will cover topics like the advantages of SMSF property investing, tax benefits of SMSFs, limited recourse borrowing arrangements, and a case study of a couple who purchase an investment property through their SMSF. The webinar is aimed at both new and experienced investors and will allow time for Q&A.
5. Master class webinars
• Designed to share knowledge.
• Desire to provide extra value to our
clients.
• Great for both new and experienced
investors.
• Plenty of opportunity for Q&A.
• We will run these regularly
throughout the year, and sometimes
involve our partners to provide
additional insight.
6. Todays 9 topics
1. Demonstrating the enhanced
investment flexibility SMSF can
provide.
2. Explanation of the many
advantages of SMSF property
investing.
3. How to take control of your
investment mix inside of SMSF.
4. How SMSF gives you increased
estate planning benefits.
7. Todays 9 topics
5. Explanation of the many tax
advantages that can be gained
with a SMSF, both before and
after retirement.
6. Why pooling your resources with
family members can help you
reduce SMSF costs.
7. Limited recourse borrowing
arrangements (LRBA).
8. A realistic case study.
9. Why investing in property can be
a great strategy for your SMSF
and retirement planning.
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Material contained in this presentation is an overview only
and it should not be considered as a comprehensive
statement on any matter nor relied upon as such.
This presentation contains general information only and does
not take into account your personal objectives, financial
situation or needs and you should consider whether the
information is appropriate to you before acting on it. Both
superannuation and tax laws are complex and subject to
change. Before acting on any information you should consider
seeking advice from a financial adviser and your accountant
before making any financial decision in relation to any matters
discussed in this presentation.
11. Anne Street Partners Pty Ltd. ABN 25 107 671 563
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Introducing Dean Rosario
Meet your presenter
• Dean has over seven years of hands-on
experience in the SMSF sector, particularly
within the area of limited recourse borrowing
arrangements.
• Dean is a Justice of the Peace, holds a
Bachelor of Banking & Finance Degree and
a Diploma of Financial Services.
• He is also a member of the SMSF
Association of Australia.
• A SMSF Trustee himself, Dean enjoys
providing assistance and direction to other
SMSF trustees.
12. Anne Street Partners Pty Ltd. ABN 25 107 671 563
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Anne Street Partners
• Established 1997
• Privately owned – non bank aligned
• Broad range of financial solutions
• Nationwide footprint
• Experienced SMSF administrators
since 2008 – 700 funds under
administration
One of Australia’s leading wealth management organisations
13. Anne Street Partners Pty Ltd. ABN 25 107 671 563
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What is a Self-Managed Super Fund?
• Self-Managed Superannuation Funds (SMSFs)
are financial vehicles for retirement savings.
• The difference between a SMSF and other
types of funds is that the members of a SMSF
are usually also the trustees.
This means the members of the SMSF run it
for their own benefit and are responsible for
complying with super and tax legislation.
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What is a Self-Managed Super Fund?
• A super fund with up to 4 members
• All members are trustees or directors of
corporate trustee
• All trustees are members
• Regulated by the ATO
• No member of the fund is an employee of
another member (unless related)
• Trustee are not able to be remunerated for
their duties as trustees
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Did you know?
• There are over 525,000 SMSFs in Australia
containing approximately 30% of the $2.05 trillion
held within superannuation.
• Over 1 million Australians have a SMSF and
embraced the vehicle as a useful tool to save for
their retirement
• In 1998 only 12% of Australia’s superannuation
wealth was contained within SMSFs compared to
more than 30% today.
16. Anne Street Partners Pty Ltd. ABN 25 107 671 563
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Audience poll
What are your SMSF plans?
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Why choose Self – Managed Super?
• Asset types
• Personal investment strategy
• Pooling of super funds – family/friends
• Limited recourse borrowing arrangements (LRBA)
• Tax planning
• Estate planning
• Acquisition of business premises
• Running cost / economy of scale
In a word - CONTROL
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Important considerations
• Roles & responsibilities of trustee
• Existing insurance cover
• Allocation of time
• Outsourcing of services
• Minimum superannuation balance
• No access to Superannuation
Complaints Tribunal
• Living permanently overseas
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Trustee responsibilities
• SMSF trustees have ultimate responsibility for the
operation, management and compliance of the fund
• The primary obligation is to ensure the fund is maintained
only for the purposes of providing retirement benefits to its
members
• This is the Sole Purpose test
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Role of a trustee
• Act honestly in all matters concerning the
fund
• Exercise skill, care and diligence in
managing the fund
• Act in the best interest of the members
• Ensure members only access benefits
once condition of release is met
Trustees are required by law to:
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Role of a trustee
• Ensure members’ personal monies are kept
separate from the funds
• Take appropriate action to protect the fund’s
assets
• Comply with all regulations under the
Superannuation Industry Supervision (SIS) Act
• Prepare, implement and regularly review a
fund investment strategy
Trustees are required by law to:
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Role of an Administrator
• Acts as the tax agent for the fund and assists
with the annual compliance requirements
• Prepares annual tax return and financial
statements
• Lodges annual tax return with ATO
• Different levels of service offerings available
• Works with the Auditor to arrange the
completion of the annual audit
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Role of an Auditor
• It is a formal requirement that each SMSF is
audited by an approved auditor, registered
with ASIC, on an annual basis
• Provide an independent audit of the fund’s
accounts along with a SIS compliance audit
• The auditor will notify the trustees of any
concerns raised during the audit. Depending
on the severity the auditor may be required to
raise an audit contravention report with the
regulator, the ATO, for further action
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Role of an Adviser
• As a SMSF is a complex structure it is
imperative that the trustees form a close
relationship with a Financial Adviser for
ongoing education, guidance and advice
• For funds entering LRBAs many lenders
require the fund to obtain independent
financial advice
• Strategic planning for structure and
diversification
• Risk guidance
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Tax considerations
• Generally, the superannuation environment is
subject to a concessional tax rate of 15%
– Negatively geared investments
– Fully franked dividends
– Discounted capital gains tax
– TTR strategies
• An SMSF trustee has control over the timing
of asset disposals and acquisitions which
allows the trustee to maximise the tax position
of the fund
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Estate planning
• Ordinarily a super death benefit does not form
part of your estate
• Legislation only permits Super death benefits
to be paid to:
– Estate
– Spouse
– Child
– Any other person in interdependency
relationship
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Estate planning
• Super dependent vs Tax dependent
• Check the trust deed
• Review estate plan regularly
• Inter-generational wealth transfer strategies
can be adopted using a SMSF
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Timeframes in establishing a SMSF
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Audience poll
What are the total fees
you are paying your
super funds each year?
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What are the costs?
• Fund establishment with corporate trustee
• Security / borrowing trust with corporate
trustee
• Annual administration (depending on
complexity)
• Annual audit
• Annual ASIC fees (from 1st July 2015)
• Annual ATO Supervisory levy (existing fund)
$1,000 – 2,000
$1,000 – 5,000
$500
$46 - 246
$259
$2,000 – 4,000
Fee $
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Winding up a SMSF
• Non compliance
• Separation of trustees
• Death of member(s)
• Insufficient balance
• Overseas retirement
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Is a SMSF for everyone?
• Competence
• Commitment
• Compliance
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Tips and traps
• Get advice
• Most common mistakes
relate to separation of
personal assets
• Working overseas
(SMSF residency)
• Keeping records
• Pensions
• Death benefit
nominations
• Beware of scams!
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Limited recourse
borrowing
arrangements
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Amendment to SIS Act
• Superannuation Industry Supervision (SIS) Act
amended in September 2007 (section 67A)
• Section 67A contains an exception for certain limited
recourse borrowing arrangements (LRBAs):
– Borrowing is for acquisition of single acquirable asset
– Acquirable asset is held on trust with trustee acquiring
beneficial interest
– Trustee has a right to acquire legal ownership after one or
more payments
– Upon default, lender’s rights are limited to rights relating to
the acquirable asset (personal guarantees)
38. Anne Street Partners Pty Ltd. ABN 25 107 671 563
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Audience poll
How much super do you need
for a comfortable retirement?
40. Anne Street Partners Pty Ltd. ABN 25 107 671 563
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Meet Tony & Karen
– Tony is 44, works full time on $155,000 p.a.
– Karen is 42, works part time on $45,000 p.a.
– They have two dependent children aged 16
and 13.
– They have a combined Super balance of
$205,000 across 5 Super funds.
They wish to invest in property however due to
both children being dependent they spend all of
their income on lifestyle commitments.
They are looking for an alternative way to invest
in property which does not impact their current
lifestyle.
41. Anne Street Partners Pty Ltd. ABN 25 107 671 563
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Tony & Karen’s strategy
– Establish a SMSF
– Combine their existing super
balances in the SMSF
– Purchase a $460,000
apartment in Chermside,
Brisbane
– Obtain lending via a LRBA to
complete the purchase
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The numbers
Tony & Karen’s SMSF property purchase
Purchase price $460,000
Stamp duty $14,525
Other purchase costs $5,000
Total Investment $479,525
Loan details
Principal & interest
Term 30 years
LVR 70%
Rental income (4.7% yield) $21,620
Interest rate 5% p.a
Monthly repayments $1,703
$322,000 from lender and $157,525 from SMSF
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Property cash flow (simple)
Income
Gross rental income $21,620
Expenses
P&I Loan repayments $20,440
(Interest only portion $15,552)
Agent fees (8%) $1,730
Rates & Water $1,200
Body Corporate $3,000
Insurance/Other $1,000
Net property cash flow -$5,750
(Net property cash flow -$862 if interest only loan)
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Tax Position of Fund
Income
Personal concessional contributions $19,000
Interest $997
Gross Rental Income $21,620
Gross Income $41,617
Less Expenses
Interest $15,552
Agents Fees $1,730
Rates / Water / Body Corporate $4,200
Administration / Audit / ATO / ASIC $3,051
Insurance (Personal & Property) $3,000
Borrowing Costs (Amortisation) $440
Depreciation - chattels $1,997
Depreciation - building Write Off $6,416
Total Expenses $36,386
Net Income $5,231
Tax Payable at 15% $785
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SMSF cash flow (simple)
Income
Contributions $19,000
Interest income $997
Expenses
Net property cash flow ($5,750)
Personal Insurance ($2,000)
Administration & Audit ($2,500)
ASIC & ATO ($551)
Income Tax ($785)
Net SMSF cash flow $8,411*
(Net SMSF cash flow $13,299* if interest only loan)
*before depreciation
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Surplus cash applied to loan
(Single property) – Freehold by year 17
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
YEARS
Loan Balance
$267.8k
$45.5k
$178.3k
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Projected SMSF value
(Single property + cash)
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Years
Assumes surplus cash applied to loan
$380.8k
$1.58m
$1.03m
$654.9k
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Go further – buy 3 properties
$2,329,980
Property 2
$750,000
Property 3
$1,000,000
$3,862,101
$1,579,596
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Net SMSF Value Property Value Loan Value
20 year result
Property 1
$460,000
51. Anne Street Partners Pty Ltd. ABN 25 107 671 563
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Go further – buy 3 properties
• Value of 3 properties at year 20 $3.86m
• Loan balance on properties $1.58m
• Property equity $2.21m
• Less
– equity in SMSF at start $205k
– 20 year contributions (with 3% CPI)
$510k
• Equity growth through property (net of purchase costs) $1.49m
• Average annual capital growth over 20 years $74.7k
• Annual fund surplus cashflow by year 20
(excluding personal contributions) $50k p.a.
52. Anne Street Partners Pty Ltd. ABN 25 107 671 563
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Audience poll
What is your current
combined super balance?
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Benefits of strategy
• Ability to invest in direct property
• No financial impact on lifestyle
• Increase exposure to growth assets
• Control over investment choice
• Tax benefits to fund
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Introducing Anne
Street Partners Super
Solutions
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The Anne Street Partners Super Team
• Brisbane based team with over 40 years collective SMSF
experience
• Established 1st SMSF in 2008
• Developed SMSF trust deed suite in 2013
• Provides setup & administration services to 700+ funds
• Able to respond to ATO audits
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Get your 45 min complimentary SMSF
phone consultation today
Reserve your opportunity at:
tinyurl.com/ASPSMSF4
submit your details and one of
our specialists will call you.
Register today and
receive your free
SMSF E-book
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SMSF Q&A
Reserve your opportunity at:
tinyurl.com/ASPSMSF4
Register today and
receive your free
SMSF E-book