A presentation on the basics of gearing in a SMSF.

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Gearing in SMSF

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Lasseter has prepared this presentation for general information purposes only and does not constitute personal
advice.
You should not act solely on the basis of material contained in this presentation.We recommend that formal advice
is sought which considers all your individual objectives and needs.
No material contained within this report should be construed or relied upon as providing recommendations in
relation to any financial product.
General Advice Disclaimer

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• As a result of the amendments in September 2007 to the Superannuation Industry (SIS) Act 1993, it is now
possible for a regulated superannuation fund to borrow to acquire a property under strict specific conditions.
• In order for a borrowing to qualify for the exception in s.67 (4A) it is crucial that:
o The asset acquired is not one that the super fund is prohibited from acquiring
o The asset is held on trust for the super fund so the trustee acquires a beneficial interest
o The super fund has the right to acquire legal ownership of the asset by making one or more further
payments
o The rights of the lender, should the super fund default on the loan are limited to rights relating to the
original asset
• Currently there are funding options to gear into the following assets:
o Property
o Listed shares
o Managed funds
SMSF Gearing Opportunity

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• Residential
o Members or related parties are prohibited from living in the premises
o Members are able to purchase the property to live in after their retirement subject to a number of
conditions.
• Holiday or Student Housing
o Subject to lenders requirements
• Commercial Property
o Members are allowed to operate their business from the property subject to arms length residency
agreement.
Types of Property

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LENDER SMSF
TRUST
YOUR COMPANY
BUSINESS PREMISES
Loan
Repayments
Contributions Rent
LeaseLimited Recourse
Features of a SMSF Purchasing Property

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Advantages
•Asset protection (Asset in SMSF not business)
•Negative cashflow comes from super e.g. 9% SGC (limits)
•Frees up cash held in Superannuation that can used for the business.
•CGT on sale lower 10% or nil after age 60
•Income Tax benefits 15%
•Interest rate are at commercial rates
•Saving for retirement
Disadvantages
•Associated costs
•Complexity
•Over exposure to property
•Needs cashflow in fund to meet loan repayments – issue in retirement
Pro’s and Con’s

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Summary
•ABC Pty Ltd (family business)
•Currently renting business premises
•Current super
• Dad $250,000
• Mum $70,000
Case Study

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• Set up SMSF & role current super into fund ($320,000)
• Purchase factory for $800,000
• Borrow 65% - $520,000
• Rent factory to A & B P/L at 8% - $64,000
• Loan over 15yrs @ 9.5%
• SMSF uses rent to make loan repayments – $65,160
• Property growth at 3%
Outcomes
• Tax benefits Between $9,600 - $19,200
• Asset protection
• Saving for retirement
• Reduce CGT or in pension mode tax free
Case Study

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Year Value Loan Net Equity
$800,000.00 $520,000.00 $280,000.00
1 $824,000.00 $503,536.35 $320,463.65
2 $848,720.00 $485,438.66 $363,281.34
3 $874,181.60 $465,544.74 $408,636.86
4 $900,407.05 $443,676.30 $456,730.75
5 $927,419.26 $419,637.38 $507,781.88
6 $955,241.84 $393,212.56 $562,029.28
7 $983,899.09 $364,165.02 $619,734.07
8 $1,013,416.07 $332,234.45 $681,181.62
9 $1,043,818.55 $297,134.72 $746,683.83
10 $1,075,133.10 $258,551.26 $816,581.84
11 $1,107,387.10 $216,138.32 $891,248.78
12 $1,140,608.71 $169,515.81 $971,092.90
13 $1,174,826.97 $118,265.93 $1,056,561.04
14 $1,210,071.78 $61,929.40 $1,148,142.38
15 $1,246,373.93 $0.00 $1,246,373.93
Case Study

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• Establishment Costs – FREE (Lasseter will establish your SMSF at no cost)
• Corporate Trustee - $444 (One Off – ASIC Fee) see our SMSF Starter Package
• Annual Accounting and Tax – starting from $1320, see our Compliance and Administration Package
• Annual Audit – starting from $330 *
• Annual ATO Levy - $150
• Annual ASIC Fees - $212 (only for corporate trustee)
• Other Professional Fees – ie Financial Advisor
• Investment Fees – depending on investments chosen
What are the Costs?

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If you have any queries please call us on 1300 083 691
or
We can contact you request via our website press here
View our SMSF Starter Package
View our Compliance and Administration Package
What Next?

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Lasseter InFocus
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Melbourne
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