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Real Estate & Investment<br />
Pros and cons of buying<br />
property in super<br />
TOO many people set up a SMSF to buy a property, who shouldn’t really be doing so.<br />
At the same time, there<br />
are many it really suits<br />
who just haven’t got their<br />
head around it yet...that<br />
buying in SMSF ticks both<br />
the tax minimisation and<br />
Asset Protection boxes.<br />
When your capacity to<br />
service loans is assessed,<br />
for lending outside Super,<br />
the bank takes into<br />
account at all your commitments<br />
and will NOT<br />
account for the income<br />
you’re forced to put in Super<br />
(your ‘SG’ or Superannuation<br />
Guarantee).<br />
However, when it comes<br />
to SMSF’s the banks can<br />
consider only your regular<br />
contributions into Super<br />
and the rental income the<br />
acquired asset will generate.<br />
I helped a dentist buy her<br />
surgery building last week<br />
and it actually wouldn’t<br />
have worked outside super,<br />
given her numerous<br />
other loans.<br />
Anyway, she’s much<br />
<br />
SMSF tax haven… great<br />
<br />
3 years with no Establishment<br />
Fee. The variance<br />
amongst the banks’ rates<br />
in this space is crazy.<br />
<br />
can’t give anything other<br />
than general advice. Plus I<br />
have chosen to specialise<br />
only in lending, so I’d get<br />
sued harder LOL.<br />
But what I can tell you<br />
is why only months ago,<br />
I actually purchased our<br />
<br />
SMSF! …if you’re interested…<br />
The purchase price was<br />
$1.52m.<br />
I snapped it up two<br />
weeks prior to the auction,<br />
just loved it, it used<br />
to be the CBA building<br />
on the Hume Highway in<br />
<br />
kid, and more recently a<br />
Curves gym.<br />
The cheapest rate was<br />
<br />
only lend 65% though.<br />
But I didn’t have enough<br />
in Super for the rest.<br />
That’s why I had extended<br />
the settlement period<br />
to July 7, enough time for<br />
Tina and myself to each<br />
concessionally contribute<br />
$35k in each before June<br />
30, and then again on July<br />
2.<br />
The rest came from an<br />
<br />
and was non-concessionally<br />
contributed (we got<br />
no tax break for that bit).<br />
By the way, at the moment<br />
(watch this space<br />
though), Bankwest allow<br />
you to unlock the equity<br />
against your home at the<br />
same owner-occupied<br />
rate (the increase must<br />
be restricted to a dollar<br />
amount representing 50%<br />
of your home’s value). The<br />
other banks charge the<br />
higher investment rate for<br />
the cash out bit. It’s daylight<br />
second if you want to<br />
avoid cross-collateralising<br />
and want part of your future<br />
investment loan at<br />
owner-occupied rates.<br />
<br />
underway, being paid by<br />
the tenant (my business).<br />
The rent iChoice pays my<br />
SMSF is of course a tax<br />
deduction. However, my<br />
SMSF only pays 15% tax<br />
on it, rather than something<br />
like 45% if we had<br />
bought in our personal<br />
names. How much that<br />
<br />
a big number. Rent of<br />
$90,000 x (45% - 15%) =<br />
$27,000 annual saving.<br />
We need to understand<br />
that Super’s simply a different<br />
tax environment,<br />
<br />
Government to encourage<br />
us to not rely on the pension.<br />
The above shows<br />
how powerful it can be.<br />
Once I hang my boots up<br />
(the loan will be repaid in<br />
15 years) the tax rate in<br />
Super changes to 0%.<br />
And Capital Gains Tax is<br />
better too. But let’s look at<br />
the negatives of my decision<br />
to buy it in Super:<br />
The equity I build up in<br />
the property will be unusable<br />
(I can’t leverage<br />
against this property) as<br />
loans in Super can only be<br />
taken to acquire<br />
The building actually has<br />
the scope for another level<br />
to be built on top, but<br />
this is not allowed when<br />
the property is geared (to<br />
build it I’d need to not only<br />
<br />
the loan, but also the cost<br />
to build!)<br />
The paperwork! If you<br />
have an SMSF you’d<br />
know all about it! But I<br />
don’t mind being a little<br />
inconvenienced if it gives<br />
Wednesday 20 December, 2017 THE WEEKLY TIMES 23<br />
The Barefoot Broker<br />
WINNER! 2017 BEST SMALL BROKERAGE IN NSW<br />
<br />
with Jason Khoury<br />
1300 80 10 83<br />
How can I sell my properties at top price, fast & smoothly? . . .<br />
You prepare your property for inspection by the buyer. You leave the job to your agent<br />
<br />
agent’s skill comes into play.<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
CALL/SMS 0413 168 681 <br />
EMAIL <br />
me an extra half a mill,<br />
I’ll always switch & move<br />
my lending around to get<br />
ahead, we all should.<br />
If you’re thinking of setting<br />
up an SMSF maybe<br />
do it in July (don’t do it in<br />
June and pay for a tax return<br />
for nothing) and also<br />
get the Custodian Trust<br />
set up to, as it needs to<br />
be established before you<br />
exchange. An accountant<br />
or Financial Advisor can<br />
assist you, please get a<br />
good one, not the nearest<br />
one. In life you need<br />
an accountant, solici-<br />
<br />
credit advisor / maortgage<br />
broker who are at the top<br />
of their game. Lucky the<br />
later comes at no cost!<br />
By the way, name your<br />
corporate trustee of your<br />
SMSF something cool.<br />
I called mine Khoury<br />
Boys Pty Ltd, and also<br />
set up khouryboys.com.<br />
au in case my little fellas<br />
ever open a pizza shop<br />
one day.<br />
Merry X’mas to you all
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