Buying Property through your Super ?

Buying property through your Super?

Property is the most trusted asset class for Australians, yet only around 3.5% of all SMSF investment is in residential property according to the latest ABS report (www.ato.gov.au/Super/Self-managed-super-funds).

Property investment can produce a range of tax benefits, for e.g. your tax can be significantly reduced or eliminated for rental income and capital gains, and the rental return can be used for loan repayments.

Do you need an SMSF to buy property through your super?
You do, that is if you want to choose which property you invest in anyway. Contact us today for a FREE 30 min SMSF consult and we can help you get started.

Are you in business?
Business owners can get some significant benefits when buying their commercial premises through their super. Along with all of the tax benefits mentioned above you also avoid the tenant or landlord issues that are often associated with commercial property. This is great, as buying your own business property still satisfies the ‘sole purpose’ test which is discussed under ‘what are the rules’ that follows.

Can you borrow money when buying property through super?
You CAN. Often banks will lend up to 80% for a residential property and 70% for commercial property loans through your SMSF. This is an example of leveraging the bank’s money to increase your investment.

What are the rules?
There are significant and strict rules around property investing through your super, according to moneysmart.gov.au the property must comply with these 4 key rules:

1. The property must pass the ‘sole purpose test’ – this means that the property must provide benefit solely to the SMSF fund member’s retirement. It’s the same as investing in art through your SMSF, you must keep that art in storage until you retire so that you don’t get any pleasure from it before that time.
2. You cannot buy or acquire the property from a family member
3. Neither you or your family members can live in the property
4. Neither you or your family members rent the property. Basically, it’s off limits to you and your family members. It is an investment property for your SMSF only.

Tips and Traps
If you’re happy with (or can at least manage) the restrictions you need to consider if you’re ready for this. Like any major financial decision jumping in means that you take on more responsibility. You should also consider if you’re better off buying the property outside of your super fund. Although the tax benefits can be great and borrowing money for your super-fund can be an extremely well leveraged strategy, the negative gearing benefits could be negligible. Therefore positively geared properties are often a good option for your SMSF. In short – make sure you do your research and consult an expert.

The bottom line
There can be some MASSIVE benefits of buying investment property through your SMSF, by borrowing money you are increasing your investment which can yield great results over time. There are also options to secure your loan to protect your other assets in the fund. These investment and asset protection strategies are things you really should spend time researching and talking through with your advisor. We specialise in SMSFs and would LOVE to talk to you about your options.

Free SMSF Consultation – Book NOW
To assist you to make an informed decision, contact us TODAY on
(07) 3285 1388 for a FREE 30 minute consultation. We can clearly explain, using our exclusive SMSF Comparison Report, the benefits of a SMSF and whether or not a SMSF is the right thing for you.
Don’t delay. The sooner you get started with the right advice, the sooner you will grow your assets to have a better financial future! PETER DI TOMMASO CHARTERED ACCOUNTANTS
821 Gympie Road
Lawnton Q 4501
P: (07) 3285 1388
Email: peter@ditommaso.com.au

MyTax 2014 – What you need to know

The boring old tax return has come a long way since the ‘Tax Pack’ days.

The Government have announced the roll out of the new MyTax system. Users all over Australia will be receiving text messages to inform them over the coming weeks.

So we just wanted to let you know what it means for you by answering some likely frequently asked questions (FAQ’s) to help you make an informed decision.

What is MyTax?

MyTax will enable tax returns to be submitted via a smart phone, tablet or on a computer through a web browser (i.e. Internet Explorer, Chrome, Firefox & Safari). MyTax will PRELOAD much of the information required on the return. This means that millions of Australians will simply have to review and modify (if required) the pre-filled information online before lodging their return – bypassing the need for paper, pens and software downloads. But will it bypass the need for an Accountant?

Can I use MyTax?

Millions of Australians will likely be eligible to use MyTax. According to the Federal Government’s media release:

“Taxpayers will be able to use MyTax if:

  • they were an Australian resident for the financial year;
  • they have income only from salary, wages, allowances, bank interest, dividends and/or Australian government payments;
  • their only deductions are for work-related expenses, expenses related to interest or dividend income, donations and/or the costs of managing their tax affairs; and
  • the only offsets they want to claim are the senior and pensioner tax offset and/or zone and overseas forces tax offset.

Taxpayers will receive an SMS or email from the ATO advising that MyTax may be right for them.

Taxpayers are ineligible to use MyTax if they have:

  • business income or losses
  • rental properties
  • partnerships or trusts, including managed investment trusts
  • capital gains or losses
  • foreign income
  • lump sum payments
  • employee share schemes
  • superannuation income streams and superannuation lump sum payments.”

It’s important to note that to be eligible you must adhere to ALL the pre-requisites, however if they fall under ANY of the ineligible factors they cannot use MyTax.

See the full media release here

Do I still need my accountant?

First and foremost, if you are not eligible to use MyTax it would still be beneficial for you to have a trusted accountant. Even if your tax return is relatively straight forward, effective tax planning can ensure that your tax return outcome is maximised to keep more money in your pocket. MyTax is an incredible improvement for tax lodgement, however we want to make sure that you are financially fit and ready for anything.

I’m pretty sure I can use MyTax – Should I?

Before you jump in with both feet, have a quick chat with us to ensure your needs are completely covered by MyTax. If MyTax is all you need we’ll likely recommend using it as according to the ATO MyTax is supposed to be quite easy to use. However, easy doesn’t always mean that it’s the best, for example, MyTax may not claim ALL valid deductions, without the help of a skilled tax accountant you could be missing out.

Want to talk?

Feel free to call our office any time on 07 3285 1388 to discuss whether you can use MyTax.

Federal Budget 2014 – What you need to know

Yesterday, the Treasurer Joe Hockey delivered his first Federal budget.

The budget was in many ways what was expected, below is a summary of the key features and how they could affect you – Please get in contact with us if you would like further details on how these decisions will affect your own personal situation.

More ‘Tax’ for Higher Earners

A Temporary ‘Budget repair Levy’ was introduced to tackle the rising national debt. This debt levy will affect higher income earners (over $180,000) – a rundown of the levies is as follows:

debt-levy

Also a number of other tax rates that are currently based on calculations that include the top marginal tax rate will also be increased in line with the Temporary Budget Repair Levy from 1 July 2014. An exception applies for fringe benefits tax (FBT), which will be increased from 47 per cent to 49 per cent from 1 April 2015 until 31 March 2017 to align with the FBT income year.

Short Term Clarity on Super

Last night’s budget confirmed the rise of the superannuation guarantee to 9.5% as of 1 July 2014 this is in-line with 2012 legislation. However the proposed schedule has changed to hold the rate 9.5% for 4 years followed by 0.5% yearly rises up to 12% by 2022/23.

Changes to the excess non-concessional contributions tax means that contributions made since 1 July 2013 can be withdrawn. This is good news for anyone who has accidentally exceeded their non-concessional contributions as they can withdraw it rather than paying the top marginal rate.

Tighter Welfare Rules

The government has proposed several clamp downs on welfare including:

  • Reduced deeming thresholds from 2017 making it harder to pass the ‘income test’ for social security benefits
  • Commonwealth Seniors Health Card changes
  • Progressively increase the Age Pension age to 70 from 2025

We want to make sure ALL our clients are ready for anything this is why we would love to talk to you about a ‘Freedom Plan’. This puts the power back into your hands by clearly identifying what you need to do to retire on your own terms. Call us today to find out how.

Family Assistance

Changes to the Family Tax Benefits (FTB) scheme include a change to Part B where the primary income limit will be reduced from $150,000 to $100,000 from 1 July 2015. Also Payment of FTB Part B will be limited to families whose youngest child is under age six from 1 July 2015. Transitional arrangements will ensure families whose youngest child is age six and over on 30 June 2015 will remain eligible for FTB Part B for two years.

The paid parental leave scheme has been proposed on a smaller scale to what was expected. It will provide six months of paid leave, including superannuation, from 1 July 2015. However, the payment threshold is proposed to be reduced from $150,000 per annum to $100,000 per annum.

Business & Investors

The company tax rate has been reduced by 1.5% bringing it down to 28.5%. This reduction, however, will be off-set by businesses that earn more than $5,000,000 in taxable income by a 1.5% levy to fund the paid parental leave scheme.

For investors, this means that little will change for those invested in businesses who earn less than $5,000,000 as the increased dividends will be offset by a decrease in franking credits. However, for those invested in companies who earn more than $5,000,000 will be worse off as they will have less franking credits as well as a decreased dividend.

That being said, with the marginal tax rate for businesses at 28.5% and the maximum individual marginal tax rate at 49% there may be some opportunities. Call us to discuss how this may impact you.

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