Tax and legal advice
Shukri Barbara

When should you consider an SMSF?

By Shukri Barbara

Different life stages present diverse opportunities and limitations when it comes to investing. How does your age affect your self-managed super fund?

Blogger: Shukri Barbara, principal adviser, Property Tax Specialists

When looking at successful investment property strategies, it’s easy to start asking yourself: at what point should property be owned by my SMSF? What are the tax implications?

Super is a means by which to save so that in your retirement there is income (tax free) to live on, instead of drawing on the public purse of government pensions.

Positively geared property in a self-managed super fund (SMSF) has the advantage of lower tax rates, at only 15 per cent of net rental income and 10 per cent of capital gains.

Compounded over a 20-year/‍ two-property cycle timeframe, this can result in comfortable tax-free retirement incomes. 

Those aged between 20 and 35 may not have accumulated sufficient funds for a deposit, particularly if the fund’s primary contribution is coming from the statutory 9.25 per cent of wages. Adding a spouse or another family member to the fund would increase the pool of funds faster.

Young people have to balance their desire to spend money and explore life against the need to save for retirement. Salary sacrificing as close to the $25,000per annum cap as possible would help achieve a deposit faster – with the added advantage of tax saving.

For those aged 35 to 45, the challenges of life and family (children, losing one income stream, school fees, mortgage on a bigger home) are the major hindrances limiting members’ abilities to put more savings into their SMSFs.

Despite this, people in this age bracket tend to have been members for longer periods and often benefit from spousal contributions. Their increased earning capacity also means they can contribute more and thus, investment in geared rental property is achievable. However, complications arise when funds have to be split as a result of marriage breakdown.

Those in the 45 to 55 age group still have at least one to two property cycles available to take advantage of a strategy with investment properties in SMSFs.

With children growing up, leaving the home (and preferably earning their own income), there is more disposable income available to sacrifice into an SMSF.

Reeling from a structural budget deficit, the government has limited concessional (tax advantaged) contributions to caps at $25,000 per annum. More recently, they have capped the tax exemption on earnings of SMSFs supporting income streams (generally for people over 60 years of age) to $100,000 per individual per annum. The excess will be taxed at 15 per cent.

In the planning stages, this age group should give serious consideration to exiting at lower tax rates – for example, timing the sales of the investment properties and realisation of the capital gains to come in below the $100,000 taxable income limit, amongst other strategies.

With less time to plan before retirement than other age groups, baby boomers aged between 55 and 70 should preferably already have guidelines, if not plans, around how to exit and access funds – including tax-free pensions or lump sums.

Savings in a super fund are preserved until age 55 for those born before 1 July 1960 and up to age 60 for those born afterwards. After age 65, exit is generally tax-free.

It is always best to discuss your situation, figures and tax implications with your property tax specialist before committing to a transaction. Use the tax advice as part of the broader financial plan within the retirement context – especially for those on taxable incomes in excess of $300,000.

Disclaimer: The above is to be considered as general education. This is not advice and it is not to be acted upon without advice from a qualified professional who understands your personal circumstances.

 

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About the Blogger

Shukri Barbara

Shukri Barbara

Shukri Barbara is a CPA with over 30 years experience in public practice and professional associations support service. He is a Certified Practising Accountant and a Chartered Tax Adviser, as well as Principal Adviser at Property Tax Specialists.

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  string(51) "Boost for investors as app sets up off-site bidding"
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  ["introtext"]=>
  string(144) "

Property investors are now able to identify and bid on auctions remotely using a new live-streaming functionality launched by Gavl.

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Called “Request an Auction”, the new functionality enables users to watch and bid on any Sydney or Melbourne auction remotely.

Through Gavl, prospective buyers are now able to register to bid on their preferred auction. The platform will obtain permission from the listing agent and confirm within 48 hours.

Vendors can also request to have their auctions broadcast to a larger buyer audience.

Co-founder Joel Smith said that auctions streamed on Gavl attract 47 per cent more viewers than traditional ones.

He said that Request an Auction will be valuable for remote buyers.

“Buyers are able to have Gavl attend any auction they nominate, so they will never have to miss out on an opportunity due to logistical complications in physically attending the auction.

“Vendors, too, have the opportunity to directly book an auction with us, so they can open up their event to buyers all around the world. With more potential buyers, they’re giving their property the chance to receive more bids and maximise their sales result.”

Mr Smith said that prior to the Request an Auction app, buyers were limited to what they could achieve through the Gavl technology.

Gavl is a live-streaming and bidding platform for real estate auctions.

Mr Smith said that it has streamed more than 6,000 auctions, which have achieved 3.5 million views from 50 countries.

Gavl’s Request an Auction function is currently being offered in Melbourne and Sydney only.

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Boost for investors as app sets up off-site bidding
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Having to split her time between Hong Kong and her original base of Sydney has not slowed Julia Tita’s goal of building a high-performance Australian property portfolio. Instead the resulting alterations to her strategy have positively impacted her investing success.

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Having recently purchased her 6th property, Julia joins host Tim Neary to discuss her journey, share her ups and downs over the years, and reveal her thoughts on why some properties are better than others.

Julia also explains why she no longer makes a move without the help of a buyer’s agent, why working with a strong team of specialists is extremely important and discloses her long-term property ambitions.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

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How a move to Hong Kong impacted Julia’s Australian property goals
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  ["title"]=>
  string(88) "‘Common’ referrer practice of being paid on both sides of the fence coming to an end"
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The practice of property investment firms sharing undisclosed kickbacks among the supply chain involved in development sales will be outlawed in NSW on 1 July this year under the Real Estate Reform being handed down by regulators in NSW.

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Property commentator and valuer, Suburbanite’s Anna Porter, said the reform will address conflicts of interest.

She said they arise when a mortgage broker, accountant or financial planner receives part of the commission from the property firm, who receive their fees from the developer or seller.

“This puts the broker into a position by which they are being paid on both sides of the fence,” she said.

“Until now this has been a grey area and there was nothing stopping this practice.” 

Ms Porter said this has been a common practice in the industry.

"Some well-known mortgage broking firms openly admit to receiving $5,000–$10,000 per referral in their pocket.”

She also said this process has been going on for decades.

"Property investment firms commonly pass some of their commission on to the mortgage broker, accountant or financial planner as a reward to them for passing on the referral. This means that many brokers or financial service providers are making significant amounts of money just to refer on to a property firm, often totalling hundreds of thousands of dollars a year," Anna Porter said.

Ms Porter said the Property, Stock and Business Agents Amendment (Property Industry Reform) Bill 2017 will be in force from July this year, and will prohibit this practice unless the broker or referring partner also holds a real estate industry license.

"Under the new laws, if the broker takes a referral fee from the property firm, they will have to be a licensed real estate agent and also hold a corporation’s license,” she said. 

“Subsequently, every transaction that they receive a referral fee from, they will be putting their license up against the transaction and taking full liability for the conduct, practices and outcome of that transaction, even if they have little to do with the transaction; they are a party to it financially and therefore take as much risk as everyone else in the transaction.”

Mr Porter said where a referrer holds a real estate license, and receives a part of the sale commission, they may find themselves in breach of the ethical requirements under the act.

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‘Common’ referrer practice of being paid on both sides of the fence coming to an end

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