smsf borrowing before the ban
TRANSCRIPT
@business_DEPOT businessdepot businessdepot.com.au
Head of Tax & Super
- Building & Construction - Property- Small to medium business
[email protected](07) 3193 30020404 869 255
@mgarrone
• What likely to happen to existing arrangements
• What is involved if you are borrowing
• What are the steps from contract to settlement
• What do you need to consider at settlement & in the future
• Our practical experience
• SMSF here to stay
• Growing, healthy, vibrant area
• Competition – SMSF & Super market
• Professionalism growing
• Innovation – cloud, advice, offerings
• Structural risk – GFC 2008 & future shocks
• Super 2nd largest asset [behind home]
• Benefits individuals / economy as a whole [stabiliser – avoid age pension]
• Limited recourse in name only – eg, PG’s, risk to other assets
• Lack of diversification [risks increased]
• BUT noted borrowing still relatively small [future risk]
• RBA/APRA want leverage limited [risks incompatible with objective of savings
vehicle for retirement]
• Old problems back
• Property industry growth profile – RBA heavy lifting
• Difficult economic environment
• Ban likely
• Limited recourse in name only
• LVR rules
• No related party loans
• SMSF Corporate trustee required
• Diversification / liquidity rules
• Ban PG’s
• 31 March 2015 FSI submissions close
• April to May budget night
• Complicated by
(i) Lack of political capital
(ii) Tax white paper
• Terminate existing arrangements [unlikely]
• Grandfathering – likely
(i) Pre 99 unit trusts – 10years and ongoing [possible to have in place - just less
flexible]
(ii) July 2010 borrowing changes
- Timing restriction – difficult as long term 10-30 years
- Maintain borrowings – what does that mean – refinance?
- Loan refinance?
- Backdating of legislation [unlikely]
• ensure settled by 31 March 2015 [Safest]
• Under contract but not settled [Caution]
(i) Conditional subject to finance
(ii) Unconditional [risky]
(iii) Careful [if long settlement or off the plan]
(iv) July 2010 changes – when loan contract signed
Consider:
• Age
• Liquidity
• Diversification
• Overall situation
Wait until suitable property found?
• Set-up in advance?
• Timing on rollover?
• Insurance required?
• Ensure deed allows borrowing
• SMSF Corporate trustee in place – change assets over, eg, shares, property, bank accounts
• Borrowing – Bank indication of lending limits
• Balance – SMSF
(i) Own cash
(ii) Contributions
(iii) Existing assets liquidated
• Make sure you can execute on plans
• Find suitable property
• Review property with advisors
(i) likely cash outflows – eg, repairs, improvements
(ii) single acquirable asset?
(iii) understand likely property plans/options in the future
• Directors?
• Shareholders?
• Name on contract
“Company Pty Ltd as trustee for Borrowing Trust”
• Insurance on property – name?
• Form day before going to contract?
• Stamp duty issues if SMSF doesn’t pay deposit
• Can you get your own deposit back?
• What if you cannot get you deposit back?
• 45 days to settlement [subject to finance]
• 60 days if no SMSF set-up [abn, rollovers, insurance]
• Don’t forget potential ban / legislation changes
• Why not 30 days?
• Liquidity
• Diversification
• Risk/Return
• Existing strategy – full update?
• SMSF Deed
• Borrowing Trust
• Property
• Lending – eg, capacity to repay and lvr’s
• GST registration, if required [easily forgotten]
• Do earlier or only just before settlement?
• Limited recourse loan to SMSF
• Cash from SMSF
• Contributions (what if settlement doesn’t go through?)
[easy to see mistakes on settlement – cash instructions required if more complicated – care
required with timing]
SMSF Specialist- SMSF advice- Real estate guru- SMSF Association specialist
[email protected](07) 3193 3020
@megankelly @megankelly
SMSF
Rent Expenses
TRUST
Tenant
Lease
Limited recourse
Loan Repayments
LENDER
• Lease with instalment trust – assigned or new lease
• Use ABN/TFN of SMSF
• Rent deposited to SMSF [use SMSF bank account]
• SMSF pays expenses
• BAS – if GST applicable [quarterly]
• Financial Statements [SMSF only]
• Audit [slightly higher costs]
• Transfer to SMSF [leave some debt in place?]
• No CGT?
• No GST?
• No stamp duty? [who paid deposit & more]
• Cloud – Class Super & Apps
(i) costs
(ii) benefits – reporting & interaction [online access – you & your advisor]
• Borrowing ban / changes
• Murray FSI – lot more then Super
(i) Tax free pensions & withdrawals > 60?
(ii) Franking credit changes?
(iii) SMSF Corporate trustee mandated?
• Self managed Super
• Property
• Structuring
• Strategic Advice
• Retirement planning
• Estate Planning
@business_DEPOT
businessdepot
businessdepot.com.au
(07) 3193 3020
(07) 3193 3052
(07) 3193 3021
@business_DEPOT
businessdepot
businessdepot.com.au
(07) 3193 3002
(07) 3193 3020