Buying a house in SMSF to live in when retired

Hi all. I'm toying with the idea of transferring my super into a smsf and using this as about a 65% deposit on a house while taking out a mortgage for the remainder. I'm still working and will be for about 9 years when i'll be 60. I'm finding it difficult to understand the rules and conditions when i google it. I understand i can't live in it until 60 and also read that the interest rate is likely to be higher. I also understand there must be enough in my super fund to meet any costs. I intend to rent it out and believe the rent will cover the mortgage repayments. Once retired i intend to live in it, which i understand is a condition. My questions are:
1) What is the calculation for how much i need in my smsf to meet these costs, if this is the case?
2) What are these costs?
3) How much more, if any, is typically the rate of interest for this?
4) Are banks generally happy to do this?
5) Anything else you think i should consider?
Thanks

 

You can't live in a property held by your SMSF even after 60.

 

I read about in specie transfers so long as i've retired and satisfied the sole purpose test beforehand.

 

You can always buy from a smsf trustee even before reaching a condition of release. The trustee will need to consider CGT which could be nil or 10% and the transferee will need to consider stamp duty

 

If you're purchasing an asset and the only reason you're purchasing it is so that you can take it out of super and live in it in the future - are you satisfying the sole purpose test?

 

My understanding is the that the sole purpose test applies whilst it is in the smsf. At age 60 it would be transferred out of it and so it becomes irrelevant how it's used from that point on. I could be wrong, that's just my limited read of it so far.

 

I have to admit the word trustee does financially confuse me. I thought i would be the trustee or at least the smsf is trustee which is me isn't it?

 

It could be you, or you could be one of them. But usually a company

 

I think i'd just make it me. But i see your point with cgt and stamp duty. A transfer from the smsf sounds like its akin to the smsf selling it to me. I didn't think of that.

 

If you are the sole beneficiary you could not be the sole trustee.

 

2 questions, the first regarding limiting cgt, the second stamp duty.1) My understanding is that superannuation is tax free, so wouldn't cgt be a percentage of zero which is zero? 2) Would it help if i gave it away free to my adult son?

 

Oh i didn't know this. Does setting up a company get around this?

 

I've always been cautious on these sorts of arrangements because when the trustee buys the property in the first place is it's purpose to be an investment to provide retirement benefits, or is it's purpose for a member to live in it in the future?

Determining the purpose of an investment would take into account all the factors and considerations around it including future intention.

Potentially a grey area.

 

A single member SMSF needs either a second individual trustee or a company trustee.

 

I see. Is it easy to start a company?

 

1. Depends superfunds usually pay 10% cut if asset held longer than 12 months otherwise 15%

but if it supports a pension it may be tax free. Then there is tax on taking out of smsf

 

2. No because a) you won’t own it and b) duty is levied on market rates unless an exemption applies. There may be limit d exemptions in some states from transfers from a trustee to beneficiary

 

Thanks Terry. These smsf's aren't as straight forward as i first thought. I doubt i'll ever be eligible for the pension. Sounds like 10% cgt will likely apply. My final question is if i set up a company for the purpose of this, am i able to be the sole name behind my smsf company and then transfer the property into my name upon retirement?

 

You could be be the sole director and shareholder and sole member of the SMSF. And the SMSF can potentially sell you the property or make an inspecie transfer - if the trust deed allows it and hte trustee has the powers to do so.

superannuation law is very complex, even for lawyers.

 

It's certainly more complex than i first thought. I'll have a chat to my accountant. Thanks for your answers.