Can you buy overseas property with your SMSF and keep it when you retire?

Discussion in 'Superannuation, SMSF & Personal Insurance' started by 2ndTimeAround, 6th Jan, 2020.

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  1. 2ndTimeAround

    2ndTimeAround Active Member

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    Im considering a special location in Northland NZ that has some historical meaning. Im wondering if I can use my super to leverage my way into a property there and in 10 years time when retired, keep it and move in?

    Im brand new to smsf so be nice :)
     
  2. JohnPropChat

    JohnPropChat Well-Known Member

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    Cash purchase? If you need to borrow i.e. LRBA then it is more complex but still can be done. Lots to go wrong. Get professional advice.
     
  3. Islay

    Islay Well-Known Member

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  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    A super fund trustee can buy property overseas and borrow to do so, but it is difficult to be compliant where borrowing overseas because of different laws.

    You cannot live in or use a residential property held by a superfund. But you could buy it from the fund
     
  5. Foxdan

    Foxdan Well-Known Member

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    If it’s in the super fund, I was under the impression that you could “withdraw” the house as a payment after you reach preservation age.
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes that might be possible as well.
     
  7. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    There may be a serious non-compliance and stamp duty concern with the proposal. A LRBF would be very difficult to implement and may give rise to dual taxation as NZ doesnt recognise our bare trust structure as a SMSF custodian.

    At the time that the member seeks to retire the fund may need to wind up and pay a lump sum pension so that the member is given title. Otherwise the fund is non-complying. NZ transfer costs would apply and the buyer pays those. CGT may be payable by the fund. And potentially in NZ depending if the property is excluded from NZ property tax (akin to CGT) which applies to some sales.
     
  8. Redwood

    Redwood Well-Known Member

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    Hi there

    Welcome to SMSF Land.

    You can, but need to be very careful.

    We used to have heaps of clients buying in the US - we - for many years have no set up a smsf to buy there due to the complex nature of the investing and the compliance issues.

    Some considerations:
    1. Will NZ allow you to purchase property in a Australian Company name i.e ABC SMSF Pty Ltd?
    2. If not - you will need to set up a structure over there and seek advice on the set up and tax implications and requirements
    3. If 2 is completed - youy will need a bank account - this will need to be with an ADI
    4. this is costly
    5. Will it be business real property - that will give you flexibility
    6. I would discourage a loan - it most likely will not be compliant

    Some considerations.

    Cheers Ivan
     
    Never giveup likes this.
  9. JohnPropChat

    JohnPropChat Well-Known Member

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    In-specie benefit but I thought this would still trigger CGT for SMSF and stamp duty for member that receives it so very similar to buying it?
     
  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes it could trigger both, but could also be tax exempt and duty free. too
     
  11. 2ndTimeAround

    2ndTimeAround Active Member

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    thats what I thought he meant by buying it from the fund, but yeah, this is what i was hoping I COULD do....
     
  12. 2ndTimeAround

    2ndTimeAround Active Member

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    Who would be the best type of consultant to give me an exact answer on this?

    Otherwise Im going to leverage to buy Brisbane property and keep (can I keep property or do I have to sell it when I retire?)

    Or I will leverage a Mutual fund, given they diversify so much its fairly safe, and id think if economies hit a wall its easy enough to pull out and sell? Or do I have to but stocks literally?

    I was thinking like average MF is say 9% over 5 years.

    So $300k in super, borrow $600k. 9% on $300k is $27k and 9%-4% leverage loan is 5% on $600k is $30k, so $57k PA = 19% on my $300k. I did this on paper for 10 years and was something like $1.5mill. Now is THIS allowable and easy enough to do?
     
  13. 2ndTimeAround

    2ndTimeAround Active Member

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    Mum just passed away, which has put a screaming halt on all my dreams.

    Maybe Im stupid to consider using leveraged SMSF to reach my goals.

    But Ive seen numerous articles talking about the property markets slowly heating up over next 3-4 years.
     
  14. Islay

    Islay Well-Known Member

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    Argh, I'm so sorry @2ndTimeAround. May I suggest one thing at a time for now. You can look at the property and SMSF in a couple of months.
     
  15. 2ndTimeAround

    2ndTimeAround Active Member

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    Thank you Islay for your kind words. I put my life on hold for 10 years for both parents who both seemed would never pass away. Yet it still came as a shock as she sounded much better last we spoke a few days ago.

    Yes I will take some time. Im not a huge griever. I tend to process loss well. But no matter what it hurts when you lose someone you love.

    This is why at 46 I want to retire by 58 but keep active in the hobbies and communities I enjoy. I think if you just retire and sit around this can impact life expectency too.

    Anyway not to be morbid.

    I need to choose how I do my SMSF. What is the easiest path? If I wanted to buy a property I am not allowed to rent it myself?

    If not I am thinking Brisbane. But Im not sure where to start so any basic guides would be appreciated.

    Ive always been either a day trader or a manage fund person. I dont see borrowing 70% on 9% avg managed fund is a bad deal.

    I have the basic knowledge how to pick stock, research, its key indicators etc. I paper traded a few years back and made some good paper money. But has been a while, have forgotten much of it.

    Do I need a different type of Trust for Property than I do for Stocks?
     
    Islay likes this.
  16. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes.
     
  17. PandS

    PandS Well-Known Member

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    Sorry to be harsh but you need a reality check

    From your post you seem fairly novice with stock market and properties and you want to do all this stuff in 10 years and retire on 300K starting capital?

    The number you throw around like 9% annual return is not a given, it not as simple as that.
    cash flow, service, interest rate movement, unexpected expenses etc...

    and borrow 70% to invest in stock market and expect 9% return annually? who gave you this idea?
    you know you could face wiped out with such move? your only experience is paper trade?
    investing in stock market with real money is a whole different ball game.

    I think you need to think through carefully before you jumping into SMSF and lose your live saving.
     
    ellejay likes this.
  18. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    You can. If you want to pay stamp duty as the new owner :)
    This is the major obstacle.
    If the SMSF has a limited recourse loan then the matter will fail as the loan must be discharged first then transferred. A fund without cash to discharge cant pay a pension....So a lump sum could even have tax issues.
     
  19. 2ndTimeAround

    2ndTimeAround Active Member

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    No problems with your sentiments, Id rather somebody gave a SH.. than ran me up the river.

    My simple plan was to invest in a managed fund, which on average return 8-9% per year. Yes in 2009 some lost up to 20%. I get that. But I thought letting a managed fund manage my investment over doing trading myself would be safer than leveraging 70% on Stocks I have only paper traded.

    Do you have any advice on where I would turn to learn a better strategy?

    Also can I buy a block of land in NZ with my SMSF and when I retire keep it as a PPOR?

    Sorry I dont plan to retire only on my $300k, Im earning $150k and planning to invest as much as humanly possibly on top of the $300k for 10 years. I should have clarified. That. As I said, Im a total Noob to it all.

    I kind of found this helpful.

    How to create an SMSF investment strategy (including examples)
     
  20. 2ndTimeAround

    2ndTimeAround Active Member

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    Is it best to see a financial advisor to setup the strategy or is their a better choice?

    Also should I use or avoid all in one setups like NABtrade? Trade Australian & International Shares Online - nabtrade

    They make the steps seem very cleary. Obviously I have a lot to learn about stocks, but Ive done well with property.

    I was a buy, reno and seller for a long period and did very well with buying below what I estimated at market value. Along with being a Project Manager I simply used a crew of tradies and applied my PM skills to get the property ready for sale on the day of money changing hands via an early access clause, which can be risky. But it can take 30 days to get a renovation that involves a change to the internals done. Paper work to the council etc.

    Im wondering if I can invest in my own Reno and HOLD properties?
     
    Last edited: 13th Jan, 2020