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

But this throws cold water on SMSF?

Poor performance: why you shouldn't set up an SMSF

Is this simply because these people didnt know what they were doing before they jumped in?

 

Why do you want to buy property in a SMSF? If you're earning $150k why not just save a deposit and buy a rental in NZ to move into when you retire? SMSFs are very expensive to run and the wrong property (i.e maintenance issues and minimal growth) along with the running costs will drain your current $300k in no time at all.

 

Only financial advisors can give financial advice, so you won't have much choice - other than doing it yourself.

If property then this is not a financial product so more open to who can advise.

 

LOTS to think over.

I thought you could still leverage SMSF, and I originally thought an LVR of 30% with my super into MANAGED fund which is returning around 9% per 10 years would be a simple strategy.

 

Thats likely what I will do, I just thought leveraging my super to acheive it would make money on the banks lending. Very unlikely to lose $300k on a property, Ive been VERY active in property for 30 years and never seen a loss like that, even leaky homes are fixed for less, but I never buy rendered property in NZ for this reason. My latest is a quality JH weatherboard with colour steel roofing, HRV, Gas heating, house was architect built and Project Managed, has a brand new kitchen as owners wanted high spec granite island etc. Gorgeous plush carpet with 30 year garuntee. I got it for 15% less than what I think is MV and 30% less than RV/QV. I only buy homes i would either live in or renovate to a level I would live in and are profitable.

 

If you buy the property and it's the only property in your smsf and the rent payments don't cover all the costs you have with the smsf like set up, life insurance, mortgage, house insurance, maintenance and repairs, fees for admin and accounting then each month money is going out of your smsf rather than going in. If this happens over the life of the loan it obviously adds up alot. If you don't plan properly, or if you buy the wrong property your smsf balance will reduce monthly. You just need to be aware.

I'm not sure if SMSFs are a great strategy for holding one property. You'd be leveraging the banks' money if you just bought with a loan. You need to discuss your scenario with an smsf specialist.

 

The land idea has a issue. YOU wont buy it. A SMSF may. Its not your land. What is the SMSF investment strategy for vacant land that produces no income and incurs rates ? How does it become a main residence if its just land ? What may the transfer costs be ? What is the condition of release that is met ? The sole purpose test for super funds may pose a concern.

The SMSF can distribute the land. Duty + legals applies etc in NZ. There could also be other issues surrounding residency which could lead to the fund being non-compliant. A SMSF must have its central management and control in Australia. If you move to NZ that could trigger issues - chicken v egg issue.with the fund being non-compliant prior to transfer. The property may be subject to the CGT tax that applies to investment property held for sale in NZ as well as AU super tax.

 

Well thanks for at least having a crack at it and giving some ideas

I was considering putting a relocatable home on it which would end up becoming what they call in NZ "Minor Dwelling" where there is no title etc required. Renting it out at nominal price, where it is located is a tourism hot spot, so will do well in summer and drop off over winter months, but it attracts divers all year around.

I was hoping I could buy the property with my super, then when I retire at 60, transfer the property from my SMSF into my name.

I realise that will cost money etc, but is it technically possible is really all Im asking?

There is no stamp duty etc in NZ and if was transfering it to PPOR it may not trigger CGT, but even CGT is minimal compared to Aus. Oh boy do the Kiwis like to keep the government in check, CGT alone was a very hard one to slip in.

If this is not possible I will use my own money, along with paying off my current NZ PPOR and possible 2 IPs in Bris which I feel are building for a bit of a rise. But mostly after the good yields, which are impossible in NZ. Or conversely I could revert back to what I know best, buying below evaluated market malue by 10-20%, small reno and major curb appeal reno along with landscaping (my 2 favs) and either sell or keep for what Im expecting to be bumper years 2022-2027, just a guess or a "feeling" dont quote me.

Can I use my SMSF to buy properties to renovate and sell to produce increasing equity?

 

I hear ya. I might use my own money to do the NZ property to keep it simple.

But as above, Im a Project Manager and have used that skill set for well over 50 properties, evaluating market value, getting my tradie team ready with their sections of my gant chart and time frames I require from them, I get stuff done on time and I will like sell for equity gains, although I do feel Bris is about to rise some in a couple of years. Either way, I get tear down jobs looking like adorable little Qldrs on time within budget and generally look for 10-20% profit. If I do 4 of these a year, on top of my $150k salary, Im generating quite a bit toward my retirement.

So is this situation legal, using my SMSF equity as deposit for a property, using other equity to pay for my tradies and supplies to get the job done, REA fees, legals etc?

 

Yes this is possible. But CGT is assessed on the transferor and it cannot be the main residence of a SMSF. But it could still be CGT exempt, or 10% CGT if held more than 12 months.

 

Nice one, because IMO it will be 2 years for Bris to heat up a bit anyway so that could be good timing. Buy a dump which I can make money from in a flat market but if the markets heating up keep it and ride it out.

Have a PPOR in Auckland. OMG the ROI is terrible if I wanted to rent it, like 3.7%. Prices though did drop and have now plateued for 4 years. IMO its the rest of the country that is an issue, cities with `100k population and $700k median suburbs, very few 6 figure jobs etc. Could see a spot correction there imo, which Auckland has already suffered and like Aus has not risen so is somewhat protected. Its all local median income multiples though not international economies that effect NZ. Its like a mini isolated country. Of course any massive US dump would effect everyone, but I dont see that imo, but dont have a crystal ball.

If I keep doing my thing in Brisbane I may just keep the properties when I retire, can I do that and just collect rent to avoid tax?

 

Or 47% if it's non complying as a non resident trust and evident breach of the sole purpose test. Many issues need consideration. A lump sum withdrawl and condition of release based on member retirement age?

 

I think it all sounds too hard. I will just pay cash for NZ property.

I will go SMSF for my Aus eventures

 

Do you know the cost and work involve with smsf?
You have to account for every cents and auditor has to be able to verified it and sign it off else you risk non compliance
And it a yearly thing