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SMSF purchase, short on funds

Discussion in 'Accounting & Tax' started by Bran, 28th Jul, 2016.

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  1. Bran

    Bran Well-Known Member

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    This is in the hands of my accountant, but lets say you were buying a commercial property. Ideally, a SMSF purchase is probably most desirable.

    I'm about 100k short.

    Are their options here? Tipping in the balance? What are the implications of doing this?
     
  2. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Im not a financial planner or accountant but believe contributions are limited to 25k per person and has recently been increased to 30k for 48 years or younger on the 30 June 15 or after.

    49 years or older can contribute 35k per year.
     
  3. Marg4000

    Marg4000 Well-Known Member

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    It is not just the shortage of funds to buy. You will have to keep a cash buffer in case of unexpected expenses. Even more so if property is vacant.
    Marg
     
  4. Tonibell

    Tonibell Well-Known Member

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    You should be able to make a non-concessional contribution for the balance.

    There are just 3 year and lifetime limits and how much you can contribute.
     
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  5. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    1. Non-concessional contribution. While not taxed in the fund it is non-deductible and also remains preserved.
    2. Concessional contribution/s subject to member caps. Such a contribution is taxed at 15% but deductible to the employer or self-employed.
    3. Related party loan. VERY difficult to establish in a manner that is acceptable to the ATO.

    The best alternative may be a ungeared unit trust with the SMSF having an interest in the unit trust and a member also having an interest. Member borrows for their interest in the trust. Key issues include (there are others) :
    1. Trust does not borrow.
    2. The property has no loan against it
    3. Other property is used as loan security for the $100K borrowing

    Key benefit is trust interest is +ve geared. Member interest can be neg geared and over time strategy to swing ownership to 100% SMSF works - OK a little CGT and in some states like QLD there could be small amnt of duty.

    Your accountant should explain a Reg 13.22 trust. I would have considered that first and it would have been option 1 if there was any hint liquidity was a issue.
     
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  6. Bran

    Bran Well-Known Member

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    Thanks Paul. I'm a little bit sheepish now for asking the question, as this is all WAY over my head.

    The unit trust sounds very interesting. I don't understand "the property has no loan against it"

    In my head, I pondered an additional 30k in each of the next 2 financial years prior to settlement, will get us close

    Not sure if I could somehow contribute the same to my wife - especially as she is about to be indirectly employed by me as well. Is a joint SMSF possible ? I would treble her super with 2x 30k contributions in each FY
     
  7. Redwood

    Redwood Well-Known Member

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    Related party loan....

    Cheers Ivan
     
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  8. Foxdan

    Foxdan Well-Known Member

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    We have a loan contract between ourselves and our SMSF. The company that manages our SMSF arranged for a loan contract and repayment schedule that passes ATO rules. PM me if you want more details. Seemed pretty simple to set up.
     
  9. Redwood

    Redwood Well-Known Member

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    Correct its extremely simple, the most recent tax guideline provides further information on the terms of the loan which are due to be implemented by January. I have already made the required changes for my loan now - i.e P&I not IO - 5.85% etc.....All of this will be included in the loan agreement.

    Cheers Ivan
     
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  10. Serah

    Serah Well-Known Member

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    Hi @Paul@PFI

    Can I please butt in?

    I am in the process of rolling over to smsf. There are so many questions, and to start with are the non-concessional contribution, concessional contribution and the related party loan.
    1, non-concessional contribution, can I contribute up to 100k pa from my not yet taxed income (e.g self employ)?
    2, the concessional contribution, can I contribute up to 30k?
    Can I use 1 and 2 combine? e.g contribute from non-concessional contribution 100k & concessiona contribution for 30k?
    Can I just write a memo each time when I do the contribution?
    3, Related party loan - the same question do I just write a memo/contract ?

    Many thanks.
     
    Last edited: 13th Oct, 2016
  11. JacM

    JacM VIC Buyer's Agent Business Member

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    Perhaps a combination of pre-tax (SGC and Salary sacrifice contributions) and post-tax (money lying around in your bank account) contributions?

    Another option may be if you have a business or portion of business you're planning to sell, you may be able to divert the sale proceeds into the SMSF. I believe this is allowed for (eligible) businesses. Check with your accountant. There's a bit of a spiel about it here: http://www.smh.com.au/small-busines...ell-your-business-taxfree-20141117-3kksj.html
     
  12. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Accountants cant give credit or financial advice (unless they have a AFSL). NOBODY without a AFSL can discuss or recommend contributions, rollovers or introducing other members which may be options.
     
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  13. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    That would be financial advice and I cant answer this. Its important with all SMSFs to have access to a financial adviser, SMSF adviser and other key people. We are a one stop shop which helps...Many administration firms are not and expensive add-ons quickly make it more costly
     
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  14. Redwood

    Redwood Well-Known Member

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    Hi there

    Refer to this link
    Contribution caps

    There are changes to the caps which I will not link but its on Redwood's site.

    Re Related Party Loans - you will need advice, a memo will not do, a loan agreement will need to be documented stating the terms of the loan. Of course you will also require a bare trust to satisfy s67A of SIS. Please don't do this alone.

    Hope that helps
    Cheers Ivan
     
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  15. Greyghost

    Greyghost Well-Known Member

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    Non concessional contribution lifetap cap.
    Have a read
     
  16. hobo

    hobo Well-Known Member

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    Just re the bit I've bolded in your post - I believe Non-Concessional Contributions have to come from post-tax income. The link @Redwood posted further up in the thread explains more (Contribution caps) and as he also mentions, the caps are changing so you do need to seek proper advice to get it right.
     
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  17. Stoffo

    Stoffo Well-Known Member

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    How about tenants in common ?

    The SMSF could own the % up to it's limit, and you could personally own the $100k/% balance ?

    Thoughts

    Edit: just to get the sale/purchase over the line.
    Rather than fold and miss this opportunity :)
     
    Last edited: 13th Oct, 2016
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  18. Bran

    Bran Well-Known Member

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    As an aside, and this may help others, I saw a facebook post recommending to log in to the mygov site, hook it up to ATO, and the ATO then lists all your super funds which you can transfer with a click or two.
    It took me about 90 seconds from start to finish, and I found 20k in super funds that I didn't know I had. THis is on top of previous searches done by FPs over the years.
    Definitely worth a go. Sadly my wife had zilch.
     
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  19. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Trouble is the smsf could not later acquire the share of the non smsf owner.
     
  20. Scott No Mates

    Scott No Mates Well-Known Member

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    @Terry_w, there shouldn't be an impediment as the property is commercial, or do different rules apply to acquiring partial interests?