What are you doing with your SMSF ?

It's over now - I won't be returning to that space any time soon.

Not that it worries me, either.

But thanks

 

The constant rule changes and additional fees got to me too. However, I think intergenerational is where SMSF really comes into it's own.

I won't rule out returning to this space in the future. But for now I'm happy with my industry fund.

 

Intergenerational SMSF is hard when you have more than a 2 kids, I guess? Or do people see parents setting up multiple SMSFs to account for all kids??

 

If you had 3 kids you could ask your spouse to remove her/himself.

Don't forget on death the SMSF could keep going, but the individuals death benefits would need to be paid out. These benefits could go to all children equally or unequally (directly or indirectly) even though there may be more than 4 of them.

 

Ours go up the generation, ie we invited 2 parents not down the generation of inviting kids

 

that was the way i was thinking too.

 

Ah, that makes more sense. Thanks

 

G'day Westminster -

Great thread.

You are able to purchase property off a related party if you meet the Business Real Property Definition.

In certain cases Residential Property will meet the definition of Business Real Property, for instance a developer buying its own town house stock. This can be done, however its important not to cut corners and obtain legal advice. The ruling is quite specific so its easy to follow. In this case, you can borrow to buy the end stock. The bank's lawyers will generally like some comfort from your lawyer on how the arrangement satisfies SIS and we have a great lawyer who signs off on the structure (when the steps are followed).

Cheers, Ivan

 

Hi there -

As Terry has eluded too it is possible to live in the property and run the farm within the SMSF. ?There are a number of considerations and it is important to seek legal and specialist SMSF advice before proceeding.

First point is to satisfy the defn of Business Real Property and from there a ruling provides some guidance, the residential property must be less than 2 hectares. If you are looking at borrowing, there are specialist lenders and rates will depend on the acreage of the property.


Cheers, Ivan

 

Hi all, has anyone used squirrel super for smsf? Was thinking esuperfund but they look like they only allow certain banks to borrow from. Can anyone confirm. Thanks in advance.

 

I also know of a couple of SMSFs that have teamed up to JV on small development projects. This could work nicely where neither has quite enough balance to go it alone on a purchase. I think it would be important to "get in and get out" nice and quickly on a project like this as it could be slightly messy if the death of a SMSF member occurred before the property was sold.

 

@Doors I believe you are free to choose your own lender with Squirrel as they operate in a no-commission model. I'm not sure if that means higher fees or not. We hadn't heard of them until we were already committed at eSuperfund. With eSuper you are limited to BOM, St George, Macquarie and one other which escapes me.

We went with BOM as we are able to have an offset account with them. These lenders have a requirement that you have at least 10% of the value of your total property value as cash or liquid assets in your SMSF.

Our strategy on the two properties we have purchased is as follows;

IP1: $290k purchase, $360w rent, loan of $200k on P&I @ 5.45%

IP2: $420k purchase, $430w rent, loan of $290k IO fixed at 4.99% for 3 years.

Offset account started against loan on IP1. $70k cash from SMSF placed in offset. Repayments of $1175/m from SMSF rental income, + extra repayment of $1800/m from SMSF contributions at max $18k pa from wife and I.

This will see the loan paid in less than 5 years and save us in excess of $210k if the loan were to go to term.

We then switch the other loan to P&I and rinse and repeat. This should see us own the two properties in less than twelve years (age 55), as well as having whatever our current $50k in shares turns into and whatever cash is leftover.

Obviously very fluid, dependent on interest rate rises and legislation changes etc, but that's the backbone of it at the moment.

 

eSuperfund definitely only allow borrowing from certain banks.

 

I'm thinking of setting up an SMSF and was wondering about the life / TPD insurance element.

Can the premiums for this be paid out of the SMSF? Who are the insurance providers worth considering?

 

yes , they can . We have insurance inside and outside of Super .

Keeping it all in place with our recent buys , but might be able to ditch some in 2-3 years .

Cliff

 

Yep the SMSF is the policy holder, and "you" are the insured person. The SMSF pays the premiums.

Most life insurance brokers you can find on google should be able to understand what you're on about if you ring and say you want to find out about death & tpd insurance taken out from your Self Managed Super Fund.

Remember that if you pay annually it's just one bank account transaction for the SMSF auditor to "audit". Whereas if you pay monthly it's 12 lines. In this regard paying annually is preferable.

 

I wrote a legal tip on structuring life insurance:
Legal Tip 53: Structuring Life Insurance

 

Love your thinking, Erica. We did that here in Melbourne back in 2001 and haven't looked back. Property close to triple the original price.

 

Adrian,

How did you go with this? I'm looking at doing the same.

 

Hi,

Yes we got the conversion done but I'll admit it was harder than I thought. My retail fund, Colonial First State didn't make it easy to part ways.. Said my signature now didn't match my sig from 1998, needed docs certified, then recertified, then I had to have a phone interview with an ATO tax official which took about 6 attempts, had to re-explain the investment strategy over the 55 minutes we had with her, then the copy of my docs sent to the ATO "never arrived"... It's parked in a resi development fund now. Finally. Expect to get 19-22% annually over the next 2.5 years.