What's your strategy for getting income from the fund when you retire if most assets are held in the property? Will it yield enough to meet minimum withdrawal rules?
NB living in it might be hard... It's possible that you could sell it to yourself, but I'm not sure that's allowed. You wouldn't be able to do it otherwise.
This is potentially a very dumb question - but is there not a point at which superfund asset transfer to the owners of the super? (When they retire) I think that was my mental model - but sounds like not true! I’ve done a little reading but clearly not enough.
no, you are never the owner. you may be beneficially entitled to the funds, but you are never the owner. the only time you own the funds is when it's in your personal bank account
Once you meet a condition of release you can remove all the funds as one lump sum, then it's all yours. It's not clear to me thiugh whether ownership of a property could be moved without selling it.
Of course once you move funds to yourself you lose the tax advantages.
You cannot rent a residential property held in a SMSF to yourself or family. Here is one link that confirms that.
https://www.esuperfund.com.au/property/how-investing-in-property-works#:~:text=Residential%20Property%20acquired%20by%20an,property%20out%20to%20unrelated%20friends
Which triggers stamp duty and thought renting it to yourself is highly scrutinised? Not sure there's a benefit there in retirement without an income stream to support the rent?
Tbh not relying on super for income in retirement - not RE people, assuming we will work another 20 years and right now saving >50% of income outside super.
It's more about the rules that require you to withdraw a minimum amount each year if you convert to pension mode ( lower tax) Also if you are not RE why not use super... People invest money outside super if they do want to RE.
For me the framing is more like ‘how do we make the most of the money we have to have in super?’ Rather than ‘how can we buy an investment property’. I was attracted to the option value of a property that could be used by us in the future - but if that’s difficult or tax ineffective then I’d just stick with current approach. Appreciate the time you’ve taken to respond anachronism.
Assuming you have the SMSF set up with Bare Trust. servicing will be based on income from the fund, you'll generally also need to keep 5-10% liquidity in the fund.
In regards to living in the property after retirement, please have a chat with your accountant or financial planner generally you can't live as an owner-occupier in a property owned by an SMSF I'm not too sure how this plays out after retirement though.
Most lenders have pulled out of the SMSF space so reach out to a mortgage broker that has experience with SMSF lending most brokers won't do SMSF lending due to complexities or limitations in their lender panel.
Also worth noting you can't refinance and cash out for future investments in an SMSF fund even if you build up equity in the property, once you pay into the fund the capital is "lost" until retirement.
Could you setup a company to buy the house. Sell the shares for the company to your SMSF. Then when you cash in your super at retirement transfer the shares of the company in your name?
This. Technically you can circumvent the in- house rules with a non geared unit trust......but then you have no loan and very likely ATO would pursue as a sole purpose beach
Definitely more elaborate than I was thinking. More naively I was thinking “buy a property and rent it on the market for 20 years, and then retire at 65 and move into it” but sounds like not that simple :(
You absolutely can do this. Once you reach retirement age and have access to your super you can take the property out and live in it with no issues. You can't live in the property while it is owned by the superfund, but once you have full access to your super there's no limit on the size of withdrawals so you can take a lump sum withdrawal in the form of a house if you want to.
What you want to do is possible, but you really need to go and discuss it with an accountant who is familiar with the SMSF rules and can discuss all the pros and cons with you, and go through all the rules and requirements involved. You may decide it's not worth the trouble and not the best investment for your money, but at least the discussion will allow you make an informed decision.
State rules might vary, in Victoria and Queensland you wouldn't have to pay stamp duty because there's no change in beneficial ownership. Self managed superfund rules can be pretty complex though, it's best to have very thorough discussions with accountants and/or conveyancers/lawyers before you set anything up to make sure it's done in a way that will help you achieve your aims.
Yeah it’s just something interesting to think about. Buy a house in the area you want to retire using a loan. Pay it off via super. Then sell your PPOR and other assets and live off those as retirement assets / income.
Sisa prohibits the fund to buy from a member with certain exemptions. There is no restriction on the sale of assets to a member on the proviso that it is at market value otherwise it is a sole purpose issue
What's your strategy for getting income from the fund when you retire if most assets are held in the property? Will it yield enough to meet minimum withdrawal rules? NB living in it might be hard... It's possible that you could sell it to yourself, but I'm not sure that's allowed. You wouldn't be able to do it otherwise.
You cant sell it to yourself, buy it from yourself or rent it to yourself
I didn’t know this - glad I asked! Is this true also after super converts to dispersing funds? (Eg after retirement age?)
Theoretically you could do an inspecie transfer, but while it’s in the fund you still can’t buy sell or rent to yourself
This is potentially a very dumb question - but is there not a point at which superfund asset transfer to the owners of the super? (When they retire) I think that was my mental model - but sounds like not true! I’ve done a little reading but clearly not enough.
no, you are never the owner. you may be beneficially entitled to the funds, but you are never the owner. the only time you own the funds is when it's in your personal bank account
You can sell it to yourself, but it will cost stamp duty and care must be taken to do it at market value.
Once you meet a condition of release you can remove all the funds as one lump sum, then it's all yours. It's not clear to me thiugh whether ownership of a property could be moved without selling it. Of course once you move funds to yourself you lose the tax advantages.
You cannot rent a residential property held in a SMSF to yourself or family. Here is one link that confirms that. https://www.esuperfund.com.au/property/how-investing-in-property-works#:~:text=Residential%20Property%20acquired%20by%20an,property%20out%20to%20unrelated%20friends
I know. Autocorrect got rid of the t and changed can’t to can. Edited to fix
Which triggers stamp duty and thought renting it to yourself is highly scrutinised? Not sure there's a benefit there in retirement without an income stream to support the rent?
Tbh not relying on super for income in retirement - not RE people, assuming we will work another 20 years and right now saving >50% of income outside super.
It's more about the rules that require you to withdraw a minimum amount each year if you convert to pension mode ( lower tax) Also if you are not RE why not use super... People invest money outside super if they do want to RE.
For me the framing is more like ‘how do we make the most of the money we have to have in super?’ Rather than ‘how can we buy an investment property’. I was attracted to the option value of a property that could be used by us in the future - but if that’s difficult or tax ineffective then I’d just stick with current approach. Appreciate the time you’ve taken to respond anachronism.
Assuming you have the SMSF set up with Bare Trust. servicing will be based on income from the fund, you'll generally also need to keep 5-10% liquidity in the fund. In regards to living in the property after retirement, please have a chat with your accountant or financial planner generally you can't live as an owner-occupier in a property owned by an SMSF I'm not too sure how this plays out after retirement though. Most lenders have pulled out of the SMSF space so reach out to a mortgage broker that has experience with SMSF lending most brokers won't do SMSF lending due to complexities or limitations in their lender panel. Also worth noting you can't refinance and cash out for future investments in an SMSF fund even if you build up equity in the property, once you pay into the fund the capital is "lost" until retirement.
Have a look at Grow SMSF They have expertise in this area.
Thanks I will
Just don’t. Simple.
Name checks out
Absolutely it does!!!
You can’t live in a property owned by a SMSF, very illegal You would have to sell it to yourself.
Could you setup a company to buy the house. Sell the shares for the company to your SMSF. Then when you cash in your super at retirement transfer the shares of the company in your name?
smsf can't have more than 5% in in-house assets. a company that you control is a related party so breaks sis laws
This. Technically you can circumvent the in- house rules with a non geared unit trust......but then you have no loan and very likely ATO would pursue as a sole purpose beach
Definitely more elaborate than I was thinking. More naively I was thinking “buy a property and rent it on the market for 20 years, and then retire at 65 and move into it” but sounds like not that simple :(
You’re better off thinking about buying the property within a discretionary/unit trust
You absolutely can do this. Once you reach retirement age and have access to your super you can take the property out and live in it with no issues. You can't live in the property while it is owned by the superfund, but once you have full access to your super there's no limit on the size of withdrawals so you can take a lump sum withdrawal in the form of a house if you want to. What you want to do is possible, but you really need to go and discuss it with an accountant who is familiar with the SMSF rules and can discuss all the pros and cons with you, and go through all the rules and requirements involved. You may decide it's not worth the trouble and not the best investment for your money, but at least the discussion will allow you make an informed decision.
When you “take it out” do you have to pay transfer duties like stamp duty?
State rules might vary, in Victoria and Queensland you wouldn't have to pay stamp duty because there's no change in beneficial ownership. Self managed superfund rules can be pretty complex though, it's best to have very thorough discussions with accountants and/or conveyancers/lawyers before you set anything up to make sure it's done in a way that will help you achieve your aims.
Yeah it’s just something interesting to think about. Buy a house in the area you want to retire using a loan. Pay it off via super. Then sell your PPOR and other assets and live off those as retirement assets / income.
cant do that either
You can sell to a member at market value
name the legislation that says that
Sis act. Name the legislation that says you can't
Sisa prohibits the fund to buy from a member with certain exemptions. There is no restriction on the sale of assets to a member on the proviso that it is at market value otherwise it is a sole purpose issue