Can you live in a property bought thru your SMSF?

I'm thinking of setting up a SMSF (single,share trader (self-employed) age 46)and was wondering if you can live in a property bought through your SMSF?

 

Hi ShareJunky,

Sole Purpose Test forbids you from benefiting from your superannuation before retirement (certainly for Residential Property).

You should speak to a Self Managed Super Fund professional before making an investment decision.

Cheers,

Dan

PS I'm not a SMSF expert so don't believe me, speak to your SMSF professional.

 

sharejunky
But if you bought a place for your business and didn't live there it would be allowed

 

Thanks guys, no worries, I thought that might be the case (I'm currently renting.) I'm speaking to my accountant in a few days; in the meantime, what do you think of the idea of someone my age and occupation putting the majority of my income into a SMSF? (I just trade shares on the net, made about $150k in about 200 trades in the current boom since early March.)

 

Hi ShareJunky,

You'll find that Mr Rudd has scuttled most of your idea with reducing concessional contribution caps.

Cheers,

Dan

PS Speak to your registered accountant or FPA registered Financial Planner for further information.

 

Maybe you should have been doing the trading through your SMSF

Also, unless you have some good use for your money, I'd salary sacrifice as much as possible

 

Yes I should have set something up previously. My accountant has mentioned setting up a company/trust arrangement, with a portion
in a SMSF. My situation isn't terribly complicated, I trade shares
and have about 1/2 million in four different overseas share funds;
any ideas on an average cost to set up something like that?

 

setting it up costs a few hundred $ but the managing/tax return could be from $1000 upwards.
The costs usually increase as you do more transactions
There are some companies which will provide an online facility for managing your SMSF and trading online but I forget what the URL is.
Do a search for SMSF ans SMSF management

 

Well he mentioned $!500 just to set up a shelf company, so it looks like it'll be a lot more than that; just wondering if I'm been charged more than the average. Btw what would normally be a good % to put into a SMSF? Being only 15% tax, I'd assume as much as possible, but I haven't researched it much as yet.

 

The cost would depend on what structure you want and how much commision he wants to make. The majority of the fees are not his to keep, however, the need for an elaborate structure is not often there and by creating a company you have 1 additional annual cost which quite often is not needed.

If you are only trading shares, IMHO you don't need a company.
some accountants will try to sell you a corporate trustee structure.
There are benefits in doing this but it depends on your circumstances and what you want to do with your SMSF.

Setup costs vary
check these guys out.

SMSF
http://www.cst.com.au/?cat=Prices
DIY Super Fund

 

Thanks Bill! - Do you think I might only need a trust then?
The idea of course is to minimize tax - 30% with a company
versus 46% trading as an individual.

 

yep, you get your accountant to setup a SMSF and then open up a etrade/comsec account with a business account and go for it.

However, you'll need funds in your SMSF to be able to do your trading.
If you have any super saved up you could roll it over into your smsf and start from there, or you could deposit more money into your SMSF
but ask your accountant because such amounts could be taxable at 15%

 

So a trust would get taxed 30% same as a company then? My accountant mentioned a Family Trust before, though I'm not sure how that would work with only one person (me.) Don't I need a second trustee for that?

Re super I've got $125k in a Commonwealth Public Service Fund, but I don't think I'm allowed to move that into a SMSF. I'll ask my accountant anyway when I see him in a few days.

Thanks for your help!

 

Hi SJ

The answer to a lot of the questions you have asked are "it depends*".

It depends on your financial goals, personal situation, expected future income, family, debt, insurance and a hundred other things. The advice your accountant should be giving you should take into consideration your overall situation.

I have a few clients who trade for a living and they use the Praemium service through their broker (e.g. Tricom but other brokers do it). The amount they pay in additional admin fees for the service saves them a lot more in their own time and accounting fees.

Good luck with everything and ensure you really drill your accountant!



*With the exception of your first question about living in a property owned by your SMSF - you definitely can't do that!**

**Although if it was a pre-1999 lease in place then you actually can.

 

A SMSF is not allowed to trade. If you were trading in a super fund, I believe you would get hit with the top (47%?) tax rate.


Also you can only contribute $25,000/year before tax now can't you?

 

What's the definition of trade?
I need to check with my accountant but I was of the impression that you were allowed to buy and sell shares and use the funds from your SMSF account.

 

Family trusts are not the same as a SMSFwhich is basically like your existing superannuation fund but a personal one with you the administrator.
You can roll over your super from just about any fund into your SMSF
but check with your accountant first.

 

Why? The income tax rate for assets held for less than a year, rental return, dividends, interest, etc are tax at 15% for superannuation accounts (obviously for franked dividends you a refund for the difference of 15% and 30% company tax rate).

Proposed in the 2009 Budget, expected to start from 1st July 2009 for under 50s.

Cheers,

Dan

PS Before making an investment or superannuation decision speak to your FPA registered Financial Planner.

 

Probably best to double check with CPSF, ask them if it's a defined benefit scheme or an accumulation scheme. If it's accumulation scheme there probably won't be any issues. If it's a defined benefit scheme you've got to wait until the benefit age (generally 55, 60 or 65) which you can check with CPSF.

Cheers,

Dan

PS Before making an superannuation decision speak to your FPA registered Financial Planner.

 

You can live in a property owned by your SMSF but it must be worth less than 5% of the total fund's value ie for a $250,000 property (market value) you must have more than $5m in the fund, so to say you can't is wrong, just not many people can!

If you are going to set up a SMSF you MUST understand the rules first, so get educated - look for reputable seminars like the ASX, AIA (investors.asn.au), etc. AIA has one on SMSF in Sydney in August and some one SMSF at their Gold Coast Conference in late July.