Gearing in SMSF

Lasseter has prepared this presentation for general information purposes only and does not constitute personal advice. You should not act solely on the basis of material contained in this presentation. We recommend that formal advice is sought which considers all your individual objectives and needs. No material contained within this report should be construed or relied upon as providing recommendations in relation to any financial product. General Advice Disclaimer

As a result of the amendments in September 2007 to the Superannuation Industry (SIS) Act 1993, it is now possible for a regulated superannuation fund to borrow to acquire a property under strict specific conditions. In order for a borrowing to qualify for the exception in s.67 (4A) it is crucial that: o The asset acquired is not one that the super fund is prohibited from acquiring o The asset is held on trust for the super fund so the trustee acquires a beneficial interest o The super fund has the right to acquire legal ownership of the asset by making one or more further payments o The rights of the lender, should the super fund default on the loan are limited to rights relating to the original asset Currently there are funding options to gear into the following assets: o Property o Listed shares o Managed funds SMSF Gearing Opportunity

Residential o Members or related parties are prohibited from living in the premises o Members are able to purchase the property to live in after their retirement subject to a number of conditions. Holiday or Student Housing o Subject to lenders requirements Commercial Property o Members are allowed to operate their business from the property subject to arms length residency agreement. Types of Property

LENDER SMSF TRUST YOUR COMPANY BUSINESS PREMISES Loan Repayments ContributionsRent Lease Limited Recourse Features of a SMSF Purchasing Property

Advantages Asset protection (Asset in SMSF not business) Negative cashflow comes from super e.g. 9% SGC (limits) Frees up cash held in Superannuation that can used for the business. CGT on sale lower10% or nil after age 60 Income Tax benefits15% Interest rate are at commercial rates Saving for retirement Disadvantages Associated costs Complexity Over exposure to property Needs cashflow in fund to meet loan repayments – issue in retirement Pro’s and Con’s

Summary ABC Pty Ltd (family business) Currently renting business premises Current super Dad$250,000 Mum$70,000 Case Study

Set up SMSF & role current super into fund ($320,000) Purchase factory for $800,000 Borrow 65% - $520,000 Rent factory to A & B P/L at 8% - $64,000 Loan over 9.5% SMSF uses rent to make loan repayments – $65,160 Property growth at 3% Outcomes Tax benefits Between $9,600 - $19,200 Asset protection Saving for retirement Reduce CGT or in pension mode tax free Case Study

YearValueLoanNet Equity $800,000.00$520,000.00$280, $824,000.00$503,536.35$320, $848,720.00$485,438.66$363, $874,181.60$465,544.74$408, $900,407.05$443,676.30$456, $927,419.26$419,637.38$507, $955,241.84$393,212.56$562, $983,899.09$364,165.02$619, $1,013,416.07$332,234.45$681, $1,043,818.55$297,134.72$746, $1,075,133.10$258,551.26$816, $1,107,387.10$216,138.32$891, $1,140,608.71$169,515.81$971, $1,174,826.97$118,265.93$1,056, $1,210,071.78$61,929.40$1,148, $1,246,373.93$0.00$1,246, Case Study

Establishment Costs – FREE (Lasseter will establish your SMSF at no cost) Corporate Trustee - $444 (One Off – ASIC Fee) see our SMSF Starter PackageSMSF Starter Package Annual Accounting and Tax – starting from $1320, see our Compliance and Administration PackageCompliance and Administration Package Annual Audit – starting from $330 * Annual ATO Levy - $150 Annual ASIC Fees - $212 (only for corporate trustee) Other Professional Fees – ie Financial Advisor Investment Fees – depending on investments chosen What are the Costs?

If you have any queries please call us on or We can contact you request via our website press here press here View our SMSF Starter PackageSMSF Starter Package View our Compliance and Administration PackageCompliance and Administration Package What Next?

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