Self Managed Super Funds

Transcription

1 Self Managed Super Funds Nathan Lear and Glenn Fairbairn 1st March 2017

2 Agenda About Us / Our Services What is an SMSF Benefits of an SMSF Investment Opportunities within an SMSF When to establish an SMSF Questions

3 About us Established in 1985 Operate under our own Australian Financial Services (AFSL) Licence Truly Independent No conflicts Unbiased Advice Direct Investment Philosophy Fee for service model We do not accept commissions

4 Our Services Superannuation/Self Managed Superannuation Funds (SMSF) Investment Advice Wealth Creation Cash flow and taxation planning Retirement planning Risk assessment and wealth protection Succession and Estate planning

5 What is an SMSF? Trust Structure governed by a Trust Deed You are the trustee of your super fund You control the fund Can act as trustee in an individual capacity or as director of a corporate trustee Can have between 1 and 4 members Members must be trustees

6 Benefits Control: Bespoke rather than one size fits all Investment Choice: Direct Australian and international Shares Direct Property Business real property (small business owners) Sophisticated Investments

7 Benefits Gearing: Borrow to buy property Tax Control: Maximise franking credits to reduce tax Defer sale of assets to minimise CGT Estate Planning: Minimise tax for beneficiaries Non lapsing binding nominations

8 Investment Opportunities Self Funding Instalment Warrants: A method of investing into blue chip Australian company shares on a conservatively geared basis, with dividends used to reduce leverage.

9 Investment Opportunities How they Work:

10 Investment Opportunities How an SFI can increase exposure to Australian Shares: Assume the SMSF invests $10,000 into Commonwealth Bank Shares using SFIs with a gearing ratio of 40% rather than investing in Commonwealth Bank directly: CBA CB SFI Amount Invested $10,000 $10,000 Price (Per Security or SFI) $83.50 $55.60 Number of securities Initial share exposure $10,000 $15,030 Loan Amount $34.40 Gearing 40% By investing in an SFI rather than ordinary share, the SMSF increases its exposure to Commonwealth Bank by $5,000.

11 Investment Opportunities Tax Minimisation: Apart from benefits of leverage SFI s can reduce tax on earnings and contributions. TLS TLS SFI Amount Invested $25,000 $25,000 Price $4.80 $2.70 Number of Securities 5,208 9,260 Dividends Per Share $0.30 $0.30 Total Dividends $1,560 $2,780 Total Franking Credits $670 $1,190 Total Dividends & Franking Credits $2,230 $3,970 Interest Deductions $850 Tax Payable/(Refund) ($335) ($722) Potential Tax Free Earnings $2,233 $7,465

12 Investment Opportunities Benefits: Leverage Exposure to Australian Share Does not impede on other personal lending limits Dividends cover interest cost Listed on the ASX Highly liquid Investment Term of up to 7 years Minimise Tax One of the only ways to gear within Superannuation

13 Borrowing to purchase property within your SMSF Limited Recourse Borrowing Arrangements (LRBA) SMSFs can use borrowed monies to purchase a single asset The SMSF trustees receive the beneficial interest in the purchased asset but the legal ownership of the asset is held on trust (the bare trust). Strict guidelines

14 Borrowing to purchase property within your SMSF Structure:

15 Borrowing v No Borrowing Projection $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $ Un Geared Geared

16 Borrowing to purchase property within your SMSF Benefits: Leverage Concessionally taxed at 15% or 0% if over 60 years of age and in pension phase Considerations: Arm s length Arrangement Can t live in the property nor can family or friends Lumpy asset Understand the risks!

17 When to establish a SMSF How much do you need in super? You can pool your superannuation benefits with your spouse

18 Considerations Trustee Responsibilities Costs Involved

19 Upcoming Seminars Sophisticated Investment Opportunities for Executives Tax minimisation and Salary Packaging options for Executives

20 Questions

21 Phone: Address: Level 8/417 St Kilda Road Melbourne 3004