It’s hard to get access to bank money to fund projects especially when you’ve got no experience at property development.
The attractive point of property development is that you can often, especially if you’ve got friends who are cashed up in their super funds, you can pool money together, and as long as you structure it right, you can access millions of dollars worth of funding to go and carry out property development.
The other benefit, like everything with Super, is that they’re usually very light with tax. So there’s some good reasons to do it.
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Many people are quite comfortable sitting in simple, plain, ‘vanilla’, industry and retail superannuation funds. Self Managed Super Funds or ‘SMSF’s’ are a lot different.
Then really, a retail or an industry-based fund is really up your alley.
Don’t make the step of going through a self-managed super fund.
But for those who want a bit more excitement, those who want to really press ahead and become a self-made success, to really make the most of the opportunities, I really suggest that a self-managed super fund may well be for you.
From our perspective, if you move over, and you become engaged in your SMSF, you need to start to choose these 9 things –
“Engagement with your Super is Engagement with your Future.”
One of the most important things about engagement and being a Self-Made Success is then to become knowledgeable in what is a self-managed super fund.
To learn the rest of the 8 Benefits of an SMSF, The ‘Inspire Boys’ Favourite 3 Wealth Strategies they personally use, and details of the Become a SMSF Millionaire 12 Week Online Course, go to www.smsfmillionaire.com/go
Ben Walker of Inspire SMSFS Pty Ltd (1243433) is an authorised representative of Finance Wise Global Securities Pty Ltd ABN 60 146 708 045. Finance Wise Global Securities Pty Ltd holds an Australian Financial Services License (No. 397877).
How much do I need in super to start an SMSF?
The rough guideline for how much you need in superannuation to justify a SMSF or Self Managed Super Fund is about a quarter of a million dollars or $250,000 – or more.
Remember a SMSF can have up to 4 members and so you might find the $250,000 is easier to find than you think!
In my experience, people tend to have a number of retail superannuation funds.
If you’ve had 2 or 3 jobs over the last couple of years, you may have a super fund for each of those jobs.
So it’s a great tip to first find your 4 potential SMSF members, and then find all the super accounts.
Retail Story: When Harvee’s family set up their SMSF their 4 members (Harvee, Raymond, Raewyn & Phoebe) discovered they had 10 retails super funds amongst them. It’s now consolidated into one Self Managed Super Fund – “The Pene Family SMSF”.
Once you tally up the total balances you might be really surprised with how much you actually do have in Super.
Now, $250,000 is a rough guide, but there are people who do set up self-managed Superfunds with less than that.
For example, a SMSF with 4 members might only have $150,000 to start with. But if the 4 family members each contribute $25,000 in the next financial year, that will equal an additional $100,000 in contributions – or $250,000.
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Any information is general in nature only. It does not take into account the objectives, financial situation or needs of any particular person. So before acting on anything to do with your finances, you need to consider your financial situation and needs before making any decisions based on this information.
Benjamin Walker of Inspire SMSFS Pty Ltd (ASIC Authority 1243433) ABN 38 879 130 483 is an Authorised Representative of Finance Wise Global Securities Pty Ltd ABN 60 146 708 045. Finance Wise Global Securities Pty Ltd holds Australian Financial Services License No. 397877.
In every Self Managed Super Fund there are 2 sides. An Accumulation side and a Pension side.
Using Harvee’s plane analogy from the beginning, the accumulation side or phase of a SMSF is when the fund is actively growing. The same as when that plane is climbing to new heights. You can’t touch any of that money while it’s in accumulation and that accumulation side has a set tax rate of 15% on what it earns.
So step 1 in controlling taxation is saving tax on contributions.
For example, I contributed $30,000 this year into my Family Super Fund – it’s called the Keshi Super Fund, named after a family dog I used to walk.
If I chose not to dump the $30K into super, I would have paid tax on that $30,000 at my highest marginal tax rate of 49%.
So by putting $30,000 towards my goal of becoming a Self Made Success, I saved $10,200 tax because as I’m in accumulation, I paid at only 15% instead of 49% – my plane is ascending!
Now fast forward 33 years and my wealth plane has been ascending higher and higher, it’s 2049 and I hit what is called preservation age, which means the government allows me to start accessing my super.
The plane begins its descent towards landing at retirement, so I am allowed to bring some of my assets in the SMSF over to the Pension side.
Any idea what the tax rate is on the Pension Side?
Zero percent. Booyah!
So that $30,000 I contributed last year, not only did I save $10,200 on the contribution, but so too did the other 3 members in my Family Super Fund.
With the $120,000 now in the fund, from 4 members contributing $30,000, we used that as a deposit to buy a $500,000 Commercial Property.
If we held on to the property for 34 years, and let’s say it doubled in value over that time and it’s worth $1,000,000.
I can sell the property when the SMSF is in pension phase and pay ZERO tax on that $500,000 capital gain.
WOW, WOW, WOW.
Just to give you some context, If made the exact same property deal but brought it in my own name, outside of super, I would have had to pay $122,500 tax (based on my top marginal tax rate of 49%)
So that’s how the Accumulation side and Pension side of an SMSF work – 15% in accumulation 0% in Pension.
But that’s not all …
What if I told you we could use negative gearing inside of a Super Fund to turn that 15% tax rate in the accumulation phase, down to ZERO?
That is legit possible.
There’s thousands of us SMSF Millionaires who implement this strategy every day.
Week 3 of the Become a SMSF Millionaire, 12 week course the lesson is called “The SMSF Millionaire’s guide to paying Less, Little and even NO tax in your SMSF”. It’s very hard to get ahead if 50c of every dollar you earn is going to the Tax Man.
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