Author: kriskitto

About Kris Kitto

Director at Superfund Partners. I love working in the SMSF space. Self-managed super funds are more than just a savings vehicle - they enable people to truly take control of their financial situation which is key to achieving happiness. Leading the Superfund Partners team is a privilege - they are a great crew and they always put others first.

SMSF unit trust

Using an SMSF unit trust to buy property with super

The following article on using an SMSF unit trust to buy property was written by Daniel Butler of DBA Lawyers and published in the Australian Financial Review on September 26; 2015. The original article can be found here: Beware when using a unit trust to buy property in your SMSF (AFR subscription may be required).

SMSF unit trusts are popular structures by which to hold property and other investments.

They are particularly popular for self-managed superannuation funds (‘SMSF’) that invest in real estate. Using such a structure, one or more SMSFs, as well as other investors, can join forces to acquire an investment property, potentially giving each investor access to a better property with more upside potential than they might otherwise have.

Working within the SMSF unit trust rules

However, an SMSF must be careful to ensure it complies with a raft of superannuation rules.

An SMSF is not permitted to invest more than 5 per cent in a related trust,

What SMSF ‘advice’ your accountant can give (and what is changing)

Since self-managed super funds came into existence accountants have been the number one source of advice when it comes to their set-up up and operation.  However the actual advice accountants have legally been allowed to give SMSF trustees has always been very limited, and from 1 July 2016 will get even tighter.

So what does this mean for SMSF trustees – especially those of us who are self-directed?

SMSF advice your accountant can (and can’t) give

In general any person or business who advises or deals in financial products or services needs to have an Australian Financial Services License (AFSL).  When it comes to SMSFs – most services and advice will be considered financial advice unless it’s specifically related to:

  1. Taxation advice or services
  2. Accounting and administration advice or services
  3. Information regarding compliance with laws and regulations relating to SMSFs

Although the above seems comprehensive, the list is actually quite narrow and excludes advice that are the most important and valuable to us as SMSF trustees!

Pay your ASIC fees in advance and relax

We always recommend our clients use a special purpose trustee company for their SMSF. Once the trustee company is set up, the ongoing maintenance to look after it is relatively simple, but very costly if you get it wrong as the Australian Securities & Investments Commission (ASIC) can levy hard penalties that are difficult – if not impossible – to get remitted.

In this article we will show you how to make looking after your SMSF trustee company easy and save you money at the same time.

ASIC late fees

If you cannot, or forget to pay on time, the ASIC late payment fees ASIC applies are quite onerous:

  • Up to one month late – $79
  • More than one month – $329

So how can you ensure you avoid these hefty fees, as well as simplifying the administration of your SMSF trustee company? Easy!

Advance pay the annual review fee for ten years

If you make an advance payment of $370 (if prior to 30 June 2019) you will save based on the current annual review fees for a special purpose company.

5 questions to ask your SMSF administrator

I recently came across a great article in AFR Smart Investor magazine by Steven Enticott entitled “Where you can’t skimp on your SMSF” which not only outlines the value of working with qualified and experienced SMSF specialist accountants and advisers, but asks five really good questions that you should ask before selecting an SMSF administration provider.

You can read the full article here: Where you can’t skimp on your SMSF.

I thought the questions were very relevant to both our clients, and others looking for a quality business that can help look after your SMSF, so I’ve taken the time to put together my answers to the questions which will give insight into how Superfund Partners operates.

1. Is the paperwork being done offshore?

No. Absolutely not.

The Directors of Superfund Partners made the decision a number of years ago not to offshore in the interest in saving on labour costs.  

Psychology of ‘bricks and mortar’ property investment for SMSFs

Australians love property and our high level of (expensive) property ownership is one of the reasons we are ranked as one of the wealthiest countries in the world. Not only do we desire our own block of paradise, we also love to invest in property with 1.9 million individuals declaring rental income (or more likely a rental loss) in their annual tax returns.

But do we every stop and ask why? Why do we love property so much, and why is a large chunk of the population obsessed with becoming property millionaires?

In this article I will delve into some of the psychology that drives bricks and mortar investment. My goal is not to change behaviour or even judge whether the desire to invest in property is right or wrong. I simply want to hold up a mirror so we can better understand our own decisions and biases.


Property is a physical asset

Property is a physical thing.  

BrickX versus limited recourse borrowing – which is better for SMSF property investors?

Earlier this year real estate investment start up BrickX launched their platform which enables investors – including SMSFs – to buy a piecemeal interest in individual residential properties.

Utilising a unit trust structure to provide multiple investors with ‘shares’ in an underlying property is not new.  Listed and unlisted unit trust structures have been around for many years and we’ve also recently seen a fractional property investment solution launched by DomaCom.

The real point of difference that BrickX provides investors is that they are effectively creating a market where the shares (or ‘bricks’) in the individual properties can be bought and sold openly with very little cost (2% purchase cost, $0 sale cost).  The transparency and liquidity this can provide is something residential property investors can’t currently access.

But would SMSF investors be better off buying an entire property via a limited recourse borrowing arrangement, or should you buy a number of bricks across a number of properties?

New rules on excess non-concessional contributions

SMSF members had a win recently due to changes to the tax treatment of non-concessional contributions that exceeded the relevant contribution cap.  This means that people who breach the cap will no longer face draconian tax penalties of up to 93% – however there is still some complexity you need to be aware of.

Is an SMSF Right For You?

Recently, I did a podcast with Josh Stega, The Wealth Guy.

His goal is to bring the topic of personal financial planning into discussion and show you how to manage your money, build your wealth and reach your goals.

ATO targets boomers with self-managed superannuation funds

ATO assistant commissioner for SMSFs Matthew Bambrick (above) said a boost in compliance work on the nation’s 531,059 – and growing – funds was not a bad idea.  Photo: Dominic Lorrimer

The following is a verbatim copy of an article originally published by Katie Walsh (@katiewalshAFR) in the Weekend Australian Financial Review 17 January 2015.  You can view the original article here: ATO targets boomers with self-managed superannuation funds

The Australian Taxation Office will intensify its focus on self-managed superannuation funds as baby boomers retire and the risk increases that tax-free income could be stashed and passed on to beneficiaries. Read-more

The tax man is concentrating efforts on education and scrutiny of SMSF auditors and advisers.  ATO assistant commissioner for SMSFs, Matthew Bambrick, said a boost in compliance work on the nation’s 531,059 – and growing – funds was “not a bad idea”.

“It is something that we will have to keep an eye on in coming years,”

Anti-detriment strategies in practice

In Chloe Ward’s article from November 2014 – Creating a super legacy – we introduced a not so simple, but extremely valuable strategy known as the anti-detriment strategy.  In this article we will explore the strategy in more detail, with a practical example of course, to show just how valuable an anti-detriment strategy can be for the right family.

WARNING: This article contains some technical taxation and superannuation concepts!