SMSF assets swept up in housing boom

DIY super Duncan Hughes Self-managed superannuation funds are increasing the amount of debt they use to buy properties by nearly 80 per cent ayear, a sign of how the investment boom in housing is being driven in part by personal super funds.

The debt growth figures, published by the Australian Taxation Office, are five times the rate for listed shares and seven times that for cash and deposits.

Industry experts say continued growth at this rate, from a low base, has the potential to “threaten the stability” of self-managed super funds.

“Many in the industry bury their head in the sand and ignore any concerns around this growth in leverage,” said Claire Mackay, a principal of Quantum Financial Services, whose company was winner of this year’s SMSF Adviser of the Year. Ms Mackay is a member of the ATO’s Superannuation Industry Relationship Network, an industry consultative committee.

Revised figures from the Tax Office show there are estimated to be more than 534,000 self-managed funds with assets totalling about $557 billion.

Estimates for assets held by SMSFs using limited-recourse borrowing arrangements were revised threefold from $2.6 billion to $8.3 billion.

Based on the original Tax Office figures, that means an earlier fivefold increase in the value of limited-recourse borrowing arrangements for SMSFs between 2009 and 2014 has been revised to an increase of 17.5 times.

SMSFs can only use limited-recourse borrowing arrangements when purchasing property. If something goes wrong and the fund defaults, its other assets are not at risk. But lenders insist on personal guarantees outside the fund, such as the family home.

“If there was reason for concern before, there’s even more now,” Ms Mackay said.

Industry specialists are calling for a crackdown on property spruikers as well as advisers who encourage investors to leverage their super assets to buy properties, often concentrating all their retirement savings in a single asset If the past trend continues, limitedrecourse lending will increase over the next five years by more than 1600 per cent compared with 92 per cent for listed shares and 68 per cent for cash.

Even if the rate of increase falls by half, the growth in limited-recourse lending is likely to be significant Tax officials say less than 3 per cent of self-managed funds have limited-recourse borrowing arrangements.

Residential assets account for about $19.5 billion while non-residential assets – or commercial accounts used by business owners to buy their premises – account for $65 billion.

“Yes, this growth is from a low base, but a continual growth rate of this size has the potential to threaten the stability of the SMSF sector in the nottoo-distant future,” Ms Mackay said.

“We should not wait until it’s too late.”

The Financial System Inquiry raises the idea of restoring a ban on gearing with super because, even though current levels are low, they have the potential to rise rapidly and create problems in the system.

Cavendish Super, a major SMSF provider with more than $5 billion funds under administration, recommends the borrowing criteria be tightened, claiming that properly used leverage is beneficial, particularly for those needing to “fast-track” savings as they near retirement age.

Others, such as SMSF Owners’ Alliance executive director Duncan Fairweather, urge regulators to crack down on funds being used to buy a single, highly leveraged asset that is “vulnerable to changes in property values and rental markets”.

Key points ATOfiguresshow personal super funds are increasing debt for property at five times the rate for shares.

Industry wants crackdown on property spruikers.

Australian Financial Review, Australia, 13th Sep 2014


SMSF property debt a risk to financial system, says Cooper

Self-managed super funds are accumulating too much property debt, which is a major risk to the financial system, warns Challenger’s Jeremy Cooper.

Mr Cooper said the interim report of the financial system inquiry led by David Murray was right to question whether borrowing by self-managed funds should be banned, and warned that housing debt was a risk to the stability of the financial system.

‘There’s enough leverage in society anyway,” said Mr Cooper, who is Challenger’s chairman of retirement income. “We leverage up our homes, the minute you buy a share you’re building leverage, there’s a lot of personal debt around and we’re seeing people going into retirement with more debt”

Mr Cooper, a former deputy chairman of the Australian Securities and Investments Commission, said he was against government policy allowing self-managed superannuation funds to highly gear into property investments, but it was hard to unwind.

“I don’t like it, but it’s tricky to allow something and then ban it,” he said. “It’s problematic because there’s a lot of illusions about geared property investment that people fall into. They forget the effect of inflation and fact that they have to pay stamp duty.”

Mr Cooper is also worried about the impact of a policy option released by Treasury that wealthy retirees may not have to withdraw as much money from their private pensions.

The Australian Financial Review on Tuesday reported widespread concerns that a reduction in the minimum drawdown from account-based pensions would be an easy way for the rich to preserve tax-free superannuation for their heirs. The Abbott government is looking at whether a reduction in the rate would give self-funded retirees confidence that their funds would not run out during economic downturns.

Mr Cooper said if the option was implemented, “like all policy changes it creates unintended consequences”.

He said there wasn’t clear evidence about whether people would spend the money or save it, but if retirees did bank up tax-free funds to later bequeath, it may then result in alternative policies such as a death tax.

“We need to be careful what we wish for,” Mr Cooper said. “They [the government] then may say, ‘well if you haven’t spent it by the end, we will hit you with a tax at the end [of your life]’, like they do in the UK.”

In Britain there is a 40 per cent “inheritance tax” on legacies valued above 325,000 ($583,000).

Mr Cooper said minimum withdrawals created a lot of heat during the financial crisis, but the bigger question was about risky investments.

During the financial crisis, the former Labor government temporarily reduced the minimum withdrawal amount. “These account-based pensions were so smashed up in the crisis that they needed the government to change the rate,” Mr Cooper said.

He said retirement products were “letting people down”. “It’s been widely said that the risk settings that people in retirement have are way too high and that’s why they blew up [during the crisis].

“If you have an account-based pension that has roughly 70 per cent of growth assets sitting in it and you have a major downturn, maybe that’s the problem.”

Mr Cooper called on the Abbott government to better sell its policy to increase the retirement age to 70. He said the average age of death was now 87, and one in 10 women currently aged 65 would live past 100.

He called for a campaign to educate people about this reality and the impact it would have on federal revenue.

“Without a campaign… the government’s idea of pushing the pension age out to 70 is operating in a vacuum.”

Mr Cooper also slammed the way Treasury estimated the cost of superannuation tax concessions to the federal budget Treasury predicts superannuation tax breaks will cost $36.25 billion in 2014-15. It said the super concessions would cost $171 billion over three years.

Mr Cooper said this figure was inaccurate and Australia needed to come up with a better way to measure the revenue impact. The debate could then move on to how the super system could meet the needs of an ageing population.

“We need to come up with the proper model for what the super system is costing us,” he said. “The sooner we move on from all this bickering about $30 billion, which is not real, [the better].”

SMSF: Can you afford not to have a corporate trustee?

With a do-it-yourself super fund administrative penalty regime certain to come into effect from July 1, there is a new reason why DIY funds should have a corporate trustee.

The way the new penalties will be imposed, says AMP SMSF technical specialist Peter Burgess, adds further weight to the benefits of DIY funds having a corporate trustee rather than individual trustees.

Another way of looking at this is DIY funds with individual trustees just over three-quarters of the estimated 515,000 funds – having an extra incentive not to commit any breaches of super rules and regulations that will attract administrative penalties.

If a DIY fund has a corporate trustee with directors – fewer than one in four funds – and the trustee becomes liable to pay an administrative penalty, it will be levied on the trustee as a single entity. However, if the fund has individual trustees, each is likely to be liable to pay the penalty.

For example, says Burgess, if a fund with a two-director corporate trustee fails to prepare financial accounts, a $1700 penalty could be imposed on the body corporate, which the directors must pay between them. But if the trustees are individuals, each individual trustee could incur a $1700 penalty.

Where a fund has two individual trustees, they will be up for a total $3400.

Furthermore, it will be a personal liability on the trustees, which cannot be paid for or reimbursed from the assets of the fund.

As far as the directors of the corporate trustee are concerned, they will also be personally liable for any penalty but they can share the penalty. That said, if one can’t pay for any reason then the other is liable for the lot

The new regime, says Burgess, will have the greatest effect on trustees who have been serial offenders against the super rules. Many have been able to get away with it mainly because of a reluctance by the DIY super regulator, the Australian Taxation Office, to take the court action necessary to impose penalties for breaches.

As far as the administrative penalties that trustees will be up for, there are four that trustees will face, each with fines of $10,200 per trustee.

They will be imposed for such offences as trustees failing to notify the ATO of an event that can have a significant adverse effect on the financial position of their fund, and trustees lending fund money to a member or relative of a fund member or providing any other financial assistance using the resources of the fund. Other major offences with similar $10,200 penalties are trustees borrowing money in an arrangement that fails to satisfy the requirements of a limited-recourse borrowing arrangement and trustee breaches of the in-house asset rules where a fund allows the value of investments to related parties like members and relatives to exceed 5 per cent of the total fund value.

One significant related-party rule that wasn’t introduced in the administration penalty regime, says Burgess, is deliberate actions to breach the rules. Where a trustee intentionally acquires an asset from a related party, knowing the 5 per cent rule will be breached, they could be up for penalties of up to $220,000 or a jail term of up to one year.

The rules for intentional acquisitions provide some flexibility where trustees may have acquired investments that breached the rules unintentionally. They may have, for instance, acquired shares from a related party that were not listed on a stock exchange under a mistaken belief that the rules that allow shares listed on a sharemarket to be acquired from a related party also applied to unlisted shares.

Among offences with $3400 administrative penalties are any failures to comply with the prescribed operating standards for super funds. Examples of this are breaches of the contribution rules where they have to ensure they only accept contributions when allowed to, along with breaches of the rules that require benefits to be preserved until a member satisfies a condition that allows them to be released. Such conditions include reaching the age of 55, where benefits can be taken under the transition to retirement rules, reaching 60, where benefits can be taken when a member retires, and 65 when super can be taken freely with no preservation restriction.

Trustees failing to notify the ATO that the fund has ceased to be a selfmanaged super fund is a another $3400 offence.

There are six offences with $1700per-trustee penalties for major administrative failure, like not preparing financial statements for the fund and retaining records for five years, failing to keep and retain minutes of trustee meetings for 10 years, and not keeping records of changes of trustee for 10 years.

An important $1700 offence for new funds is trustees failing to sign a trustee declaration within 21 days of becoming a trustee, then retaining this declaration for 10 years. Not retaining copies of member reports for 10 years attracts a similar $1700 penalty, as does not retaining elections as required for certain preAugust-1999 investments for the same time.

Breaches that attract penalties of $850 are failing to appoint investment managers in writing, failing to comply with an education direction issued by the ATO, failing to provide information to the ATO in the approved form, and failing to provide statistical information to the ATO when instructed.

Burgess says the aim of the new regime is to impose penalties more appropriate than the current very strict rules where the regulator can declare a fund non-complying, and trustees liable to being banned and funds stripped of half their assets in tax penalties.

Another current major negative is the ATO having to go through a timeconsuming court process to penalise any trustees. The new penalty regime will not require court action, although the ATO will still have to show why trustees will be penalised.

The new regime will have greatest effect on trustees who have been serial offenders.

SMSF and USA Bank Accounts?

For those if you who are investing in USA Properties within your SMSFs, you’ll understand that the SIS Act is very strict with compliance and there are only selected banks that you can open an account with for your SMSF. These banks must be regulated and approved by Australian Prudential Regulation Authority (APRA), and a full list of valid banks are listed here. In particular for USA bank accounts – see the headings below of Foreign Subsidiary Banks and Branches of Foreign Banks.

List of Authorised Deposit-taking Institutions

The institutions listed on this page are regulated by APRA in accordance with the Banking Act 1959.
This list was last updated on 14 February 2014.
  • Australian-owned Banks
  • Foreign Subsidiary Banks
  • Branches of Foreign Banks
  • Building Societies
  • Credit Unions
  • Other ADIs

    • Specialist Credit Card Institutions
    • Providers of Purchased Payment Facilities
  • Authorised Non-Operating Holding Companies

Australian-owned Banks
  • AMP Bank Ltd
  • Australia and New Zealand Banking Group Limited
  • Bank of Queensland Limited
  • Bendigo and Adelaide Bank Limited
  • Commonwealth Bank of Australia
  • Community CPS Australia Limited (trading as Beyond Bank Australia)
  • Defence Bank Limited
  • Heritage Bank Limited
  • Macquarie Bank Limited
  • mecu Limited (trading as bankmecu)
  • Members Equity Bank Pty Limited
  • National Australia Bank Limited
  • Police Bank Ltd
  • Police Financial Services Limited (trading as BankVic)
  • Police & Nurses Limited (trading as P&N Bank)
  • QT Mutual Bank Limited
  • Rural Bank Limited (a subsidiary of Bendigo and Adelaide Bank Limited)
  • Suncorp-Metway Limited
  • Teachers Mutual Bank Limited
  • Victoria Teachers Limited (trading as Victoria Teachers Mutual Bank)
  • Westpac Banking Corporation

Foreign Subsidiary Banks
  • Arab Bank Australia Limited
  • Bank of China (Australia) Limited
  • Bank of Sydney Ltd
  • Citigroup Pty Limited
  • HSBC Bank Australia Limited
  • ING Direct (the trading name of ING Bank (Australia) Limited)
  • Investec Bank (Australia) Limited
  • Rabobank Australia Limited

Branches of Foreign Banks
  • Banco Santander, S.A.
  • Bank of America, National Association
  • Bank of Baroda
  • Bank of China Limited
  • Bank of Communications Co., Ltd.
  • Bank of Scotland plc
  • Barclays Capital (the trading name of Barclays Bank PLC)
  • BNP Paribas
  • BNP Paribas Securities Services
  • China Construction Bank Corporation
  • Citibank, N.A.
  • Credit Suisse AG
  • Deutsche Bank Aktiengessellschaft
  • First Commercial Bank
  • Hua Nan Commercial Bank, Ltd
  • Industrial and Commercial Bank of China Limited
  • ING Bank N.V.
  • JPMorgan Chase Bank, National Association
  • Korea Exchange Bank Co., Ltd
  • Lloyds Bank plc
  • Mega International Commercial Bank Co., Ltd.
  • Mizuho Bank, Ltd.
  • Oversea-Chinese Banking Corporation Limited
  • Portigon AG
  • Rabobank Nederland (the trading name of Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.)
  • Royal Bank of Canada
  • Standard Chartered Bank
  • State Bank of India
  • State Street Bank and Trust Company
  • Sumitomo Mitsui Banking Corporation
  • Taiwan Business Bank
  • Taiwan Cooperative Bank, Ltd
  • The Bank of New York Mellon
  • The Bank of Tokyo-Mitsubishi UFJ, Ltd
  • The Hongkong and Shanghai Banking Corporation Limited
  • The Northern Trust Company
  • The Royal Bank of Scotland N.V.
  • The Royal Bank of Scotland plc
  • UBS AG
  • United Overseas Bank Limited
  • Woori Bank

Building Societies
  • B & E Ltd
  • Big Sky Building Society Limited
  • Greater Building Society Ltd
  • Hume Building Society Ltd
  • IMB Ltd
  • Maitland Mutual Building Society Limited
  • Newcastle Permanent Building Society Limited
  • The Rock Building Society Limited
  • Wide Bay Australia Ltd

Credit Unions
  • Allied Members Credit Union Ltd
  • Australian Central Credit Union Ltd (trading as People’s Choice Credit Union)
  • Australian Defence Credit Union Limited
  • AWA Credit Union Limited
  • Bananacoast Community Credit Union Ltd
  • Bankstown City Credit Union Ltd
  • Berrima District Credit Union Ltd
  • CAPE Credit Union Limited
  • Central Murray Credit Union Limited
  • Central West Credit Union Limited
  • Circle Credit Co-operative Limited
  • Coastline Credit Union Limited
  • Collie Miners Credit Union Ltd
  • Community Alliance Credit Union Limited
  • Community First Credit Union Limited
  • Community Mutual Ltd
  • Country First Credit Union Ltd
  • Credit Union Australia Ltd
  • Credit Union SA Ltd
  • Dnister Ukrainian Credit Co-operative Limited
  • ECU Australia Ltd
  • EECU Limited
  • Encompass Credit Union Limited
  • Family First Credit Union Limited
  • Fire Brigades Employees’ Credit Union Limited
  • Fire Service Credit Union Limited
  • Firefighters & Affiliates Credit Co-operative Limited
  • First Choice Credit Union Ltd
  • First Option Credit Union Limited
  • Ford Co-operative Credit Society Limited
  • Gateway Credit Union Ltd
  • Goldfields Money Limited
  • Goulburn Murray Credit Union Co-operative Limited
  • Heritage Isle Credit Union Limited
  • Holiday Coast Credit Union Ltd
  • Horizon Credit Union Ltd
  • Hunter United Employees’ Credit Union Limited
  • Intech Credit Union Limited
  • Laboratories Credit Union Limited
  • Latvian Australian Credit Co-operative Society Limited
  • Lithuanian Co-operative Credit Society “Talka” Limited
  • Lysaght Credit Union Ltd
  • MacArthur Credit Union Ltd
  • Macquarie Credit Union Limited
  • Manly Warringah Credit Union Limited
  • Maritime, Mining & Power Credit Union Limited
  • MCU Ltd
  • My Credit Union Limited
  • MyState Financial Limited
  • Newcom Colliery Employees Credit Union Ltd
  • Northern Inland Credit Union Limited
  • Nova Credit Union Limited
  • Old Gold Credit Union Co-operative Limited
  • Orange Credit Union Limited
  • Police Credit Union Limited
  • Pulse Credit Union Limited
  • Qantas Staff Credit Union Limited
  • Quay Credit Union Ltd
  • Queensland Country Credit Union Limited
  • Queensland Police Credit Union Limited
  • Queensland Professional Credit Union Ltd
  • Queenslanders Credit Union Limited
  • Railways Credit Union Limited
  • Select Credit Union Limited
  • Service One Credit Union Limited
  • SGE Credit Union Limited
  • Shell Employees’ Credit Union Limited
  • South West Slopes Credit Union Ltd
  • Southern Cross Credit Union Ltd
  • South-West Credit Union Co-Operative Limited
  • Summerland Credit Union Limited
  • Sutherland Credit Union Ltd
  • Swan Hill Credit Union Limited
  • Sydney Credit Union Ltd
  • The Broken Hill Community Credit Union Ltd
  • The Capricornian Ltd
  • The Gympie Credit Union Ltd
  • The University Credit Society Limited
  • Traditional Credit Union Limited
  • TransComm Credit Co-operative Limited
  • Transport Mutual Credit Union Limited
  • Warwick Credit Union Ltd
  • WAW Credit Union Co-Operative Limited
  • Woolworths Employees’ Credit Union Limited
  • Wyong Shire Credit Union Ltd

Other ADIs
One ADI that provides general banking services which does not fall into the above categories:
  • Cairns Penny Savings & Loans Limited
These companies provide services (e.g. payments clearing) to building societies and credit unions:
  • Australian Settlements Limited
  • Cuscal Limited
  • Indue Ltd

Specialist Credit Card Institutions (SCCIs)
Foreign-owned SCCIs
Locally Incorporated SCCIs

Providers of Purchased Payment Facilities

Authorised Non-Operating Holding Companies
(authorised under subsection 11AA(2) of the Banking Act 1959)



Potential SMSF changes bringing in penalties up to $10,200 discussed by ATO

Almost one million Australians have opted for self-managed super funds, and many more are considering the option, however there are regulatory changes coming, according to ATO Deputy Commissioner Superannuation, Alison Lendon.

Lendon said that they are looking to work with trustees and advisors to help prepare them for several regulatory changes to be rolled out over the next year, and would be providing YouTube videos for trustees at the SMSF Professionals Association of Australia (SPAA) national conference this week as a result of the sector’s growth.

“With the popularity of SMSFs continuing to grow, we want to work with trustees and their advisors to improve compliance and make sure they are prepared for several regulatory changes that will be rolled out over the next year,” she said.

Proposed legislation giving the ATO new powers to address non-compliance by SMSF trustees will be a hot button topic at the conference.

Should this legislation be introduced, administrative penalties will apply to breaches of super law from July 1 this year. This will see trustees breaching this law potentially liable for penalties from $850 to $10,200 depending on which provision has been contravened.

“SMSF trustees should rectify any contraventions as soon as possible or they may face a penalty,” said Lendon.

“In some cases these changes will impact the way SMSFs operate so for the ATO our focus will continue to be on education and support to ensure trustees understand the rules,” she said.

The most common contraventions being reported to auditors are related to:

  • Loans
  • Borrowings
  • Sole purpose breaches
  • In-houseassets
  • Arms-length and related party investments

Arms-length and related party breaches could include renting out a property in your SMSF to yourself or a friend or family member of a trustee.

Every Auditor Contravention Report will be reviewed by the ATO this year.

New data and payment standard reporting rules have also been changed.

By Jennifer Duke

Twenty-seven properties that are out of bounds for SMSF purchase financing

Self-managed super fund purchases are still quite a new frontier in the realm of property buying.

The shyness for many investors on entering financial markets has helped create this trend.

However, it has a few more challenges than conventional property buying, such as the level of deposit required and the type of property you are allowed to acquire.

We’ve found a list of unacceptable properties that will stop a bank or lending institution providing credit for a self-managed super fund property purchase:

• Units or apartments with less than 45 square metres of living area

• Converted Hotels or motels

• Churches or places of worship (converted or otherwise)

• Residential property with a commercial content or used for a commercial purpose

• Commercial or industrial property

• Relocatable homes

• Leasehold other than Crown Leasehold

• Any property in excess of 50% per borrower in any one completed development that has a maximum of 8 properties in the development (duplexes are acceptable), or any property in excess of 4 per borrower in any one completed development where there are more than 8 properties in the development.

• Boarding houses or hostels

• Brothels

• Specialised student accommodation

• Any property subject to a rental guarantee (display homes and state and federal government properties are acceptable however)

• Any property that is subject to a ‘two tier’ market

• Home units attached to management rights of the complex

• Any property located in a flood zone greater than 1:100 year frequency

• Any property located on a contaminated site, or land holding greater than 40 hectares (100 acres)

• Any property that is used for the purpose of farming

• Specialised or unique dwellings

• ‘Over 55?s dwellings

• Property with a capital value less than $60,000 (land and improvements)

• Any property that will require developments of more than two dwellings on it

• Boundary of property located within 50 metres of high voltage transmission lines

• Properties with partly finished construction work

• Serviced apartments

• Studio apartments or bedsitters

• Any property located on a island that is not accessible by road

• Any property with a ‘lease for life’ covenant on the title

SMSF purchasers should seek advice before committing to a property contract, as the rules are tight.

As always, do your homework!

By Paul Osborne
Tuesday, 07 May 2013


Concerns about unscrupulous property spruikers remain

The Property Investment Professionals of Australia welcomes the release of the Australian Securities and Investment Commission first SMSF taskforce findings.

PIPA applauds the regulator for its recognition of concerning property spruiking activities with regards to self-managed superannuation funds.

The report, which focused largely on the standard of advice provided to SMSF trustees, found that the majority of advice provided is ‘adequate’ but it noted pockets of ‘poor’ advice, particularly with regards to recommendations that investors set up an SMSF in order to invest in real property.

Moreover, ASIC noted its concern regarding a rise in aggressive advertisements pushing property investment through SMSFs.

ASIC commissioner Peter Kell said ASIC did not want to see SMSFs become the vehicle of choice for property spruikers.

“Where we see examples of unlicensed SMSF advice, or misleading marketing, we will be taking regulatory action,” he said.

Such news is welcomed strongly by PIPA, which has long held grave concerns about property spruikers, particularly those targeting SMSF investors.

As ASIC would be fully aware, reports of Australian investors suffering at the hands of unscrupulous marketeers are all too common and such cases have the potential to explode as interest in property investment via SMSFs continues to grow.

While PIPA welcomes ASIC’s heightened awareness of property spruiking, the association remains concerned about the provision of advice with regards to property investment within SMSFs.

ASIC’s investigation found that the majority of advice provided to SMSF trustees by financial planners and accountants is adequate.

While ASIC remains comfortable for such professionals to provide advice on property selection however, PIPA believes trustees not only require but deserve specialised property investment advice.

From PIPA’s perspective, financial planners and accountants lack understanding and formal education in relation to real property so we believe they have two choices when it comes to providing their clients with advice around SMSF property selection.

One, they can refer their client to someone who does have formal property investment advice accreditations – or they can undertake their own formal qualifications in order to deliver qualified property investment advice and a more all inclusive service.

PIPA will continue to lobby the Australian government to regulate the property investment industry – and this is top of our agenda.

But for the here and now, we are calling on financial services professionals to act in the best interests of the customer,and either up-skill in order to provide advice around property investment, or refer your client to someone who is appropriately accredited.

Ben Kingsley is chair of Property Investment Professionals of Australia.

YIP March 2013 – SMSF Tax Traps

Here’s a great article from YIP March 2013 – SMSF Tax Traps

Top 5 traps to avoid when investing through your SMSF
The tax benefits of investing through SMSFs are luring many investors to set up their own super fund. But as Eddie (hung explains, there are a number of traps for the unwary.

Investing in property through a complying self-managed superannuation fund (SMSF) can be highly tax effective. Before a member of an SMSF starts drawing an income stream from the fund, the rental income from a property owned by the fu nd net of tax-deductible expenses is taxed at the Rat concessional tax rate of15%, compared with the highest marginal tax rate including Medicare Levy of 46.5% applicable to an individual. Any capital gain derived by an SMSF on the sale ofa property if it has been held for at least 12 months is taxed at a Rat rate of10% after the CGT discount, compared with 23.25% on any discount capital gain derived by an individual.

See PDF attachment for full article – YIP March 2013 – SMSF Tax Traps