Discussion in 'Superannuation, SMSF & Personal Insurance' started by bundy1964, 22nd Jun, 2007.
Well it's another day and I don't want to wait another 22.5 years to put it to work.
can't you put it to work by actively managing your super ?
Sure, no leveraging, however there are tax breaks. Its there anyhoo, it doesn't need to be as passive as it once did.
No external leveraging. But geared funds are available.
I recently rejigged my super to be more aggressive.. so now theres a geared australian fund, a property fund, a small cap fund, and an asia fund.
A common form of "leveraging" your super is using it in combination with an SMSF and a Unit Trust to purchase commercial property. No security can be held on the property in question, but for many investors who've been in the property market for a long time, they can secure any debt against another property.
This is particularly popular for business owners but other investors seem to be starting to use it too.
The other day I mentioned the guy who rolled a $600K capital gain on the sale of his business into super. He will be looking at doing something like this when he finds his next "business" opportunity. He'll use the structure to buy a commercial property which will be partly owned by his fund, and he'll rent the property to his business.
*Looks for the too hard basket*
I think I will either need a partner in crime with enough of a stake to make a go of a SMSF or look at the rules on CFD trading a bit more indepth.
I've been thinking about trading my super in an smsf, I have about $140k in two accts, and using the recommendations of Nick Radge (subscription). However I'm not comfortable trading a $140k account, and if I trade a smaller amount it lifts the bar to make it worthwhile.
I've always viewed super as petrol money, ie I work my other investments and rely on those for my well offness when I pull the pin, super will just bubble away in the background until I can tap into it. I actively manage it in terms of picking and monitoring the mgd funds but it is out of site, out of mind.
Dr Lobster, (great handle by the way)
I'm not disagreeing with your sentiment, just putting a spin on it.
Super for a lot of people can be and needs to be more than just petrol money for when they retire.
I know a lot of people poopoo it but when you consider that for a lot of people a 1/4 of their lives will be lived after the age of 55 (or 60 depending on your current age), then that has to be funded from somewhere.
Super can be worked well to their advantage.
Matt - I think the majority of us on this forum will NOT be those people who rely on Super in retirement - (that's kind of the point of being here). Super is a good safety net though, and so should not be abused.
I agree wholeheartedly Sim.
Perhaps a better way of expressing my concern is that the title "Superannuation" often has an instant effect of making people think in a certain way.
I guess I like to challenge that thinking. Particularly as I have seen it being used so effectivley by many business clients to actually assist them in the here and now, not just in retirement.
However, dont most business owners usually have very little super, as distributions from profits drawn are super exempt and most owners rely on the sale of the business to provide for their retirement?
So while it may help them now, it is really only placing in what everyone else does everytime they get paid..
i agree with both sides... ill contribute to super while i still earn less enough to get the contribution (free money), but apart from that im not 2 worried how it will set me up in over 34 years time...
I have a broad range of business clients. Some have SFA in super and others have a bundle! And Yes, many clients will use the sale of their business to provide for their retirement. This is likely to grow as the Baby Boomers transfer their business assets on retirement/sale/generational handover etc. and take advantage of the generous tax breaks in super.
Then there are business owners, some of them near retirement, others in their 30's, who are using their super to assist their business and therefore themselves. A common use of their super by business owners is to buy their own commercial premises and then rent them to their business, as mentioned earlier in this thread.
If the business owner doesn't have enough profits to put to super then thats another issue.
I guess I should point out that I see business owners as investors who have a particular asset that they are trying activley to grow.
Well I have decided to pretty much abandon my strategy of agressively trading my super. This decision has primarily been made on the basis of how much time I have to dedicate to the endeavour. I have learnt much about the psych of trading and systems and I have seen some of the things described in various readings being exhibited in my own trading. As much as I have enjoyed learning about trading, at this stage I will continue to stand on the sidelines. This decision was made before the recent corrections in the market and those corrections have no bearing on my decision to not aggressively trade my super.
What I will be doing however is to build a share portfolio out of my super funds, again this won't be based on my reccomendations however I do plan to learn why certain stocks are reccommended. There will be some degree of buying and selling however it will be based more on fundamentals than on technical analysis.
So there ya go.
I have some "speccies" in my SMSF, but also some blue chips and Navra..I believe the majority of my retirement wealth will come from Property, however, access to Super via a SMSF has renewed my interest in Super
PS: whats with all the motorbikes as avatars ?
I like this one
just letting you know there's always a mobile organ donor nearby
And whats up with the trike!
Everyone knows its not going to handle like a good two wheeler.
That trike looks like the damn Skidoo that they did a somersault with at Crusty Demons. Maniacs!
And Dr Lobster, what does a crustacean study for a Doctorate?
Seriously, I had a client a few years ago who got heavily into trading within his SMSF. When I did the accounts and audit my fees went through the roof trying to follow the trails. But he spent so much time trading and working on it that his business, from which all his wealth had come from, started to suffer severely ~ so you may not be alone on this front.
I found the same thing.
I was spending so much time trading and collecting info to the exclusion of everything else. I didn't even realise how much time I was spending until after the tech wreck and I suddenly found I had all this time on my hands.
Looking back there was no way that it was time well spent as obviously I am not a good enough trader.
Could you please explain this concept further MattR.
I was under the impression that there were problems with this method.
1. An SMSF can not have more than 5% of it's value in a unit trust such as you describe above.
2. Interest on money borrowed against another property but used to buy property in a your super fund is not tax deducible.
Would love to be shown that I am wrong or how to get around these problems.
1. Refer the following links
REGULATION 13.22C - ASSETS ACQUIRED AFTER COMMENCEMENT OF DIVISION 13.3A (ACT S 71)
Refer S.71(1)(j) EDIT: Can't seem to get this link to work
2. The money to buy units in the Unit Trust is secured against property other than the property that the unit trust buys, eg the investors home. The interest on that money (borrowings) is deductible to the purchaser of units in the unit trust as there is an intention to make a profit from the investment.
In essence the investment is units in a unit trust, which then invests in property. Also, the source of the funds and the security offered, does not determine deductibility of interest, but rather the purpose those funds are used for.
Matt. Thank you for your PM. It has encouraged me to ask what may turn out to be stupid questions but what the heck.
Last year, when it was possible for us baby boomers to put $1M into super, I asked my accountant if it was a good idea to borrow the money on my residential properties and put it into a SMSF to buy a commercal property in the fund. His answer was that the interest on this money would not be tax deductible. I understand the "purpose test" under normal circumstances so thought that super, even if used to buy an investment, did not qualify.
If this is the case, is it so that your clients use cash to finance the units within the super fund and only borrow (against another property) to buy the units that they hold outside the super fund? I can see that this should/could fall within the purpose test if the unit trust bought an investment.
I think that I read somewhere that the value of the units held by your SMSF in such a partnership, can not exceed 5% of the total value of your super. If this is true then the benefits of such a partnetship are quite limited. Have I got this totally wrong?
If all goes well, I am hoping to buy a commercial IP next year and would like to take advantage of the tax free super environment eventually, if possible.
If you have any comments about this idea I would be very happy to hear them.
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