Gearing Genie out of the SMSF bottle

We'll see the usual promoters doing the circuit peddling their products under a different guise.

First the seminar for Mums & Dads (as Trustees) on gearing for SMSFs - what a great idea.

Hey, why not set up the loan now, we happen to have just the products you need.

Don't worry about contacting your Financial Planner or Accountant, its all been Government approved - just sign here.

How good is that ?

My worry is that new failures will give the Government and Industry lobby groups more ammunition to banish most SMSFs.

Cheers,

Rob

 

Hi Rob G,

A SMSF is still a superannuation fund and the same rules will apply to SMSF as giving advice, ie, accountants and planners will still be giving advice.

It'll be interesting though to see whether the Industry Super funds can keep up with other super funds as they don't usually have the same support as SMSF, retail and corporate super funds.

Cheers,

Dan

PS Before making an investment decision speak to your FPA registered Financial Planner.

 

Speaking of promotion of the instalments / borrowings, Westpac is ahead of the other major lenders jumping on the bandwagon!

NOTE: This information is for discussion purposes only and should not be considered promotion or endorsement.

See attached.

Interestingly, none of the promotional documentation mentions the personal guarantee they usually request from the members of the SMSF (still waiting on the ATO to clarify their position on this - is it still non-recourse?).

The presentation is a little out of date, they have reduced the premium they put on these loans.

Westpac is using Gadens to prepare the documentation:

Our service includes:
preparation of a Property Trust Deed; arranging for execution and stamping of the Property Trust Deed; Ownership Certificate; Information kit for SMSF borrowers; and Information kit for accountants and solicitors on the operation of the property trust.

The cost of this package is $2,500 plus GST.

To enable us to get started, we would require the following documents from the SMSF: SMSF Trust Deed;Name of the proposed Property Trust; Name and address of the proposed Property Trustee - it is preferable that the Property Trustee is a corporation rather than an individual. If the SMSF would like us to set up a company on their behalf, there will be an additional cost of $1,116.50 inclusive of GST; Address of the property to be purchased; and Name of each member of the SMSF.

As discussed, Gadens do not act for the SMSF in relation to the borrowing / conveyance (we act for Westpac in this part of the transaction). Nor do we provide advice to the SMSF on the effect of this structure. Having said this, we are certainly available to assist the SMSF's lawyer with this new product."

Obviously because the structure if new to the market, the costs are very high however as the documentation is improved and refined the costs should come down.

From what I have seen to date, utilising an existing LOC / loan to make the borrowings member financed is the best way to do it - however this option is not available to all people.

I can't wait for the mortgage brokers to start promoting SMSF borrowings .

Look forward to comments.