Why you should set up an SMSF.
A story about Dr. Ramoray & Rachel Green.
You don’t know what to do with your superannuation, and the advice or sales pitch you receive is…
"Set up a SELF-MANAGED SUPER FUND (SMSF).”
Set up an investment platform that you have to manage yourself.
It doesn’t make sense, does it?
I’m writing this email to help you understand that the advice that gets the best results is usually simple.
Sexy for no reason or confusing just to be confusing is usually a sign that an adviser, accountant, or salesperson is trying to take your money.
I’m not against complex advice, but there’s a time and place.
I’m well seasoned in complex advice, so when you receive simple advice from our team, know that it could be complex, but we want you to get the best results.
A doctor (let’s call him Dr. Drake Ramoray) and his wife (Rachel Green) have owned their medical practice for 22 years.
Dr. Ramoray wants to retire within five years and is old enough to cash out of his super. Rachel is also eligible to transition into retirement.
They own the commercial real estate from which their medical practice operates.
The value of the commercial real estate is $1,200,000.
They’ve just finalised the sale of the medical practice.
The new medical practice owner pays rent to Dr. Ramoray and Rachel as they still own the physical commercial real estate.
This rent is taxed, and the tax itself will cost them $63,600 per year.
Their residential property is owned in both names and is worth $2,600,000.
The debt on the property is $1,400,000.
They want to be debt-free in retirement but are unsure how to do this.
Other advisers have advised them to sell investment properties or shares.
They have a collective balance of $3,600,000 in their Superfunds.
(Over 50% in term deposits and cash)
Transfer the $3,600,000 super into an SMSF.
SMSF buys the $1,200,000 commercial asset from Dr. Ramoray & Rachel.
Setup cost: $4000
Stamp Duty: $51,005
Professional & Conveyancing Fees: $3700
Total cost of transaction: $58,705
Benefits:
$63,600 of rent tax-free for as long as they hold that property in the SMSF.
(No tax due to retirement phase)The $1,200,000 from the property sale can be used towards their $1,400,000 loan via an offset account to stop repayments via I/O structure, or they can even pay off most of their home loan.
Interest savings in the first year alone are $32,160.
Cost in year 1 = $58,705 (stamp duty + setup & professional fees)
Gain = $95,760 (tax-free rent + mortgage interest savings)
Profit = $37,055
Cost in year 2 = $6500 (advice/management fees + accounting costs)
Gain = $95,760 (tax-free + mortgage interest savings)
Profit = $89,260
This is suitable and appropriate SMSF advice.
Your circumstances are probably not this complex, and you might not need access to SMSF flexibility.
This means we can get you into the most cost-effective and high-performing passive investments for now.
Our advice would include a one-off implementation engagement and no ongoing advice fees to get you to $500,000+ in super ASAP.
At that point, it might… make sense to bypass an industry, retail, or platform as you could buy the passive funds directly, and management fees are reduced.
Should you buy property inside an SMSF?
Outside of the above example and similar PTY LTD/ SMSF advice we have provided to our clients or seen. We’ve yet to see one beneficial long-term strategy in which the accountant, adviser, or salesperson isn’t lining their pockets with kickbacks and fees.
Complete this short form if you’d like to review your super, receive simple or complex (only if you need it) options, and begin the roadmap for tailored advice.
