The Superannuation Industry (Supervision) Act 1993 (Cth), is the legislation that governs the relevant super laws for Self-Managed Super Funds or SMSFs. Individuals choose to establish a self-managed super fund for the benefit of having total control of the investment strategy of their retirement savings and because as a trustee, you decide how your fund is managed.
The investment choices available to SMSF are quite broad, Trustees can potentially purchase shares, high-yielding cash accounts, term deposits, income investments, real property, unlisted assets such as private companies, international markets, collectables and more.
All Superannuation funds benefit from concessional taxation rates and Self-Managed Super Funds are no different. The Tax rate for Superannuation Funds is only 15%, and capital gains tax is capped at 15% for assets held for a minimum of 12 months and for assets held for longer than 12 months before disposal the rate is only 10%. As a result of these tax concessions, having assets in your SMSF provides greater taxation relief than dealing with assets personally outside of it.
Can I transfer my home or investment property to my SMSF?
Trustees of SMSF’s are not permitted to buy residential property from a member of the fund or a related person of the member; in short a fund member of a self-managed super fund (SMSF) cannot sell a residential property that he or she owns or is owned by a family member to the SMSF. In short, any investment property owned by yourself and or members of your family cannot be purchased by your SMSF or transferred to your SMSF as a contribution to your fund.
There is an exception where you can purchase business real property (commercial property). Business real property is property that is being used exclusively for the operation of a business such as a factory or office. An SMSF can purchase Commercial property that you or your business personally own and then lease it back to your business. Furthermore, your SMSF can purchase Commercial property that is owned personally by you that is being leased to a third party under a commercial lease arrangement.
Contributions to my SMSF
Super Contributions over a specific amount attract an excessive contributions tax, from 1 July 2017 a tax of 47% is levied on contributions that exceed what is known as the contributions cap. For persons under the age of 65 and with a total superannuation balance below $1.4 million, the contribution cap is $300,000 over a 3 year period; this entitles a member with less than $1.4 million to contribute to the fund a total amount of $300,000 over three years without being penalised by an excessive contributions tax.
Under these provisions, investment property can be sold and the funds from the sale of the property can be transferred to the fund as a contribution without incurring any contributions tax providing the funds do not exceed the contributions cap. Funds within the self-managed super fund can be utilised to purchase Residential investment property that is not connected with the member or the beneficiary of the fund.
Want to know more?
If you would like to enquire about establishing a Self-Managed Super Fund contact Daniel McDonald on (03) 8398 0820 for a free thirty minute consultation to determine whether an SMSF is right for you.
About the author:
Daniel McDonald is a Practicing Lawyer and Managing Director of McDonald Bolog Lawyers. Daniel practises in the area of Commercial, Property and Employment Law drawing upon vast experience working as a CEO, CFO and COO in previous roles. Daniel holds a 5 Star MBA from the University of South Australia and a Juris Doctor (Master of Laws) from the Royal Melbourne Institute of Technology.