Over the past 12 months, I’ve had a lot of people enquiring whether it’s worthwhile setting up a Self-Managed Super Fund (SMSF) to purchase a property and expand their portfolio. As such, I thought I’d prepare a case study to provide more information.
Often, the biggest challenge people face is finding out all the information on SMSFs and understanding the fees and charges the fund will incur over a 12 month period.
Let’s look at the example SMSF tax return figures I’ve prepared for our case study:
|Rent 52wks x $250/wk||$13,000.00|
|9.5% Super Contribution based on $52k/annum||$4,940.00|
|Property Mortgage $123,200 @ 5.34%||-$6,578.00|
|Postage & Petties||-$66.00|
|Annual Property Maintenance Allowance||-$1,000.00|
|Body Corp Fees||-$1520.00|
|15% Super Contribution Tax||-$741.00|
|Annual Bank Fee||-$144.00|
|Annual Bank Fee||-$120.00|
|ASIC Trust Payment||-$236.00|
As you can see in this case study, with a mortgage of $123,200 on the property and the compulsory super payments, the super fund is positively geared, which meets the “Sole Purpose” test.
Some savings could be made by purchasing a free-standing home, thereby avoiding Body Corp fees. The audit fee is compulsory as the fund has to be audited independently from your accountancy company.
So back to the original question, “is it worth it”?
Although in the early stages there may not be a large cash flow, this can potentially increase over time as wages, rent and the compulsory super contributions increase. The fund can also potentially pay down debt, reduce interest and minimise outgoings, which may make it more profitable. If the correct property has been purchased, the value of a said investment will also generally go up over time.
If you keep your costs to a minimum and do the right “Due Diligence” prior to purchase, then YES, it can be worthwhile.
Speak to us today about setting up your own SMSF. Finance Ezi has been in the industry for over 10 years so you can rest assured you’re dealing with a company that’s productive, efficient and transparent.