Self Managed Super Fund and buying an investment property

[lorluc]

Looking at creating a self managed super fund with the intention to use some to buy an investment property. Has anyone done this? If so, any advice?

[Andrew from Vista Financial]

Hello

 

Firstly a quick question.......is this with transferred UK Pension monies?

[lorluc]

Hello

 

Firstly a quick question.......is this with transferred UK Pension monies?

 

Our super consists of UK pension funds transferred and also contributions made here. We have been here almost 10 years, and did the transfer not long after we arrived.

 

The UK part sat in a QROPS fund (Solar wrap) for the time required which i think from memory is 5 years...although we left ours in there for longer. My husbands part was transferred to his employment super fund here early in 2014. I still have some in a my Solar wrap account that needs to be transferred

Edited October 11, 2015 by lorluc

[Andrew from Vista Financial]

Our super consists of UK pension funds transferred and also contributions made here. We have been here almost 10 years, and did the transfer not long after we arrived.

 

The UK part sat in a QROPS fund (Solar wrap) for the time required which i think from memory is 5 years...although we left ours in there for longer. My husbands part was transferred to his employment super fund here early in 2014. I still have some in a my Solar wrap account that needs to be transferred

 

 

Thanks for that.

 

This could prove difficult then as using UK pension monies for purchase of residential property is not permitted and big penalties (levied by HMRC) could apply if it came to light it had occurred.

 

The reporting period lasts for 10 years from when the funds are received and the tax charge on unauthorised payments for 5 full UK tax years from being a non UK tax resident however buying residential property as well as a few other assets is not permitted ever.

 

There could potentially be a way around it but as said it could prove difficult, particularly for the mixed monies in your husbands Super Fund, you see UK monies are classed by HMRC as first in first out, so theoretically if he were to transfer out the UK monies first to another fund and then set up the SMSF with your non UK funds and his remaining pot using these monies to fund the property purchase could in theory work but you should take sound legal advice if looking to do this.

 

In relation to the actual question in the first instance (UK pension monies aside), this can be a good strategy for some people however again you should take sound legal/financial advice because if done incorrectly it could prove costly, there have been lots of cases where this strategy has been pushed by Accountants/Mortgage Brokers and Property Developers (spruikers) with really their benefit in mind and ASIC have been firmly stamping this out and handing out harsh penalties (and in the meantime a lot of SMSF Trustees have suffered).

 

Other than Accountants (via an exemption which ends next year) Financial Planners are the only professionals that are able to advise on the arrangement of a SMSF and most lenders now that offer SMSF loans require a Financial Advice certificate signed off in relation to the limited recourse borrowing arrangement (LRBA).

 

Also bear in mind that really as a starting point for a SMSF to be viable around $250,000 should be the minimum balance anything lower than this can mean that the fees will have a big drag on the overall returns.

 

Bear in mind too that buying a property if done within a SMSF should only be part of the bigger picture with assets held also in Cash, Bonds and Shares to diversify and mitigate risk otherwise you will be holding what is classed as a lumpy asset which could create issues especially upon the death of a member.

 

Hope this helps a bit.

 

Regards

 

Andy

[lorluc]

Thanks very much for taking the time to write all this...much appreciated.

I'll send you a private message so i can detail exactly what we have to use.

[Andrew from Vista Financial]

 

 

 

In relation to the actual question in the first instance (UK pension monies aside), this can be a good strategy for some people however again you should take sound legal/financial advice because if done incorrectly it could prove costly, there have been lots of cases where this strategy has been pushed by Accountants/Mortgage Brokers and Property Developers (spruikers) with really their benefit in mind and ASIC have been firmly stamping this out and handing out harsh penalties (and in the meantime a lot of SMSF Trustees have suffered).

 

Other than Accountants (via an exemption which ends next year) Financial Planners are the only professionals that are able to advise on the arrangement of a SMSF and most lenders now that offer SMSF loans require a Financial Advice certificate signed off in relation to the limited recourse borrowing arrangement (LRBA).

 

Andy

 

Just thought I would post this (not aimed specifically at you Lorluc more for info) as it demonstrates how ASIC are clamping down in this area on unlicensed spruikers: http://www.brokernews.com.au/news/breaking-news/supreme-court-punishes-property-group-for-smsf-property-spruiking-207040.aspx